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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the fiscal year ended December 31, 1999
OR
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 1-13205
KING POWER INTERNATIONAL GROUP CO., LTD.
(Exact name of registrant as specified in its charter)
NEVADA 75-2641513
(State of incorporation) (I.R.S. Employer Identification No.)
26th & 27th Floors, Siam Tower, 989 Rama I Road,
Patumwan, Bangkok 10330 Thailand
(Address of principal executive offices)
Registrant's telephone number, including area code: 011 (662) 658-0090
Securities Registered Pursuant to Section 12(b) of the Act:
Common Stock, $.001 par value per share
Name of exchange on which registered: American Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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. Yes _X_ No___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of regulation 8-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in a definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Number of shares of Common Stock of the registrant outstanding as of February
29, 2000: 20,250,000 shares.
The approximate aggregate market value of the voting stock held by
non-affiliates of the registrant based upon the closing price of $1.18 per share
for the registrant's common stock as reported by the American Stock Exchange as
of February 29, 2000 was approximately $8,689,658.
TABLE OF CONTENTS
Item Number Page
Part I
1. Business
2. Properties
3. Legal Proceedings
4. Submission of Matters to a Vote of Security Holders
Part II
5. Market for the Company's Common Stock and Related Stockholder
Matters
6. Selected Financial Data
7. Management's Discussion and Analysis of Financial Condition
And Results of Operations
7A. Quantitative and Qualitative Disclosures of Market Risk
8. Financial Statements
9. Changes In and Disagreements with Accountants on Accounting
And Financial Disclosure
Part III
10. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
11. Executive Compensation
12. Security Ownership of Certain Beneficial Owners and Management
13. Certain Relationships and Related Transactions
Part IV
14. Exhibits and Reports on Form 8-K
2
CAUTION REGARDING FORWARD-LOOKING INFORMATION
This report contains certain forward-looking statements and information relating
to the Company that is based on the beliefs of the Company or its management as
well as assumptions made by and information currently available to the Company
or its management. When used in this document, the words "anticipate",
"believe", "estimate", "expect", and "intend" and similar expressions, as they
relate to the Company or its management, are intended to identify
forward-looking statements. Such statements reflect the current view of the
Company regarding future events and are subject to certain risks, uncertainties
and assumptions, including the risks and uncertainties noted. Should one or more
of these risks or uncertainties materialize, or should underlying assumptions
prove incorrect, actual results may vary materially from those described herein
as anticipated, believed, estimated, expected or intended. In each instance,
forward-looking information should be considered in light of the accompanying
meaningful cautionary statements herein.
3
PART I
ITEM 1 BUSINESS
General
The global duty free business is a multi-billion dollar industry in
which luxury and brand name merchandise such as perfumes and cosmetics, liquor
and tobacco and general merchandise products are sold to travelers exempt from
import duties and taxes, within certain allowances, at their respective
destinations. Since 1993, the global duty free business has grown at a
compounded annual growth rate of 5.4% in terms of revenue from US$17 billion in
1993 to US$21 billion in 1997. However, the Asia crisis during 1997 and the
abolition of duty free among European Union (EU) members during 1999 have
stunned the growth of this industry. In 1998, global duty free sales declined by
2.4% reaching US$20.5 billion. The current onset of Asia financial recovery and
significant reduction of duty free sales in EU promoted greater market share of
Asia's duty free business.
The travel-retail industry, which is defined as all of the business
activities involved in the duty-free and tax-free businesses, including selling
merchandise at traveling ports (principally airports) and on airplanes, at
tourist centers, at resorts and in major cities, etc., began to develop in Asia
in 1964 when Japanese retailers began establishing duty free shops around the
region. As trade among the countries within the region increased, the Asian duty
free business began to grow. The Asian travel-retail industry was given
additional impetus when trade between Asian countries and the United States and
European countries began to grow further. This increase in trade resulted in an
increase in tourism by travelers from the United States and Europe.
Consequently, Thailand became the most popular travel destination among
Southeast Asia's countries, welcoming more than 33 million passengers traveling
through the International Airports in Thailand during 1998. During the 1990's,
the number of passengers has increased at a compounded average growth rate of 7%
from 19 million in 1990 to 33 million passengers in 1998, according to the
Airport Authority of Thailand (AAT). Furthermore, AAT is expecting to service
passengers up to 35 million in 2003.
King Power International Group Co., Ltd. (the "Company") is currently
the leading travel-retail operator in Thailand. The Company operates and manages
24 duty free and 25 tax free stores, via two concession agreements with the
Airport Authority of Thailand, throughout all of Thailand's major airports. At
the end of 1999, the Company has approximately 46,000 square feet of retail
space at the Bangkok and Provincial International Airports.
Background and Organization of the Company
The Company (formerly known as Immune America, Inc.) was incorporated
under the laws of the State of Nevada in 1985. Until June 12, 1997, this Company
was inactive and was regarded as a development stage company.
On June 12, 1997, the Company engaged in a reverse merger transaction
with the shareholders of J.M.T. Group Company Limited and J.M.T. Duty Free
Company Limited, whereby an aggregate 18,800,000 shares of restricted,
unregistered common stock was exchanged for 99.94% of the issued and outstanding
shares of J.M.T Group Company Limited and 94.95% of the issued and outstanding
shares of J.M.T. Duty Free Company Limited.
The reverse merger was treated as a re-capitalization of the Company.
Accordingly, the assets, liabilities and business operations of J.M.T. Group
Company Limited and J.M.T. Duty Free Company Limited were recognized at
historical cost. The consolidated historical financial statements of J.M.T.
Group Company Limited and J.M.T. Duty Free Company Limited became the historical
financial statements of the Company.
Concurrent with the reverse merger, the Company changed its corporate
name from Immune America, Inc. to King Power International Group Co., Ltd.
Subsequently, on September 9, 1997, J.M.T. Duty Free Company Limited changed its
corporate name to King Power Duty Free Company Limited and on October 10, 1997,
J.M.T. Group Company Limited changed its corporate name to King Power Tax Free
Company Limited.
The Company operates its current businesses through two divisions: the
Tax Free Division and the Duty Free Division .
4
Tax Free Division
King Power Tax Free Company Limited (the "Tax Free Division" or,
sometimes, "KPT") is a Thai corporation engaged in selling various souvenirs and
consumer products in the International and Domestic terminals of all the major
airports located in Thailand to international and local travelers. The Tax Free
Division holds the exclusive operating license granted by the Airport Authority
of Thailand ("AAT") for all shops of this specific nature.
At the end of 1999, the Tax Free Division operated 25 stores within
Thailand's major international and domestic airports, totaling more than 17,500
square feet of retailing space compared to 6,181 square feet in 1993 when it
first began operation. There are now 15 shops located in the various terminals,
which comprise the Bangkok International Airport; 10 of these shops are located
in the airside departure terminals. The landside shops are established in five
different locations in the departure and arrival halls of both terminals. The
Tax Free Division sells domestically manufactured general merchandise including
Thai silk, pewter, Benjarong porcelain, Thai dolls, jewelry, watches, pens,
lighters, leather goods and confectionery, free of Thailand's value-added-tax.
There are ten shops, located in the domestic terminals at the Bangkok,
Chiang Mai and Phuket domestic and international airports, selling indigenous
general merchandise of Thailand, together with local specialty goods.
The Company is an active participant in the promotional campaign known
as "Amazing Thailand" for the years 1998 to 2000. The three new shops were
opened in joint operations with AAT, the Tourism Authority of Thailand ("TAT"),
and the Department of Industrial Promotion from the Ministry of Industry and
dedicated to the "Amazing Thailand" promotion.
Duty Free Division
King Power Duty Free Company Limited (the "Duty Free Division" or,
sometimes, "KPD") is a Thai corporation engaged in selling duty free merchandise
to the traveling public under the supervision of Thai customs in duty free shops
located in the international terminals of all of the major airports in Thailand.
The Duty Free Division holds a non-exclusive license to operate duty free shops
from the AAT for shops of this specific nature until December 2001.
The Duty Free Division operates 24 duty free stores, with approximately
28,000 square feet of retail space, in Thailand's International Airports at
Bangkok, Chiang Mai and Phuket. The Duty Free Division accounts for 60% of the
total duty free retail space currently used in these airports. The Duty Free
Division's merchandise mix consists of top quality brand name liquor and tobacco
products, luxury goods such as watches, perfumes, cosmetics, fashion
accessories, gourmet food and chocolates. In Thailand all imported merchandise
is subject to import duties and governmental taxes. However, the Duty Free
Division's goods are sold exclusively for departing passengers and are free of
all import duties, excise taxes and the value-added-tax imposed by the Thai
government.
The Duty Free Division started its operation on January 1, 1997. During
1998, the Duty Free Division successfully introduced Harrods of Knightsbridge
U.K as the first duty-free Harrods in Asia located in both Terminals of the
Bangkok International Airport. Additionally, the Company has also introduced
specialty stores focusing on well known fashion designers, such as Ferragamo,
Versace, Cartier, Dunhill, Longchamp, Etro, Fendi, Bally, Lanvin, and Givenchy
located in the Terminal I of the Bangkok International Airport.
Both the Duty Free Division's and the Tax Free Division's sales and
their overall performance and results are subject to the influence of external
factors, some of which are beyond the Company's control. These include the
distribution of airlines at particular terminals, the routes that are serviced
by those airlines, loading levels of airline passengers, and economic and other
conditions affecting the airlines servicing Thailand in general. The Company
strategically manages those factors within its control in order to maximize its
performance and minimize the effect of those that it cannot control. The Company
believes that the devaluation of the Thai Baht, relative to the U.S. dollar,
will continue to encourage a greater number of tourists and travelers to come to
Thailand in the future which should result in a significant positive effect on
the Company's business, both as to sales volumes and profits.
King Power International Group (Thailand) Co., Ltd.
King Power International Group (Thailand) Co., Ltd. was principally
formed to lease the Company's Head Office in the Siam Tower in Bangkok in 1997.
The rental expenses for this facility are allocated according to the actual
usage by each of the Company's subsidiaries. Management has decided to have the
subsidiaries lease their premises directly from the lessor effective as of
January 1999 in order to prevent unnecessary repetitive payment of corporate
income taxes among the Company's subsidiaries.
5
Regulation
The Duty Free operations are subject to the regulated supervision of
the Customs Department of Thailand ("Customs"). All imported merchandise is
received and stored in the Company's bonded warehouses in Thailand where it is
exempt from all import duties, excise taxes and value-added-taxes of Thailand.
Since the merchandise is sold without duties or taxes, it must remain within the
bonded warehouses until it is requested to transfer to the respective Duty Free
stores for sales.
The Company has a total of two bonded warehouses located in Bangkok and
Phuket serving all of the Duty Free Division's shops in Thailand. Transfer of
any bonded merchandise must be documented and approved by Customs before these
products are transferred for sale to the traveling public at the various retail
stores. Customs makes regular inspections of the inventory in the bonded
warehouses and shop premises. With this tightly regulated control from Customs,
customers are assured that all products sold by the Company are genuine and of
the highest quality.
Suppliers, Distribution and Inventory Control
The Company purchases both local and imported merchandise from more
than 550 vendors worldwide. This supplier base gives the Company a choice to
selectively purchase the highest quality products and to negotiate with vendors
for the lowest cost, in order for the Company to supply its customers with the
best possible value for their money. Currently, the Company does not have any
long-term purchase commitments.
Through the Company's historically strong relationships with many of
its suppliers, the Company has secured exclusive agreements from numerous
suppliers to be the sole agent for the sale of their products in Thailand in the
duty free shops. Furthermore, the Company receives significant sales support
from these vendors. These supports include in-store displays, gift-with-purchase
items, sales incentives, advertisements, staff training, signage and sales
personnel.
Merchandise is generally shipped directly from vendors to the Company's
bonded warehouses for the Duty Free Division and delivered to the Company's
warehouses at the airport or downtown for the Tax Free Division. The Company's
inventories are strictly controlled to comply with Customs' regulations.
Detailed records documenting the receipt, the transfer and sale of all
merchandise are kept by the Company to certify the authenticity and excellence
of the products sold by the Company.
The Company uses an outside shipping contractor to provide the services
of customs clearing for the imported merchandise into Thailand and directly to
the Company's bonded warehouses.
In order to control inventory levels, the Company uses automated
replenishment systems. Transfers are made to stores in accordance with demands
identified by respective store's managers. The Company maintains the overall
control of enough stock displays in respective stores and repurchasing point of
inventory level in respective warehouses.
The Company's computerized inventory control system allows the Company
to: (1) identify the merchandise needs at each store, (2) promptly reorder
merchandise from the vendors, and (3) comply with the Customs' record-keeping
requirements. Through the Company's automated system, appropriate product mixes
are maintained to maximize merchandise turnovers. The Company has rarely
experienced problems with obsolescence because the turnover frequency for most
products is rapid and slow moving products are quickly identified.
Employees
The Company's business as conducted in it shops is labor intensive. The
Company currently employs approximately 1,876 persons. Each member of the sales
staff is equipped with special selling skills geared to the Travel-Retail
business, that is, they are fluent in many languages and have extensive product
knowledge in order to handle sales discussions with foreign customers.
Management promotes job enhancement at every level of the staff to ensure
maximum job satisfaction in return for the highest productivity by each
employee. For example, the Company maintains a Training Center to encourage the
learning of managerial skills, languages, product knowledge, etc. and has
implemented the ISO 9002 standards of operation. Employee turnover continues to
be very low and Management foresees no problems in maintaining its capable staff
of employees as long as the Company sustains its market share and the growth of
its businesses.
6
Competition
The Company foresees no competition for the Tax Free Division. During
1997, the Company was granted an extension by the AAT of the Tax Free Division's
license for the exclusive right to operate and sell gifts and general
merchandise at the Bangkok International Airport, for a further five year term
extending from 1998 to 2003.
The Company has developed strong relationships with the AAT over the
years and as a result of this and the major contributions which the Company has
made to increase tourism to Thailand, the Company believes that the renewal and
extension of the Duty Free Division's license will be on terms favorable to the
Company.
In Thailand, there are several barriers for parties wishing to enter
into the airport duty free business. Any new entrant company must be of Thai
ownership who have proven Asian regional duty free experience, particularly with
regard to serving international passengers and Thai Nationals. For a new
entrant, the company's management must be comprised of Thai nationals and it
must reach a minimum turnover in duty free business. Additionally, the new
entrant must possess bonded warehouse facilities located in Thailand and should
be already carrying all major international brands in its portfolio of
merchandise.
Economic Conditions and Exchange Rates
The principal customers of the Company are the traveling public
utilizing the International and Domestic Airports at Bangkok, Chiang Mai, and
Phuket. The Company's businesses closely tie up with economic conditions of
countries where the travelers come from. The Company has strategically
confronted the current economic turmoil of the Asia Pacific region with decisive
actions to minimize the adverse effects on its operations.
In 1999, the Tax Free Division was able to maintain its operational
trends because most of its merchandise consists of products purchased in Thai
Baht. Additionally, the Tax Free Division has always been able to sell its
merchandise in U.S. dollars. Although Thai Baht was floated there, was a minimal
impact on this division's operations because there was very little difference in
the purchasing power of the customers.
The Duty Free Division imports all of its products from suppliers
across the world whereas the purchasing commitments are tied to either U.S.
dollars or currencies of the originating countries. The Company partially offset
the impact of the weak Thai Baht by adjusting, as often as daily, both the
Company's pricing policy and point of sale exchange rates reflecting the current
exchange rate of the Thai banks. By this policy, the Company is able to minimize
the realized and unrealized loss of exchange when purchasing activities are
denominated in foreign currencies.
BUSINESS STRATEGIES
The Company began operating its Tax Free Division in 1993 after
obtaining the five-year sole license to operate its business from the AAT. This
license was renewed in 1998, extending for a period of five additional years
(until 2003) the Division's license to operate in Thailand. In 1997, the Company
obtained its five-year Duty Free license. Since that time, the Duty Free
Division has become the principal contributor of profits to the Company's
operations. Even though merchandise sold by the Tax Free Division generally
carry a higher profit margin compared to the profit margin for merchandise sold
by the Duty Free Division, the value of each item (measured by its selling
price) is much less. Thus, the profitability of the Tax Free Division has been
generally lower. Management intends to concentrate on improving the
profitability of the Tax Free Division, which has taken effect during this year
and in the future, principally through reducing concession fees and rent cost,
selecting higher value merchandise, and lowering operating costs. For the Duty
Free Division, the Company will continue to increase sales volumes and maintain
higher margins. Currently, the Company is in discussion with the AAT to extend
the existing concession that is scheduled to expire at the end of 2002.
Improving profitability for the Tax Free Division
The Company has on-going negotiations with the AAT to lower the
concession fees charged by the AAT, to exchange spaces between the Tax Free and
the Duty Free Divisions, and to discontinue some of the shops to lessen losses
which are caused by increased concession fees. The Tax Free Division is in the
process of re-engineering its entire operation to be more compatible with new
international trends for this business. It has implemented some phases and will
progress further throughout 2000 and beyond. The main components of this
re-engineering target:
7
(1) expanding non-concession points of sales, i.e., through e-commerce
where the Company can act as an intermediary for local products catering to
international consumers;
(2) jointly promoting merchandise with several airlines through its
frequent flyer programs and credit-card firms;
(3) increased efficiency in selecting the merchandise to be sold and
emphasizing the potential for increased sales volumes and the profitability of
each item of merchandise selected;
(4) downsizing the amount and types of merchandise displayed from the
concept of "something for everyone" to becoming more selective in the types of
merchandise displayed at different locations;
(5) developing premium brands in order to create brand awareness, the
uniqueness of product availability, to upgrade quality and design, and to
improve packaging and marketing; and
(6) utilizing the Company's overall resources more efficiently through
the implementation of ISO 9002.
Ensure adequate supplies and variety of products of the Duty Free Division
Since the current trend for the Duty Free Division's products is
continued high demand driven by the increased number of Asian tourists who have
made plans or arrangements to visit Thailand in 2000 and beyond, as announced by
the Tourism Authorities of Thailand (TAT), this Division will focus on ensuring
adequate supplies of, and more variety in, the merchandise it offers for sale in
order to cater to these customers.
ITEM 2 PROPERTIES
The Company's principal office is located at the 26th and 27th floors
of the Siam Tower, at 989 Rama I Road, Patumwan, Bangkok 10330 Thailand. The
telephone number is 011-662-658-0090. This office contains 29,353 square feet of
space and is leased from Bangkok Intercontinental Hotels Co., Ltd. under a lease
expiring in October 2000, at an annual cost of $128,096, using an average
exchange rate of 37.8226 Thai Baht to 1 US Dollar for 1999.
The Company operates 49 retail stores with retail space totaling 46,066
square feet, located in the international and domestic airports of Thailand
located in Bangkok, Chaing Mai and Phuket. All of the stores are leased from the
Airports Authority of Thailand (the "AAT") under varying lease agreements
involving the Company's two subsidiaries, KPT and KPD, and require a monthly
rental fee (excluding duty charges and other expenses) for the space actually
utilized. During the 1999 fiscal year, the Company paid a total of $1,294,232 to
the AAT under these lease agreements. The Company anticipates that the total for
the 2000 fiscal year under these lease agreements will be approximately
$1,272,153, using an exchange rate of 37.8226 Thai Baht to 1 US Dollar as of
December 31, 1999.
The Company leases three warehouses located in Bangkok, Chaing Mai, and
Phuket, containing almost 30,000 square feet, from the AAT. The two bonded
warehouses contain approximately 25,000 square feet for the Duty Free Division
and approximately 4,100 square feet for the Tax Free Division. The Company
believes that its facilities are adequate for its current operations.
All payments with regards to these properties are made in Thai Baht.
The Company used an average exchange rate of 37.8226 Thai Baht to 1 US Dollar to
translate these expenses into US Dollars during 1999.
ITEM 3 LEGAL PROCEEDINGS
The Company is not currently a party to any material litigation, or any
litigation which if it were decided against the Company would likely have a
result which would be materially adverse to the Company, its current or future
financial condition, or the Company's present or anticipated methods of
operation.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
8
PART II
ITEM 5 MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock trades on the American Stock Exchange under
the ticker symbol "KPG". The approximate number of holders of record of shares
of common stock, excluding the number of beneficial owners whose securities are
held in street name, was 361 as of February 29, 2000. The Company believes that
approximately 900 stockholders currently own and hold the stock in street name.
The following table set out the high and low reported sales prices for
the common stock as reported by the American Stock Exchange since it was listed
on July 30, 1997:
High Low
First Quarter of 2000
(Through February 29, 2000) $1.50 $1.00
Fourth Quarter of 1999 $1.81 $0.88
Third Quarter of 1999 $2.13 $1.00
Second Quarter of 1999 $2.50 $1.13
First Quarter of 1999 $2.88 $2.00
Fourth Quarter of 1998 $4.50 $1.75
Third Quarter of 1998 $4.50 $1.88
Second Quarter of 1998 $6.38 $3.50
First Quarter of 1998 $9.75 $1.19
Fourth Quarter of 1997 $13.38 $12.88
Third Quarter of 1997 $16.75 $12.88
The Company has never paid any cash dividends. Future earnings will be retained
for use in the Company's business, and the Company does not intend to pay any
cash dividends on its common stock for the foreseeable future.
9
ITEM 6 SELECTED FINANCIAL DATA
SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data)
The following data should be read in conjunction with "the Company,"
"Management's Discussion and analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and notes thereto and the
Unaudited Pro Forma Information and notes thereto included elsewhere in this
Prospectus.
Year Ended December 31,
1995 1996 1997 1998 1999
Consolidated Statement of Income data :
Sales Revenue...................................... $ 26,461 $ 41,869 $ 95,997 $ 91,125 $ 89,483
Gross Profit....................................... 192 7,383 23,154 27,051 23,859
Selling, and administrative
expenses 3,179 6,273 14,621 31,931 20,753
------------ ----------- ----------- ----------- ----------
Operating Income ( loss).......................... (2,986) 1,110 8,533 (4,880) 3,106
Operating Income (expenses),net................... 399 493 (1,846) 541 197
Income (loss) before minority interest and
income tax..................................... (2,587) 1,603 6,687 (4,339) 3,303
Net Income (loss)................................. $ (2,586 $ 1,643 7,935 (4,287) 2,413
============ =========== =========== =========== ==========
Net Income (loss) per share :
Basic.......................................... $ (0.14) $ 0.09 0.40 (0.21) 0.12
Diluted........................................ $ - $ - $ - - -
Weighted Average Share Outstanding :
Basic.......................................... 18,800 18,800 19,779 20,250 20,250
Diluted........................................ - - - - -
Consolidated Balance Sheet Data :
Working Capital................................. $ (6,109) $ (7,351) $ 17 $ 2,793 $ 6,225
Total Assets.................................... 1,952 23,742 35,078 48,076 42,213
Total Long - Term Debt - 55 227 403 254
Stockholders' Equity............................ (5,258) 3,927 9,764 8,751 11,065
10
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS
Caution Regarding Forward-Looking Information
This annual report contains certain forward-looking statements and
information relating to the Company that are based on the beliefs of the Company
or its management as well as assumptions made by and information currently
available to the Company or its management. When used in this document, the
words "anticipate", "believe", "estimate", "expect", and "intend" and similar
expressions, as they relate to the Company or its management, are intended to
identify forward-looking statements. Such statements reflect the current view of
the Company regarding future events and are subject to certain risks,
uncertainties and assumptions, including the risks and uncertainties noted.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those described herein as anticipated, believed, estimated, expected or
intended. In each instance, forward-looking information should be considered in
light of the accompanying meaningful cautionary statements herein.
Results of operations, comparing fiscal years ended December 31, 1999 and 1998
Sales revenue for the year ended December 31, 1999, was approximately
$89.5 million compared to approximately $91.1 million for 1998. This decrease is
a result of the travelers concern over Y2K problem which results to substantial
reduction in number of passengers travel through the airports. Furthermore,
commencing during the last half of 1997, the Thai Government began the "Amazing
Thailand" tourism marketing campaign for the period 1998 and 1999. This campaign
coincides with the devaluation of the Thai Baht that makes Thailand more
attractive to numerous travelers, including, in particular, budget-conscious
tourist. This caused the Company to adjust its marketing and operating
strategies to cater to this new and larger base of customers. In order to obtain
the same level of sales volume as in prior years, the Company must sell more
units of merchandise. The Company intends to optimize its resources and obtain
benefits from economies of scale in its operations in order to improve its
financial performance. Management believes that this trend is likely to continue
and ultimately should, as a result of increase sales volume, affect the
Company's results positively.
The cost of merchandise sold for the year ended December 31, 1999, and
1998, was approximately $43.3 million and $39.1 million, respectively. The
principal factor causing this increase is directly related to the current
campaign on promotional sales discount of products sold in both subsidiaries
where more units of merchandise were sold with less profit margin. However, due
to the lower concession fees paid to the Airport Authorities of Thailand (AAT),
comparing the year ended December 31, 1999, to the same period in 1998, the
ratio of concession fees paid to sales revenue fell from 27.40% in 1998 to
24.97% in 1999. This decrease is a result of successful negotiations with the
AAT to lower the fixed concession fees paid by KPT to be more closely in line
with the current sales of this subsidiary. Management anticipates a further
reduction in these fees may result from continued negotiations with the AAT.
Selling and administrative expenses also reflect the temporary
merchandise adjustment and the implementation of promotional sales discount.
These expenses were approximately $21.8 million for the year ended December 31,
1999, and approximately $16.2 million for the same period in 1998. In terms of
percentage of sales, 1999 expenses were approximately 24.40% of sales and 1998
expenses were approximately 17.76% of sales. This increase is directly
attributable to the promotional costs supporting the on-going campaigns to
expand the customer base for both subsidiaries and the promotional sales
discount offered to increase sales volume. However, Management believes that the
sales volume will grow and will ultimately reduce this ratio favorably.
Net income for the year ended December 31, 1999, was approximately $2.4
million, or $0.12 per share (basic), compared to the net loss of approximately
$4.3 million, or $0.21 per share (basic), for the year ended December 31, 1998.
The net loss shown in 1998 was caused by a one-time charge of approximately
$15.7 million, resulting from a provision for doubtful accounts for advances to
related companies and loans to directors. During 1999, the balance for these
accounts has been reduced due to successful collections from the total amount of
$27.7 million at December 31, 1998 to $19.6 million at December 31, 1999. The
management will continue aggressively in trying to reduce these loans balance
further.
11
The ratio of inventory divided by sales revenue for the year ended
December 31, 1999 and 1998, was approximately 18.44% and 16.36%, respectively.
This increase is the result of the trip cancellation by several travelers
concerning over Y2K problem which caused the company's inventories to have
lesser turnover than anticipated.
Results of operations, comparing fiscal years ended December 31, 1998 and 1997
King Power Duty Free Co., Ltd. (KPD) began retail operations in 1997
and the revenue of this subsidiary is a direct result of the increase in the
number of tourists coming to Thailand as a result of the social and government
stability, the Thai Baht devaluation and its fully functional retail stores. In
1998 additional growth was experienced in general merchandise sales at the King
Power Tax Free Co., Ltd. (KPT) stores in Thailand airports, principally due to
an increase in tourism traffic. Management anticipates that Thailand will
continue to be an attractive tourist destination during future periods and will
expand as a focal point for air travel throughout Asia.
Sales revenue for the year ended December 31, 1998, was approximately
$91.1 million, compared to approximately $96.0 million for 1997. This decrease
is directly attributable to the devaluation of Baht that took place during the
last half of 1997. Overall sales revenue, measured in Thai Baht, increased
14.29% from Baht 3,252.7 million for the year ended December 31,1997, to Baht
3,717.5 million for the same period in 1998. However, the average exchange rate
of Baht 40.795 to 1 was used to convert the 1998 figure into US Dollars, while
the average exchange rate of Baht 33.883 to 1 was used for 1997. Also commencing
in the last half of 1997, the Thai Government began the "Amazing Thailand"
marketing campaign for the 1998-1999 time period to coincide with various events
occurring in Thailand or other countries located near Thailand. This marketing
campaign is international in scope and directly targeted to attract additional
new and repeat visitors to Thailand. The Company expects that this promotional
campaign will continue to directly impact the Company's operations in a positive
manner during 1999 and in subsequent years.
The cost of merchandise sold for the years ended December 31, 1998 and
1997, was approximately $39.1 million and $38.5 million, respectively. The
principal factor causing this slight increase is directly related to the change
in product mix during 1998 resulting from the decision to concentrate more on
products that have higher turnover and to sacrifice some profit margin in order
to increase sales volumes and decrease carrying costs. In addition, KPT's
concession agreement to maintain its locations within the Thai airports requires
payments based upon a fixed amount. As a result, comparing the year ended
December 31, 1998, to the year ended December 31, 1997, the ratio of the
Company's concession fee to sales revenue dropped favorably from approximately
35.77% in 1997 to approximately 27.40% in 1998. Additionally, during the first
quarter of 1998, the Thai government permanently waived the Customs Fee
previously imposed at the rate of 15% of gross sales.
Selling and administrative expenses, excluding depreciation and others,
also reflect the expansion of KPD's business and the increase in traffic at
KPT's stores. These expenses were approximately $16.2 million for the year ended
December 31, 1998 and approximately $14.6 million for the same period in 1997.
In terms of percentage of sales, 1998 expenses were approximately 17.76% of
sales and 1997 expenses were approximately 15.23% of sales. Management has made
a commitment to improve this ratio by improving the effectiveness and efficiency
of the Company's sales force that should result from additional training and
management supervision.
For 1998 the Company provided an allowance for doubtful accounts in the
amount of approximately $15.7 million for advances to related companies and
directors. This allowance was necessary due to liquidity constraints of the
related parties, including businesses in Hong Kong which have suffered
unexpected and severe losses as a result of the dramatic decrease in tourists
visiting that country.
12
The Company's profit, before this provision for doubtful accounts, for
the 1998 fiscal year was approximately $10.8 million, compared to a profit from
operations of approximately $8.5 million for the year ended December 31, 1997.
The net loss for the year ended December 31, 1998, (including this provision for
doubtful accounts) was approximately $4.3 million, or $0.21 per share (basic),
compared to net income of approximately $7.9 million, or $0.40 per share
(basic), for the year ended December 31, 1997. This decrease was caused by a
one-time charge of approximately $15.7 million, resulting from a provision for
doubtful accounts. As a result of a substantial increase in the total amount of
Advances to Related Companies and Loans to Directors which increased from $4.9
million at December 31,1997 to $23.1 million at December 31, 1998, and liquidity
constraints on those businesses, under generally accepted accounting principles
the Company was required to make this provision. Even though an allowance has
been provided, Management will aggressively pursue collection of these accounts.
The ratio of inventory divided by revenue for the years ended December
31, 1998 and 1997, was approximately 16.36% and 13.69%, respectively. This
slight increase is a result of the commencement of operation by the Company's
new stores, including Harrods (Knightsbridge) and nine boutiques shops.
Results of Operations, comparing fiscal years ended December 31, 1997 and 1996
KPD began retail operations in 1997 and the revenue of this subsidiary
is a direct result of the increase in tourists to Thailand as a result of the
Thai Baht devaluation. Further growth was experienced in general merchandise
sales at the KPT stores in the Thailand airports due to an increase in tourism
traffic. Management anticipates that Thailand will continue to be an attractive
tourist destination during future periods and will expand as a focal point for
air travel throughout Asia.
Sales revenue for 1997 was approximately $96.0 million as compared to
approximately $41.9 million for 1996. This increase is directly attributable to
the factors previously discussed. Additionally, as a result of the Thai Baht
devaluation, KPD has increased its retail prices three times or approximately
54%, during 1997. Further, commencing in the last half of 1997, the Thai
Government began the "Amazing Thailand" marketing campaign for the 1998-1999
time period to coincide with various events occurring in Thailand or other
countries closely located near Thailand. This marketing campaign is
international in scope and directly targeted to attract additional new and
repeat visitors to Thailand. The Company expects that this promotional campaign
will directly impact the Company's operations in a positive manner during and
subsequent to this time period.
Cost of sales for the years ended December 31, 1997 and 1996, were
approximately $38.5 million and $14.5 million, respectively. The factors for
this increase relate to the expansion of the KPD subsidiary and a larger number
of customers at the KPT stores for consumer goods. In addition, KPT's concession
agreement to maintain its locations within the Thai airports requires payments
based upon fixed amount. In the time period from the year ended December 31,
1996, to the year ended December 31, 1997, the Company's concession fee as
percentage to sales revenue dropped from approximately 47.84% in 1996 to
approximately 35.77% in 1997.
Direct selling expenses, excluding depreciation and others, also
reflect the commencement of KPD's business and the increase in traffic at KPT's
stores. These expenses were approximately $4.8 million for 1996 and
approximately $8.7 million in 1997. In terms of percentage of sales, 1996
expenses were approximately 11.5% of sales and 1997 expenses were approximately
9.1% of sales. The improvement of these expenses as a percentage of sales is
attributable to the effectiveness and efficiency of the Company's sales force
through improvements in training and management supervision.
Administrative expenses for the years ended December 31, 1997 and 1996,
were approximately $3.8 million and $0.9 million, respectively. As a percentage
of total sales, these expenses were approximately 4.0% and 2.2%, respectively.
Administrative expenses have grown due to the growth in the Company's business.
Management has designated these expenses for constant monitoring in order to
control their levels in relation to the Company's size, sales volume and
operational necessity.
Net income for the year ended December 31, 1997, was approximately $7.9
million, or $0.40 per share (basic), and approximately $1.6 million, or $0.09
per share (basic), for the year ended December 31, 1996. However, included as a
component of net income is the cumulative effect of both realized and unrealized
gains and losses from foreign exchange caused charges to operations of
approximately $4.4 million or approximately $0.22 per share (basic)for the year
ended December 31, 1997.
The ratio of inventory divided by revenue for the year ended December
31, 1997 and 1996, was approximately 13.7% and 16.1%, respectively. This
reduction is due to the significant increase in sales volume during 1997, which
exceed the inventory level as projected.
13
Liquidity and Capital Resources
For the years ended December 31, 1999 and 1998, the Company had working
capital of approximately $6.2 million and $2.79 million, respectively. The
improvement in this figure is due to the Company's ability to significantly
expand operations, thereby increasing current assets. The Company experienced a
positive cash flow from operations of approximately $1.4 million at December 31,
1999, compared to a negative cash flow of $4.9 million during the same period of
1998. This increase is mainly due to the significant reduction in advances to
related companies for the purpose of pilot projects for future expansion. In
order to prevent any realization of losses attributed from the usual stage of
start-up operation, the Company's management decided not to have the Company
directly own these related companies until these companies become profitable.
Management is trying to reduce further this exposure by exploring ways that
these related companies can pay down or eliminate these loan balances or the
Company could eliminate them by acquiring these profitable related companies as
according to the original objective.
Recently Issued Accounting Principles
New Accounting Standards Not Yet Adopted - Accounting for Derivative
Instruments and Hedging Activities - Statement of Financial Accounting Standards
No. 133 is effective for fiscal year beginning after June 15, 1999. This
Statement requires that certain derivative instruments be recognized in balance
sheet at fair value and for changes in fair value to be recognized in
operations. Additional guidance is also provided to determine when hedge
accounting treatment is appropriate whereby hedging gains and losses are offset
by losses and gains related directly to the hedged item. The Company believes
that adoption will not have a significant impact on financial condition or
operating results.
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK
On July 2, 1997, the Thai Government announced that the Thai Baht would
thereafter be converted to a "Managed Float" system for the relationship of the
Baht to other international currencies. This change had an immediate impact on
the Company's operations and the results of its operations.
The Company's subsidiaries conduct their business with selling and
purchase prices based on Thai Baht, US Dollars, and other currencies. Sales are
made both in Thai Baht and other currencies, but eventually will be converted
into Thai Baht. Accordingly, the Company bears foreign currency transaction
risks between the date of purchase of goods for resale and the ultimate payment
of the goods in the appropriate negotiated currency.
King Power Duty Free Company, Limited (KPD) incurred an economic and
financial loss as a result of the devaluation and subsequent float of the Thai
Baht on the settlement of accounts in currencies owed other than Thai Baht.
However, as the Thai Baht has been stabilized and KPD began to buy forward
contracts in order to prevent any exchange risk from its foreign currencies
financial obligations, the losses from this transaction have been significantly
reduced.
King Power Tax Free Company, Limited (KPT) has been selling goods at
prices based upon the US Dollar since its inception. Further, KPT deals in
predominately Thailand produced goods whereby all purchases are settled in Thai
Baht. Therefore, the devaluation of the Thai Baht had minimal effect on the
settlement of open trade payables of KPT. Accordingly, the devaluation had an
opposite economic impact on the operations of KPT whereby the Thai Baht
devaluation increased the overall profitability of this subsidiary.
The overall effect of the Thai Baht devaluation was an increase in the
attractiveness of Thailand as a tourist destination. This increase in tourists
had a direct impact on increasing the Company's sales in the post-devaluation
time period.
The Company's financial statements and all accompanying discussions in
this document are presented in US Dollars.
14
In accordance with generally accepted accounting principles, the
Company has reported gain on foreign exchange-net of $0.22 million for the year
ended December 31, 1999, with the following showing the calculation supporting
the figure:
CHART A
The calculation of Unrealized gain on foreign exchange of US$ = 235,344 was
calculated on accumulated basis with quarterly adjustment on financial
obligations, receivable and cash on hand in foreign currency as shown below:
Account payable in foreign currency as of 12/31/99
- - ----------------------------- --------------------------- -------------------------- ---------------------------
Currency Amount Exchange Rate Total
12/31/99 Thai Baht
- - ----------------------------- --------------------------- -------------------------- ---------------------------
Australian Dollar 4,223.94 24.7173 104,404
Swiss Franc 2,369.30 23.7094 56,175
German Deutschmark 84,674.50 19.4823 1,649,654
Euro 23,016.51 38.0907 876,715
French Franc 477,824.91 5.8113 2,776,784
British Pound Sterling 28,680.00 61.1939 1,755,041
Hong Kong Dollar 6,829,759.00 4.8658 33,232,241
Italian Lire 29,738,500.00 0.0197 585,848
Singapore Dollar 3,857.39 22.7557 87,778
Japanese Yen 4,152,060.00 0.37087 1,539,874
US Dollar 1,238,019.68 37.7098 46,685,475
- - ----------------------------- --------------------------- -------------------------- ---------------------------
Total 89,349,989
- - ----------------------------- --------------------------- -------------------------- ---------------------------
BALANCE PER GENERAL LEDGER 94,001,701
Unrealized gain on accounts payable in foreign currency
---------------------------
4,651,712
---------------------------
Loan from bank (Trust Receipt) in foreign currency as of 12/31/99
- - ----------------------------- --------------------------- -------------------------- ---------------------------
Currency Amount Exchange Rate Total
12/31/99 Thai Baht
- - ----------------------------- --------------------------- -------------------------- ---------------------------
Australian Dollar 29,265.65 24.7173 723,368
Swiss Franc 290,054.70 23.7094 6,877,023
German Deutschmark 12,542.02 19.4823 244,347
Euro 47,260.38 38.0907 1,800,181
French Franc 727,837.00 5.8113 4,229,679
British pound Sterling 4,903.00 61.1939 300,034
Hong Kong Dollar 2,135,116.50 4.8658 10,389,050
Italian Lire 367,483,750.00 0.0197 7,239,430
US Dollar 2,892,559.55 37.7098 109,077,842
- - ----------------------------- --------------------------- -------------------------- ---------------------------
Total 140,880,954
- - ------------------------------------------------------------------------------------ ---------------------------
BALANCE PER GENERAL LEDGER 144,260,847
Unrealized gain on Trust Receipt in foreign currency
---------------------------
3,379,893
---------------------------
Unrealized gain advance and interest payable as at 12/31/99
- - ----------------------------- --------------------------- -------------------------- ---------------------------
Currency Amount Exchange Rate Total
Thai Baht 12/31/99 US$
- - ----------------------------- --------------------------- -------------------------- ---------------------------
Thai Baht 10,464,920.00 37.52 278,916
- - ------------------------------------------------------------------------------------ ---------------------------
BALANCE PER GENERAL LEDGER 280,538
Net Unrealized exchange as of 12/31/99
---------------------------
1,622
---------------------------
15
Unrealized gain on Cash on hand as of 12/31/99
- - ----------------------------- --------------------------- -------------------------- ---------------------------
Currency Amount Exchange Rate Total
12/31/99 Thai Baht
- - ----------------------------- --------------------------- -------------------------- ---------------------------
Australian Dollar 8,638.77 24.1525 208,648
Swiss Franc 380.00 23.3522 8,873
China Renminbi Yuan 24,054.00 4.4643 107,385
German Deutschmark 5,655.00 19.1268 108,162
French Franc 3,050.00 5.7045 17,399
British Pound Sterling 47,054.45 60.2988 2,837,327
Hong Kong Dollar 352,437.60 4.7923 1,688,987
Japanese Yen 9,515,462.00 0.364046 3,464,009
Korean Won 903,000.00 0.0326 29,438
Malaysian Ringgit 692.00 9.6074 6,648
Singapore Dollar 4,665.00 22.3073 104,063
Taiwanese Dollar 381,850.00 1.1865 453,065
US Dollar 542,722.32 37.3285 20,259,010
- - ----------------------------- --------------------------- -------------------------- ---------------------------
Total 29,293,014
- - ------------------------------------------------------------------------------------ ---------------------------
BALANCE PER GENERAL LEDGER 28,484,621
Unrealized gain on cash in hand in foreign currency
Unrealized gain on accounts payable in foreign currency
Unrealized gain on trust Receipt in foreign currency
Net Unrealized gain on exchange rate as at 12/31/99
US$ = 233,722
Total
Sub: Unrealized gain on exchange rate as at 12/31/99 - in Thai account book
Sub: Unrealized gain on exchange rate as at 12/31/99 - in US account book
Net unrealized gain on exchange rate as of 12/31/99
---------------------------
808,393
---------------------------
4,651,712
---------------------------
3,379,893
---------------------------
8,839,998
---------------------------
(US$ 1= 37.8226 Baht)
233,722
1,622
-------
235,344
-------
16
CHART B
The calculation of Unrealized loss on foreign exchange of US$ = 51,041 was
calculated on accumulated basis with quarterly adjustment on financial
receivable and cash on hand in foreign currency as shown below:
Cash on hand in foreign currency as of 12/31/99
- - ----------------------------- --------------------------- -------------------------- ---------------------------
Currency Amount Exchange Rate Total
12/31/99 Thai Baht
- - ----------------------------- --------------------------- -------------------------- ---------------------------
US Dollar 250,533.07 37.3285 9,352,007
British Pound Sterling 10,799.24 60.2988 651,181
German Deutschmark 1,045.00 19.1268 19,988
Singapore Dollar 1,369.00 22.3073 30,539
Malaysian Ringgit 55.00 9.6074 528
Hong Kong Dollar 30,800.00 4.7923 147,603
Japanese Yen 4,556,614.00 0.364046 1,658,817
Swiss Franc 210.00 23.3522 4,904
French Franc 1,350.00 5.7045 7,701
Korean Won 2,541,000.00 0.0326 82,837
Netherland Guilder 25.00 16.9911 425
China Renminbi Yuan 28,784.00 4.4643 128,500
Australian Dollar 2,905.67 24.1525 70,179
Taiwanese Dollar 16,650.00 1.1865 19,755
- - ----------------------------- --------------------------- -------------------------- ---------------------------
Total 12,174,964
- - ------------------------------------------------------------------------------------ ---------------------------
BALANCE PER GENERAL LEDGER 12,861,014
Unrealized loss from cash on hand in foreign currency
---------------------------
-686,050
---------------------------
Unrealized loss on account receivable as of 12/31/99
- - ----------------------------- --------------------------- -------------------------- ---------------------------
Currency Amount Exchange Rate Total
12/31/99 Thai Baht
- - ----------------------------- --------------------------- -------------------------- ---------------------------
Swiss Franc 6,443.50 23.3522 150,470
German Deutschmark 58,212.68 19.1268 1,113,422
Euro 43,349.50 37.4053 1,621,501
French Franc 32,110.40 5.7045 183,174
British Pound Sterling 8,401.10 60.2988 506,576
Hong Kong Dollar 3,812,465.20 4.7923 18,270,477
Italian Lire 332,758,550.00 0.0193 6,422,240
Singapore Dollar 5,880.00 22.3073 131,167
US Dollar 210,247.51 37.3285 7,848,224
- - ----------------------------- --------------------------- -------------------------- ---------------------------
Total 36,247,251
- - ------------------------------------------------------------------------------------ ---------------------------
BALANCE PER GENERAL LEDGER 37,491,710
Unrealized loss from account receivable Unrealized loss from cash on hand in
foreign currency Net Unrealized exchange loss as of 12/31/99
---------------------------
-1,244,459
---------------------------
-686,050
---------------------------
-1,930,509
---------------------------
US$ = (51,041) (US$1= 37.8226 Baht)
NET FOR UNREALIZED GAIN/LOSS EXCHANGE AS OF 12/31/99
- - ----------------------------------------------------
Thai Baht US Dollar
---------- ---------
Net Unrealized exchange loss as of 12/31/99 (1,930,509)
Net Unrealized gain on exchange rate as at 12/31/99 8,839,998
---------
NET UNREALIZED EXCHANGE 6,909,489 182,681
---------
Net Unrealized exchange GAIN KPG(US) as of 12/31/99 1,622
-----
NET UNREALIZED EXCHANGE - 184,303
-------
NET FOR REALIZED GAIN/LOSS EXCHANGE AS OF 12/31/99
- - --------------------------------------------------
Net realized loss on exchange rate of KPT as at 12/31/99 (14,662,302)
Net realized gain on exchange rate of KPD as at 12/31/99 11,327,318
Net realized gain on exchange rate of KPG(US) as at 12/31/99 - 131,775
-----------
NET REALIZED EXCHANGE (3,334,984) (88,174)
----------- --------
NET REALIZED EXCHANGE 43,601
------
TOTAL NET REALIZED/UNREALIZED EXCHANGE RATE 227,904
-------
18
Monetary Assets and Liabilities Denominated in Thai Baht
As of December 31, 1999, the amount of monetary assets and liabilities
which are denominated in Thai Baht are as follows:
TYPE OF MONETARY ASSET US DOLLARS
Cash and equivalents 2,046,904
Trade Accounts Receivable 1,101,848
Refundable value-added-tax 1,180,436
Related Parties 3,791,123
Deferred income tax assets 4,354,132
Restricted deposit 3,845,629
Other current assets 3,668,385
Other non-current assets 212,090
TYPE OF MONETARY LIABILITY
Bank overdraft & loan 6,293,968
Current portion of long-term debt 28,089
Accounts payable 7,622,178
Advance from related companies/directors 940,544
Concession fees 8,642,492
Other current liabilities 1,759,448
Long-term loan - net 254,000
ITEM 8 FINANCIAL STATEMENTS
Consolidated Financial Statements of the Company (Audited)
Independent Auditors Report - Smith, Jackson, Boyer & Daniell, PLLC
(formerly Smith, Jackson, Cooper & Daniell, PLLC)
dated March 10, 2000
Independent Auditors Report - Deloitte Touche Tohmatsu Jaiyos, dated April 1,
1999
Independent Auditors Report - BDO International Limited, dated February 27,
1998
Balance Sheets as of December 31, 1999 and 1998
Statements of Income for the Years ended December 31, 1999, 1998 and 1997
Statements of Cash Flows for the Years ended December 31, 1999, 1998 and 1997
Statements of Changes in Shareholder's Equity for the Years ended December 31,
1999, 1998 and 1997 Notes to Financial Statements
19
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
KING POWER INTERNATIONAL GROUP CO., LTD.
We have audited the consolidated balance sheet of King Power International Group
Co., Ltd. as of December 31, 1999, and the related consolidated statements of
income, comprehensive income, cash flows and changes in shareholders' equity for
the year then ended. These financial statements are the responsibility of the
Company's Management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance as to whether the financial
statements are free of material misstatement. An audit also includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of King Power
International Group Co., Ltd. and subsidiaries as of December 31, 1999, and the
results of their operations, cash flows and changes in shareholders' equity for
the year then ended, in conformity with generally accepted accounting
principles.
/s/ Smith, Jackson, Boyer & Daniell, Pllc
-------------------------------------
SMITH, JACKSON, BOYER & DANIELL, PLLC
March 10, 2000
Dallas, Texas
20
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
KING POWER INTERNATIONAL GROUP CO., LTD. AND SUBSIDIARIES
We have audited the accompanying consolidated balance sheets of King Power
International Group Co., Ltd. and subsidiaries (the "Corporation") as of
December 31, 1998 and the related consolidated statements of operations,
comprehensive income, shareholders' equity, and cash flows for the year then
ended. Our audit also included the financial statement schedule listed in the
Index at Item 14. These financial statements and the financial statements
schedule are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on the financial statements and
financial statement schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of King Power International Group Co.,
Ltd. and subsidiaries as of December 31, 1998, and the results of their
operations and their cash flows for the year ended December 31, 1998 in
conformity with generally accepted accounting principles in the United States of
America. Also, in our opinion, such financial statement schedules, when
considered in relation to the basic consolidated financial statements taken as a
whole, present fairly in all material respects the information set forth
therein.
/s/ Deloitte Touche Tohmatsu Jaiyos
-------------------------------
DELOITTE TOUCHE TOHMATSU JAIYOS
April 1, 1999
BANGKOK, THAILAND
21
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To The Board of Directors and Shareholders of
- - ---------------------------------------------
King Power International Group Co., Ltd.
We have audited the accompanying consolidated statements of income,
comprehensive income, changes in shareholders' equity and cash flow for the year
ended December 31, 1997. We have also audited the financial statements schedules
listed in the accompanying index. These financial statements and financial
statement schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and the
financial statements based on our audit.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial statement schedules are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements and financial statement schedules.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
financial statements and financial statement schedules. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial referred to above present fairly, in
all material respects, the results of operations, and cash flow of King Power
International Group Co., Ltd. for the year ended December 31, 1997, in
conformity with accounting principles generally accepted in the United States of
America. Also, in our opinion, the related financial statement schedules,
presents fairly, in all material respects, the information set forth therein.
/s/ BDO International Limited
- - -------------------------------
BDO International Limited
Bangkok, Thailand
February 27, 1998
22
KING POWER INTERNATIONAL GROUP CO., LTD AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31,
- - ------------------------------------------------------------------------------------------------
Note 1999 1998
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,192,510 $ 1,371,739
Trade accounts receivable 179,485 334,015
Refundable value added tax 4 1,180,436 2,238,862
Loans and advances to and accrued interest
receivable from affiliates, net 12 5,214,335 11,911,642
Merchandise inventories - net 16,498,754 14,910,164
Restricted fixed deposits 3 3,845,629 5,254,485
Deferred income tax assets 11 4,354,132 4,464,606
Prepaid expenses 5 2,607,962 273,163
Other current assets 667,209 612,437
----------- -----------
Total current assets 36,740,452 41,371,113
Property, plant and equipment - net 6 5,257,949 6,173,610
Investment and other assets 214,180 531,406
----------- -----------
TOTAL ASSETS $42,212,581 $48,076,129
----------- -----------
The accompanying notes are an integral part of the financial statements
23
KING POWER INTERNATIONAL GROUP CO., LTD AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
AS OF DECEMBER 31,
- - ---------------------------------------------------------------------------------------------
Note 1999 1998
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Bank overdraft and loans from banks 7 $ 10,048,791 $ 10,185,747
Current portion of long - term loans 9 28,089 1,346,820
Trade accounts payable 10,003,574 11,398,114
Accrued concession fee 8 8,467,028 10,797,835
Other current liabilities 1,967,996 4,849,894
------------ ------------
Total current liabilities 30,515,478 38,578,410
Long - term loans, net 9 254,000 402,927
------------ ------------
Total liabilities 30,769,478 38,981,337
------------
Minority interest 378,457 343,473
Shareholders' equity
Common stock, $0.001 par value,
20,250,000 shares issued and outstanding 20,250 20,250
Additional paid in capital 20,848,145 20,848,145
Retained (deficit) (9,503,916) (11,916,895)
Translation adjustments (299,833) (200,181)
------------ ------------
Total shareholders' equity 11,064,646 8,751,319
------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 42,212,581 $ 48,076,129
------------ ------------
The accompanying notes are an integral part of the financial statements
24
KING POWER INTERNATIONAL GROUP CO., LTD AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31,
- - ---------------------------------------------------------------------------------------------------
Note 1999 1998 1997
Sales revenue $ 89,482,559 $ 91,125,385 $ 95,996,663
Cost of sales:
Cost of merchandise sold 43,280,910 39,104,944 38,504,886
Concession fees 8 22,342,213 24,969,793 34,337,536
------------ ------------ ------------
Total cost of sales 65,623,123 64,074,737 72,842,422
------------ ------------ ------------
Gross profit 23,859,436 27,050,648 23,154,241
Operating expenses:
Selling and administrative expenses 21,836,679 16,184,976 14,621,272
Provision for doubtful account (1,083,190) 15,745,552 --
------------ ------------ ------------
Total operating expenses 20,753,489 31,930,528 14,621,272
------------ ------------ ------------
Income from operation 3,105,947 (4,879,880) 8,532,969
Other income (expenses)
Interest income 917,421 1,439,169 1,826,763
Interest expenses (1,127,426) (1,364,628) (1,226,176)
Gain (Loss) on foreign exchange - net 227,904 25,909 (2,746,497)
Unrealized loss on foreign exchange due to - -- -- (1,625,558)
Baht devaluation
Gain (loss) on investment in other companies (112,608) -- --
Management fee income -- 254,243 1,647,548
Other income 291,337 186,795 278,285
------------ ------------ ------------
Total other revenues (expenses) 196,628 541,488 (1,845,635)
------------ ------------ ------------
Net income before income tax 3,302,575 (4,338,392) 6,687,334
Income tax benefit (expenses) 11 (848,249) 113,955 1,219,387
------------ ------------ ------------
Net income before minority interest 2,454,326 (4,224,437) 7,906,721
Minority interest (41,347) (62,697) 28,115
------------ ------------ ------------
Net income attributed to common shares 2,412,979 (4,287,134) 7,934,836
============ ============ ============
Weighted average number of common shares
outstanding 20,250,000 20,250,000 19,779,011
Basic earning per share $ 0.12 $ (0.21) $ 0.40
The accompanying notes are an integral part of the financial statements
25
KING POWER INTERNATIONAL GROUP CO., LTD AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31,
- - -------------------------------------------------------------------------------------------------------------------
1999 1998 1997
Net income attribute to common shares $ 2,412,979 $ (4,287,134) $ 7,934,836
Other comprehensive income, before tax:
Foreign currency translation adjustments (99,652) 3,274,159 (3,984,828)
Comprehensive income $ 2,313,327 $ (1,012,975) $ 3,950,008
--------- ----------- ---------
The accompanying notes are an integral part of the financial statements
26
KING POWER INTERNATIONAL GROUP CO., LTD AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
- - -----------------------------------------------------------------------------------------------------------
1999 1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,412,979 $ (4,287,134) $ 7,934,836
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation 1,452,924 953,908 779,002
Unrealized loss (gain) on foreign exchange (184,303) (517,287) 3,553,568
Provision for damaged stock -- (617,652) 743,747
Deferred income tax assets 110,474 (3,338,336) (874,465)
Provision for doubtful accounts (1,083,190) 15,745,552 --
Decrease (increase) in operating assets:
Loan and receivables to related companies and
directors 7,782,118 (22,131,676) (2,373,415)
Trade accounts receivable 121,626 777,840 (956,125)
Refundable valued added tax 1,058,426 997,883 (40,909)
Inventories (1,588,590) 2,631,652 (5,803,278)
Prepaid expense and other current assets (2,389,570) 790,443 (728,699)
Other long term assets 200,180 665,430 (677,430)
Increase (decrease) in operating liabilities:
Trade accounts payable (1,271,552) (3,078,966) (3,859,315)
Accrued concession fees (2,330,807) 2,791,828 6,216,070
Other current liabilities (2,881,898) 3,628,816 (69,038)
Other liabilities 37,240 102,218 (29,283)
------------ ------------ ------------
Net cash provided (used) by
Activities $ 1,446,057 $ (4,885,481) $ 3,815,266
------------ ------------ ------------
The accompanying notes are an integral part of the financial statements
27
KING POWER INTERNATIONAL GROUP CO., LTD AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
FOR THE YEARS ENDED DECEMBER 31,
- - ---------------------------------------------------------------------------------------------------------
1999 1998 1997
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets $ (537,263) $(2,564,547) $(2,430,519)
Decrease in restricted fixed deposit 1,408,856 3,073,008 3,081,772
----------- ----------- -----------
Net cash provided (used) by investing
Activities 871,593 508,461 651,253
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds (repayment) in bank overdrafts (32,191) 2,176,618 (1,305,625)
Proceeds (repayment) from bank loans (15,403) 1,578,472 (1,072,033)
Proceeds (repayment) from installment purchase
Payable (30,647) -- (71,028)
Proceeds (repayment) from long-term loan (1,322,221) -- 208,665
Net proceeds form Regulation S issuance -- -- 1,887,000
----------- ----------- -----------
Net cash provided (used) by financing
Activities (1,400,462) 3,755,090 (353,021)
----------- ----------- -----------
Effect of exchange rate changes on cash and cash
Equivalents (96,417) 676,789 (3,935,821)
----------- ----------- -----------
Net increase in cash and cash equivalents 820,771 54,859 177,677
Cash and cash equivalents - beginning of period 1,371,739 1,316,880 1,139,203
----------- ----------- -----------
Cash and cash equivalents - end of period $ 2,192,510 $ 1,371,739 $ 1,316,880
=========== =========== ===========
Supplement cash flow information Cash paid during the period:
Interest paid 1,188,170 1,469,280 588,403
Income taxes paid 3,213,815 5,466 --
Common stock -- -- 1,200
Additional paid in capital -- -- (1,200)
The accompanying notes are an integral part of the financial statements
28
KING POWER INTERNATIONAL GROUP CO., LTD AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
- - --------------------------------------------------------------------------------------------------------------------
Common Stock
----------------
Shares Amount
US$
Balances, January 1, 1997 18,800,000 18,800
Recapitalization at June 12, 1997 1,200,000 1,200
Regulation S issuance at August 19, 1997 250,000 250
Net Income
Other Comprehensive income, net of tax
Foreign currency translation adjustment
Comprehensive Income
----------- -----------
Balances, December 31, 1997 20,250,000 20,250
=========== ===========
Balances, January 1, 1998 20,250,000 20,250
Net Income
Other Comprehensive income, net of tax
Foreign currency translation adjustment
Comprehensive Income
----------- -----------
Balances, December 31, 1998 20,250,000 20,250
=========== ===========
Balances, January 1, 1999 20,250,000 20,250
Net Income
Other comprehensive income, net of tax
Foreign currency translation adjustment
Comprehensive Income
Balances, December 31, 1999 20,250,000 20,250
=========== ===========
Accumulated
Additional Other
Paid in Comprehensive Retained Comprehensive
Capital Income Earnings Income Total
US$ US$ US$ US$ US$
Balances, January 1, 1997 18,962,595 (15,564,597) 510,488 3,927,286
Recapitalization at June 12, 1997 (1,200) --
Regulation S issuance at August 19, 1997 1,886,750 1,887,000
Net Income 7,934,836 7,934,836 7,934,836
Other Comprehensive income, net of tax
Foreign currency translation adjustment (3,984,828) (3,984,828) (3,984,828)
-----------
Comprehensive Income 3,950,008 -- -- --
----------- =========== ----------- ----------- -----------
Balances, December 31, 1997 20,848,145 (7,629,761) (3,474,340) 9,764,294
=========== =========== =========== ===========
Balances, January 1, 1998 20,848,145 (7,629,761) (3,474,340) 9,764,294
Net Income (4,287,134) (4,287,134) (4,287,134)
Other Comprehensive income, net of tax
Foreign currency translation adjustment 3,274,159 3,274,159 3,274,159
-----------
Comprehensive Income (1,012,975) -- -- --
----------- =========== ----------- ----------- -----------
Balances, December 31, 1998 20,848,145 (11,916,895) (200,181) 8,751,319
=========== =========== =========== ===========
Balances, January 1, 1999 20,848,145 (11,916,895) (200,181) 8,751,319
Net Income 2,412,979 2,412,979 2,412,979
Other comprehensive income, net of tax
Foreign currency translation adjustment (99,652) (99,652) (99,652)
-----------
Comprehensive Income 2,313,327
===========
Balances, December 31, 1999 20,848,145 (9,503,916) (299,833) 11,064,646
=========== =========== =========== ===========
The accompanying notes are an integral part of the financial statement
30
KING POWER INTERNATIONAL GROUP CO., LTD AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
1. BASIS OF PRESENTATION
King Power International Group Co., Ltd. (formerly Immune America,
Inc.) (herein the "Company") was incorporated under the laws of the State of
Nevada on July 30, 1985.
On June 12, 1997, the Company exchanged 18,800,000 shares of its common
stock for 99.94% of the issued and outstanding common shares of King Power Tax
Free Company Limited [(formerly J.M.T. Group Company Limited)-KPT thereafter]
and 94.95% of the issued and outstanding common shares of King Power Duty Free
Company Limited [(formerly J.M.T. Duty Free Company Limited)-KPD thereafter].
This exchange of the Company's common stock to the former KPT and KPD
shareholders resulted in those former shareholders obtaining a majority voting
interest in the Company. Generally accepted accounting principles require that
the company whose stockholders retain the majority interest in a combined
business be treated as the acquirer for accounting purposes. Consequently, this
transaction was accounted for as a "reverse acquisition" for financial reporting
purposes and KPT and KPD were deemed to have acquired 94% of equity interest in
the Company as of the date of acquisition. The relevant acquisition process
utilized the capital structure of Immune America, Inc., and the assets and
liabilities of KPT and KPD were recorded at historical cost.
KPT and KPD are the operating entities for financial reporting purposes
and the financial statements prior to June 12, 1997, represent KPT and KPD's
financial position and results of operations. The assets, liabilities and
results of operations of both KPT and KPD are included as of June 12, 1997.
Although KPT and KPD are deemed to be the acquiring corporations for financial
accounting and reporting purposes, the legal status of the Company as the
surviving corporation does not change.
Concurrent with the reverse acquisition, the Company changed its
corporate name from Immune America, Inc. to King Power
International Group Co., Ltd.
KPD is a Thailand-based corporation engaged in selling duty free
merchandise to the traveling public under the supervision of Thai customs in
stores located in the international terminals of the various airports located in
Thailand. KPD holds from the Airports Authority of Thailand a non-exclusive
license to operate duty free stores for all stores of this specific nature. For
the duty free store operation, KPD is exempt from input value added tax on
purchases of import merchandise and from output value added tax on sales of
merchandise.
KPT is a Thailand-based corporation engaged in selling various
souvenirs and consumer products in the international and domestic terminals of
the various airports located in Thailand to the general public. KPT holds the
exclusive operating license granted by the Airports Authority of Thailand for
all shops of this specific nature. For the tax-free operation, KPT is subject to
input value added tax on purchases of merchandise and is exempt from output
value added tax on sales of merchandise.
On October 10, 1997, the Company acquired 4,900 shares of common stock
in King Power International Group (Thailand) Company Limited (KPG Thai),
equivalent to 49% of the registered capital. KPG Thai was established in
Thailand on September 11, 1997, and has registered capital totaling Baht 1
million divided into 10,000 shares of common stock with Baht 100 per share. On
the same date, KPT acquired 5,093 shares of common stock in KPG Thai, equivalent
to 50.93% of the registered capital. Ultimately, the Company owns 99.93% of
equity interest in KPG Thai.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - The consolidated financial statements,
which include the accounts of the Company and its subsidiaries, are prepared in
accordance with accounting principles generally accepted in the United States of
America. All significant intercompany accounts and transactions have been
eliminated in consolidation. Investments in other companies under 20% of
interest are accounted for using the cost method. At December 31, 1999, these
investments have been written down due to an assumed permanent impairment of
their value. The consolidated financial statements are presented in U.S.
dollars.
Cash and Cash Equivalents - The Company considers all highly liquid
investments with an original maturity of three months or less to be cash
equivalents.
Merchandise Inventories - Merchandise inventories are stated at the
lower of cost or market. Cost is determined on a weighted average basis.
Provision for Doubtful Accounts - Estimated collection losses of the
Company are provided for based on the Company's collection experience together
with a review of the financial position of each debtor. Where the Company
determines reserves are necessary, it will provide an allowance for the total
receivable and accrued interest outstanding.
31
KING POWER INTERNATIONAL GROUP CO., LTD AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
Marketable Securities - Securities held for trading are marked to
market at year-end with the resulting gain or loss being included in current
income.
Foreign Currency Translation and Transactions - The financial position
and results of operations of the Company's foreign subsidiaries are determined
using the local currency as the functional currency. Assets and liabilities of
these subsidiaries are translated at the prevailing exchange rates in effect at
each period end. Contributed capital accounts are translated using the
historical rate of exchange when capital was injected. Income statement accounts
are translated at the average rate of exchange during the year. Translation
adjustments arising from the use of different exchange rates from period to
period are included in the cumulative translation adjustment account in
shareholders' equity. Gains and losses resulting from foreign currency
transactions are included in operations. Gains or losses on foreign exchange
transaction are recognized as incurred in the consolidated statements of income.
Differences between the forward rate and the spot rate in forward exchange
contracts are amortized as revenue and expense over the period of the contract.
The exchange rates at December 31,1999 and 1998, are $1= Thai Baht
37.520 and Baht 36.688, respectively. The average exchange rates during 1999,
1998, and 1997 are $1= Thai Baht 37.8226, Baht 40.795 and Baht 33.883,
respectively.
Property, Plant and Equipment - Property, plant and equipment are
stated at cost. Depreciation is computed by using the straight-line method over
the estimated useful lives of the assets as follows:
Buildings 20 Years
Leasehold improvements Term of lease
Selling office equipment and fixtures 5 Years
Vehicles 5 Years
Maintenance, repairs and minor renewals are charged directly to
expenses as incurred.
Store Pre-Opening Costs - Store pre - opening costs are expensed as
incurred.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
financial statements, and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from these estimates.
Revenue Recognition - The Company recognizes revenue from sales of
merchandise at the point of sale.
Concession Fees - According to the concession agreement with Airports
Authority of Thailand, KPT is required to pay concession fees, rental and
services fees, and other related expenses at the fixed charges per month as
defined in the agreement. According to the concession agreement with the
Airports Authority of Thailand, KPD is required to pay concession fees at the
fixed percentage of sales but at least equal to the fixed charges as defined in
the agreement, and pay rental and service fee and other related expenses.
Concentrations of Credit Risk - The Company's retail businesses are
cash flow businesses. Most sales take place with cash receipts or credit card
payments. The Company maintains its cash accounts with various financial
institutions. In Thailand, such accounts are insured for the full amount of
their value by the Thai government. U.S. bank deposits are within Federal
insurance limits. See Note 12 with respect to loans and advances to directors
and affiliated companies.
Fair Value of Financial Instruments - The carrying amount of cash,
trade accounts receivable, notes receivable, trade accounts payable and accrued
payables are reasonable estimates of their fair value because of the short
maturity of these items. The carrying amounts of the Company's credit facilities
approximate fair value because the interest rates on these instruments are
subject to change with market interest rates.
Income Taxes - The Company accounts for income taxes using the
liability method, which requires an entity to recognize the deferred tax
liabilities and assets. Deferred income taxes are recognized based on the
differences between the tax bases of assets and liabilities and their reported
amounts in the financial statements that will result in taxable or deductible
amounts in future years. Further, the effects of enacted tax laws or rate
changes are included as part of deferred tax expense or benefits in the period
that covers the enactment date. A valuation allowance is recognized if it is
more likely than not that some portion, or all of, a deferred tax asset will not
be realized
The Company does not provide for United States income taxes on
unremitted earnings of its Thailand-based subsidiaries since the Company's
intention is to reinvest these earnings in their operations.
32
KING POWER INTERNATIONAL GROUP CO., LTD AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
Earnings Per Share - Basic earnings per share has been computed based on
the average number of common shares outstanding for the period. There are no
potentially dilutive securities outstanding.
Reclassification - Certain 1997 and 1998 amounts has been reclassified to
conform to the 1999 presentation.
New Accounting Standards Not Yet Adopted-Accounting for Derivative
Instruments and Hedging Activities - Statement of Financial Accounting Standards
No. 133 is effective for fiscal years beginning after June 15, 1999. This
Statement requires that certain derivative instruments to be recognized in
balance sheets at fair value and for changes in fair value to be recognized in
operations. Additional guidance is also provided to determine when hedge
accounting treatment is appropriate whereby hedging gains and losses are offset
by losses and gains related directly to the hedged item. For the year ended
December 31,1999, that adoption does not have a significant impact on financial
condition or operating results.
3. RESTRICTED FIXED DEPOSITS
1999 1998
---- ----
Restricted fixed deposits $ 3,845,629 $ 5,254,485
Interest rates 3.00% - 5.50% 6.00% - 15.00%
As of December 31, 1999 and 1998, the restricted fixed deposits with
maturities from three to twelve months are pledged as a collateral to a
commercial bank for bank credit facilities of subsidiaries. As these are current
obligations of the Company, the deposits are shown as current assets.
4. REFUNDABLE VALUE ADDED TAX
For Thailand-based subsidiaries, refundable value added tax (VAT)
represents, on a cumulative basis, the excess of input tax (charged by suppliers
on purchases of merchandise and services) over the output tax (charged to
customers on sales of merchandise and services). Value added tax is levied on
the value added at each stage of production and distribution, including
servicing, generally at the rate of 10% effective at August 16, 1997. The
Minister of Finance, however, declared a new value added tax at the rate 7%
commencing at April 1, 1999, in order to stimulate the domestic economy.
5. PREPAID EXPENSES
Prepaid expenses consist of the following:
1999 1998
---- ----
Prepaid management fee $3,598,081 $ --
Less Amortization 1,199,360 --
---------- ----------
Total 2,398,721 --
Prepaid expenses - other 209,241 273,163
---------- ----------
Total $2,607,962 $ 273,163
---------- ----------
On June 29, 1999, KPT and KPD entered into an agreement to engage Down
Town D.F.S. (Thailand) Co., Ltd., a related company, to provide statistical
analysis and marketing procedures over a period of 18 months, commencing July 1,
1999. In accordance with the agreement, KPT and KPD agreed to pay in advance for
these services, in the amount of $1,799,041 (excluding VAT). Accordingly, the
advance payments are treated as prepaid expenses in the accompanying financial
statements and amortized on a monthly basis over the term of the agreement.
33
KING POWER INTERNATIONAL GROUP CO., LTD AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
6. PROPERTY, PLANT AND EQUIPMENT - NET
Property, plant and equipment as of December 31, 1999 and 1998, consist of
the following:
1999 1998
---- ----
Land $ 700,426 $ 716,393
Building 137,730 140,870
Leasehold improvements 4,693,023 4,556,110
Sales office equipment and fixtures 2,317,640 2,160,045
Vehicles 720,864 654,010
----------- -----------
Total cost 8,569,683 8,227,428
Less Accumulated depreciation (3,311,734) (2,053,818)
----------- -----------
Net book value $ 5,257,949 $ 6,173,610
As of December 31, 1999 and 1998, land and building are pledged
as collateral for credit line of trust receipt and long-term loan from a bank.
(Note 7 and Note 9)
7. BANK OVERDRAFT AND LOANS FROM BANKS
1999 1998
---- ----
Bank overdraft $ 484,398 $ 516,589
Trust receipts 9,564,393 9,669,158
----------- -----------
$10,048,791 $10,185,747
=========== ===========
As of December 31, 1999 and 1998, the Company has an overdraft facility
with a commercial bank in Thailand with a total availability of Baht 30.74
million ($819,296) and Baht 20.74 million ($570,000), respectively, bearing
interest at MOR (Minimum Overdraft Rate), plus 1.00% - 1.50% per annum. For the
year ended December 31, 1999, the average rate of MOR was 6.50% - 12.75% per
annum and for the year ended December 31,1998, the average rate of MOR was
15.00% - 21.75% per annum. Available lines of credit for the bank overdrafts are
guaranteed by certain directors and collateralized by fixed deposits. (Note 3)
As of December 31, 1999 and 1998, trust receipts incurred by KPD bear
interest at the rates varying from 6.17%-12.25% and 7.14%-17.50% per annum,
respectively, and are collateralized by fixed deposits, KPD's land, and
guaranteed by two directors of KPD together with a related company. Trust
receipts at December 31, 1999, are:
Currencies Amount Interest rate(%)
Foreign currency borrowing by subsidiaries in Thailand
-Under forward contract and T/R BAHT 217,975,088 $ 5,809,571 6.17-12.25
-Without forward contract USD 2,892,560 2,907,192 7.50-11.50
CHF 290,055 183,289 6.17-7.50
DEM 12,542 6,512 7.46-7.56
AUD 29,266 19,280 10.50
FRF 727,837 112,731 7.50
HKD 2,135,117 276,894 10.25-12.25
ITL 367,483,750 192,949 7.50
GBP 4,903 7,997 9.75
EUR 47,260 47,978 7.50-7.56
-----------
$ 9,564,393
34
KING POWER INTERNATIONAL GROUP CO., LTD AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
8. CONCESSION FEES
Accrued concession fees as of December 31,1999 and 1998, consist of the
following:
1999 1998
---- ----
- The Customs Department of Thailand $ 533,049 $ 2,881,077
- The Airports Authority Of Thailand 7,933,979 7,916,758
--------- ---------
8,467,028 10,797,835
--------- ----------
For the year ended December 31,
1999 1998 1997
---- ---- ----
Concession fee expense $22,342,213 $24,969,793 34,337,536
=========== =========== ==========
In order to obtain the necessary rights to operate at the international and
domestic airports in Thailand, the Company has entered into various agreements
with the Airports Authority of Thailand and the Customs Department of Thailand,
which including the right to rent office space.
Both KPD and KPT are required to pay concession fees, rental and
service fees, property tax, and other expenses, and to pledge cash or obtain a
letter of bank guarantee of a local commercial bank as collateral under the
aforementioned agreements with the Airports Authority of Thailand and pay
concession fees under the aforementioned agreements with the Customs Department
of Thailand.
A summary of the concession and rental fees payable and value of
collateral for the remaining period of the agreement are as amended are as
follows:
KPT KPD
- - -------------------------------------------------------- ---------------------------------------------
Airport Rental, Service Collateral Airport and Rental, Service Collateral
Concession fee & other Customs & other
expenses Concession fee expenses
- - ----------------------------------------------------------------------------------------------------------
($ in thousands) ($ in thousands)
Year
1999 $ 11,455 $ 646 $ 7,037 $ 10,580 $ 965 $ 4,677
2000 11,644 626 7,094 11,273 969 4,843
2001 12,317 621 7,088 11,661 969 5,010
2002 12,985 618 7,088 - - -
2003 3,193 151 6,966 - - -
Effective March 19, 1998, the Customs Department of Thailand agreed to
waive the concession fees which KPD is required to pay for the duration of KPD's
concession through 2001, thus reducing the total amount required. Amounts
expensed by KPD under The Customs Department of Thailand concession were
$9,024,251 for 1997 and $1,988,951 from January 1 to March 19, 1998.
Additionally, the Customs Department approved on November 6, 1998, an extension
of the payment of accrued concession fee for December, 1997, and January, 1998,
amounting to $1,716,107 (Bath 62,953,299) as installment payments, carrying
interest rate of 1% per month and due in October, 1999. This amount was fully
paid to the Customs Department in October, 1999.
For the years ended December 31, 1999 and 1998, both KPD and KPT were
charged penalty fees amounting to $ 1,292,170 and $ 1,451,418, respectively,
relating to late payment of concession fees to the Customs Department and the
Airports Authority of Thailand. Of these amounts, $ 175,464 and $ 179,307,
respectively, were unpaid at December 31,1999 and 1998, and are included in
other current liabilities in the accompanying balance sheets.
9. LONG-TERM LOANS - NET
Long term liabilities as of December 31, 1999 and 1998, consist of the
following:
35
KING POWER INTERNATIONAL GROUP CO., LTD AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
1999 1998
---- ----
Long-term loans $ 253,180 $ 1,575,401
Installment purchase payable 28,909 59,556
----------- -----------
282,089 1,634,957
Less Current portion of long-term debt (28,089) (1,346,820)
-----------
Other liabilities 114,790
----------- -----------
Total $ 254,000 $ 402,927
As of December 31, 1999 and 1998, long-term loans consist of loans from banks
carrying interest rates of 14.75% and 17.25 - 21.50% per annum, respectively.
The long-term loans are secured by the Company's land and building and
guaranteed by a director of the Company. (See Notes 6)
Future maturities of long-term loans are as follows:
1999 1998
---- ----
Installment Purchase Obligation
1999 $ - $ 38,340
2000 16,827 8,859
2001 6,590 6,740
2002 5,492 5,617
------ -------
Total 28,909 $ 59,556
====== ==========
Long-term Loan Installment Payments
1999 - $ 1,346,820
2000 11,262 11,647
2001 13,174 13,485
2002 15,254 15,615
2003 17,663 18,063
2004 20,443 20,907
Thereafter 175,384 148,864
------- ----------
Total $253,180 $ 1,575,401
======= ==========
10. SHAREHOLDERS'EQUITY
(a) Per the reverse acquisition agreement, the two Thailand-based companies
together received a total of 18,800,000 shares of common stock of Immune
America, Inc. which represented 94% of equity interest as of the date the
reverse acquisition agreement was effective. Therefore, the 18,800,000
shares were assumed to be issued and outstanding as of January 1, 1996, for
the purpose of presenting comparative financial statements.
(b) Per the reverse acquisition agreement, 752,000 shares out of the total
18,800,000 shares were put in escrow subject to certain requirements
including that the Company shall have financial statements prepared in
accordance with U.S. GAAP and shall have reached certain criteria of
financial performance as of December 31, 1997. If, as of December 31, 1997,
the Company failed to satisfy any of these conditions, the 752,000 shares
were to be released to a financial consultant who was also a party to the
reverse requisition agreement. During the first quarter of 1998, these
shares were released from escrow and issued to the financial consultant.
(c) Per the reverse acquisition agreement, 1,200,000 shares of common stock as
of June 12, 1997, when the reverse acquisition was effective, represented
the other 4% of equity interests. These 1,200,000 shares of common stock
were represented by the following components.
Common Stock Additional
------------ paid-in Retained Treasury
Shares Amount capital earnings stock Total
--------- --------- --------- --------- --------- ---------
Beginning Balance at
12/31/96 275,316 $ 275 $ 151,186 $(143,833) $ (6,000) $ 1,628
Form S-8 issuance at
5/8/97 924,684 925 69,717 -- -- 70,642
Reissuing of treasury stock -- -- -- -- 6,000 6,000
Net loss at 6/12/97 -- -- -- (78,270) -- (78,270)
--------- --------- --------- --------- --------- ---------
Total shareholders' equity
At June 12, 1997 1,200,000 $ 1,200 $ 220,903 $(222,103) $ -- $ --
========= ========= ========= ========= ========= =========
36
KING POWER INTERNATIONAL GROUP CO., LTD AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINACIAL STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(d) On August 18,1997, the Company issued 250,000 shares of its common stock to
two foreign entities, 125,000 shares each, at a price of $8.00 per shares
with net of proceeds of $1,887,000. Both entities are located in Taipei,
Taiwan, Republic of China. One half of these shares 125,000 were placed in
escrow until May 1, 1998, subject to an additional payment by the purchaser
of $4.00 per share on all 250,000 shares issued or ($1,000,000) in the
event that the earnings per share for the Company for the calendar year
ended December 31, 1997, exceeded a certain amount per share. If the
earnings per share for fiscal year 1997 were below the specified goal, then
the shares under escrow were to be released to the purchasers without
further consideration. These shares have been released from escrow without
further consideration. No underwriter or placement agent was used. The
issuance was conducted pursuant to Regulation S promulgated under the
United State Securities Act of 1933, as amended.
11. INCOME TAX
The provision for income taxes consist of the following:
1999 1998 1997
---- ---- ----
$ $ $
Current income tax
benefit(expense)
United States -- -- --
Foreign (737,775) (3,476,186) --
---------- ---------- ----------
(737,775) (3,476,186) --
---------- ---------- ----------
Deferred income tax benefit(expense)
United States -- -- --
Foreign (110,474) 3,590,141 1,219,387
---------- ---------- ----------
(110,474) 3,590,141 1,219,387
---------- ---------- ----------
Net income tax benefit (expense) $ (848,249) $ 113,955 $ 1,219,387
---------- ---------- ----------
Pre-tax income for foreign companies for the year ended December 31,
1999, was $ 2,256,103. Current taxes payable are included in other current
liabilities.
The components of deferred income tax assets and liabilities were:
1999 1998 1997
---- ---- ----
Reserves for bad debts and inventory obsolescence $ 4,423,804 $4,945,942 $ --
Temporary difference -- -- 264,166
Net operating loss carried forward 369,019 333,572 955,221
---------- ---------- ----------
4,792,823 5,279,514 1,219,387
Translation adjustment -- -- (344,922)
Less Valuation allowance (438,691) (814,908) --
Deferred income tax assets $ 4,354,132 4,464,606 $ 874,465
---------- ---------- ----------
As a result, the effective income tax rate for the subsidiaries is
different from the standard income tax rate. The following reconciliation shows
the differences between the effective and standard rates.
For the year ended December 31,
1999 1998 1997
---- ---- ----
Standard income tax rate 35% (35%) 35%
Foreign tax rate difference (4%) 2% (5%)
Use of net operating loss carry-forward - (1%) (30%)
Usage of temporary difference - - (4%)
Recognition of net operating loss carried-forward - - (14%)
Valuation allowance recorded - 19%
Less: Valuation allowance (11%) - -
Non deductible expenses 6% 3% -
Other miscellaneous (including translation) - 9% -
---- ---- -----
Effective income tax rate 26% (3%) (18%)
==== ==== =====
As of December 31, 1999, 1998 and 1997, the Company has deferred income
tax assets relating to net operating loss carry forwards for income tax purpose
of $369,019, $333,572 and $955,221,respectively, that expire in years 1999 to
2004. (A valuation allowance on the United States loss carryforward has been
provided, as the Company has determined that it is more likely than not that
this deferred income tax asset will not be realized.)
37
KING POWER INTERNATIONAL GROUP CO., LTD AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
12. RELATED PARTIES AND DIRECTORS TRANSATIONS
The Company has business transactions with and has advanced funds to related
companies and directors. These transactions are with companies that have joint
directors and/or shareholders with the Company. Balances at December 31,1999 and
1998, with related companies and directors are as follows ($ in thousands)
As of December 31, 1999
Loans and receivables to related companies
Account Management Accounts Other
Receivable and Directors fee receivables payable payable
-------------------------------------------------------------------------------
Loans Interest
and Total
other
1999 receivables
King Power International Co., Ltd. 2,613 3,340 207 - 6,160 222 -
Forty Seven Co., Ltd. - 2,777 541 - 3,318 - -
Downtown D.F.S. (Thailand) Co., Ltd. 451 2,596 226 2,459 5,732 1 -
King Power Duty Free (CBO) Ltd. - 1,079 36 - 1,115 - -
Top China Group Co., Ltd. - 267 - - 267 - -
Lengle (Thailand) Co., Ltd. - 960 49 - 1,009 - -
Lengle TAT Phnom Penh Duty Free 44 - - - 44 - -
Grand Enterprise and Trading Partnership - 270 10 - 280 - -
King Power On Board Sales and Services Co., Ltd. 11 1,628 1 - 1,640 11 -
Thai Nishigawa International Co., Ltd. - - - - - 45 -
Niji (Thailand) Co., Ltd. 9 - - - 9 27 -
-------------------------------------------------------------------------------
3,128 12,917 1,070 2,459 19,574 306 -
Directors - to/(from) - - - - - - -
-------------------------------------------------------------------------------
3,128 12,917 1,070 2,459 19,574 306 -
Less Allowance for doubtful accounts: - - - - - - -
- - ----
Related companies (1,240) (10,066) (595) (2,459) (14,360) - -
Directors - - - - - - -
-------------------------------------------------------------------------------
(1,240) (10,066) (595) (2,459) (14,360) - -
-------------------------------------------------------------------------------
Total 1,888 2,851 475 - 5,214 306 -
===============================================================================
38
KING POWER INTERNATIONAL GROUP CO., LTD AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
As of December 31, 1999
Loans and receivables to related companies
Account Management Accounts Other
Receivable and Directors fee receivables payable payable
-----------------------------------------------------------------------------
Loans Interest and Total
1998 other
receivables
King Power International Co., Ltd. 1,690 1,052 156 199 3,097 - -
Forty Seven Co., Ltd. - 6,022 354 - 6,376 - -
Downtown D.F.S. (Thailand) Co., Ltd. 184 2,070 377 2,515 5,146 - -
King Power Duty Free (CBO) Ltd. - 1,429 128 - 1,557 88 50
Top China Group Co., Ltd.: - 1,302 70 - 1,372 - -
Lengle (Thailand) Co., Ltd. - 299 18 - 317 - -
Grand Enterprise and Trading Partnership - 1,177 47 - 1,224 - -
King Power on Board Sales and Services Co., Ltd. - 372 25 - 397 98 -
Infotel Communication (Thailand) Co., Ltd. - 553 44 - 597 - -
King Power Development Co., Ltd. - 121 3 - 124 - -
King Power Alpha on Board and Sale Service Co., Ltd. - 2 - - 2 - -
Thai Nishigawa International, Ltd. - - - - - 55 -
Niji (Thailand.) Co., Ltd. - - - - - 66 -
---------------------------------------------------------------------------
1,874 14,399 1,222 2,714 20,209 307 50
Directors - 7,228 220 - 7,448 - -
---------------------------------------------------------------------------
1,874 21,627 1,442 2,714 27,657 307 50
Less Allowance for doubtful accounts - - - - - - -
- - ----
Related companies (1,874) (8,110) (913) (2,714) (13,611) - -
Directors - (2,134) - - (2,134) - -
----------------------------------------------------------------------------
Sub total (1,874) (10,244) (913) (2,714) (15,745) - -
Total - 11,383 529 - 11,912 307 50
============================================================================
Additionally, the Airports Authority of Thailand owns 5% of KPD common
shares. As at December 31, 1999 and 1998, there are accrued concession fees
amounting to $7,933,979 and $7,916,758, respectively.
39
KING POWER INTERNATIONAL GROUP CO., LTD AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
As at December 31,1998, the Company charged interest for loans to/from related
companies at 10.00 % per annum and to/from directors at 6.50 -10.00 % per annum.
On March 24, 1999, the board of directors of the company approved a resolution
reducing the interest on loans to/from related companies and directors to be
4.00% and 3.00% per annum, respectively, due to the dramatic decline of market
interest rate in Thailand and in order to maintain liquidity within the group of
companies. Effective April 1, 1999, promissory notes with maturity less than 6
months bear no interest. Such loans have no formal contracts or collateral and
are due on demand.
The Company had operating transactions with related parties and
directors as follows ($ in thousands):
Related Companies
For the year ended December 31,
1999 1998 1997
---- ---- ----
Sales $ 3,219 $ 805 $ 1,253
Interest income 602 843 142
Management fee income -- 254 1,648
Purchase 2,658 945 9,127
Commission -- 369 --
Concession fee 22,414 11,092 34,338
For the year ended December 31,
1999 1998 1997
---- ---- ----
Interest income $ 16 $ 198 $ 380
13. COMMITMENTS AND CONTINGENT LIABILITIES
Lease commitments
As of December 31, 1998, KPG Thai had a leasing commitment for office
space under a non-cancelable operating lease agreement in excess of one year. As
of January 1, 1999, KPG Thai transfered the rights of the following lease
agreements to KPT, KPD and KING POWER INTERNATIONAL CO., LTD. The obligations of
the various consolidated companies under these lease agreements are set forth as
follows:
-KPT has a lease agreement with SIAM TOWER to lease 26th floor starting
from January 1, 1999, to October 31, 2000. -KPD has a lease agreement
with SIAM TOWER to lease 27th floor starting from January 1,1999, to
October 31, 2000. KPT and KPD have a lease agreement with the third
party starting from April 1, 1998, to December 31, 2001. Lease and
service charge committments are due as follows:
KPT KPD
--- ---
2000 $ 155,586 $ 232,494
2001 $ 7,996 $ 108,890
Letter of guarantees
As of December 31, 1999 and 1998, KPT and KPD were contingently liable
for bank guarantees totaling $12.68 million and $13.46 million, respectively,
issued in favor of the Excise Department and the Airport Authority of Thailand
as a performance bond.
Unused letters of credit
As of December 31, 1999 and 1998, KPD have the unused letters of credit
amounting to $3.19 million and $6.46 million, respectively.
40
KING POWER INTERNATIONAL GROUP CO., LTD AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Pledge of subsidiary stock
Subsequent to year end, the Company applied for a new line of credit.
As a part of this application, the Company agreed to pledge its stock in both
KPT and KPD as collateral. The line of credit application is under negotiation.
14. SEGMENT FINANCIAL INFORMATION
The following segment information of the Company for December 31, 1999,
1998 and 1997, are disclosed in accordance with Statement of Financial
Accounting Standard No.131 ("SFAS 131"). Information by legal entities is the
reportable segment under SFAS 131 because each entity is reported separately for
management ($ in thousands).
For the year ended December 31, 1999
Duty Free Tax All Other Consolidated
Retail Free
Retail
----------------- --------------- --------------- --------------------
Segment Information US $ US $ US $ US $
- - -------------------
Revenue from external customers 63,283 26,199 - 89,482
- - - Inter segment revenue - - - -
- - - Cost of merchandise sold 31,870 11,411 - 43,281
- - - Concession fees 10,979 11,363 - 22,342
- - - Gross profit 20,434 3,426 - 23,860
- - - Interest Income 725 110 82 917
- - - Interest expense 1,111 16 1 1,128
- - - Segment net income (loss) 842 388 1,224 2,454
- - - Segment total assets 30,007 11,975 231 42,213
- - - Expenditures for segment assets 361 313 5 679
- - - Depreciation 1,067 340 46 1,453
- - - Unrealized gain (loss) on exchange 201 (18) 2 185
- - - Allowance for doubtful account 985 (561) (1,507) (1,083)
- - - Deferred income tax assets 2,788 1,542 24 4,354
Revenue Long-lived
Assets
--------------- --------------------
Geographical Information US$ US $
------------------------
Bangkok 86,304 5,344
Northern Thailand region 493 58
Southern Thailand region 2,685 70
--------------- --------------------
Total 89,482 5,472
=============== ====================
41
KING POWER INTERNATIONAL GROUP CO., LTD AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
For the year ended December 31, 1998
Duty Free Tax Free All Other Consolidated
Retail Retail
------------ --------------- ----------- ----------------
Segment Information US $ US $ US $ US $
- - -------------------
- - - Revenue from external customers 57,461 33,664 - 91,125
- - - Inter segment revenue - -
- - - Cost of merchandise sold 25,537 13,568 - 39,105
- - - Concession fees 11,198 13,771 - 24,969
- - - Gross profit 20,726 6,325 - 27,051
- - - Interest Income 1,049 264 126 1,439
- - - Interest expense 1,048 313 4 1,365
- - - Segment net income (loss) 2,251 (2,781) (3,757) (4,287)
- - - Segment total assets 35,164 11,678 1,234 48,076
- - - Expenditures for segment assets 2,532 580 710 3,822
- - - Depreciation 539 311 104 954
- - - Unrealized gain (loss) on exchange (491) 539 (74) (26)
- - - Provision for damage stock (reversal) (618) - - (618)
- - - Allowance for doubtful accounts 8,468 4,977 2,301 15,746
- - - Deferred tax 1,865 2,540 60 4,465
Revenue Long-lived
Assets
---------- ----------------
Geographical Information US$ US$
- - ------------------------
Bangkok 88,040 6,608
Northern Thailand region 619 62
Southern Thailand region 2,466 35
----------- ----------------
Total 91,125 6,705
=========== ================
42
KING POWER INTERNATIONAL GROUP CO., LTD AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
For the year ended December 31, 1997
Duty Free Tax Free All Other Consolidated
Retail Retail
------------ ------------- ------------- ----------------
Segment Information US $ US $ US $ US $
- - -------------------
- - - Revenue from external customers 59,629 36,367 - 95,996
- - - Inter segment revenue - - - -
- - - Cost of merchandise sold 25,583 12,922 - 38,505
- - - Concession fees 17,790 16,547 - 34,337
- - - Gross profit 16,256 6,898 - 23,154
- - - Management fee income - 1,648 - 1,648
- - - Interest Income 975 852 - 1,827
- - - Interest expense 643 583 - 1,226
- - - Segment net income (loss) 1,700 6,993 (787) 7,906
- - - Segment total assets 20,171 12,512 2,396 35,079
- - - Expenditures for segment assets 1,405 296 317 2,018
- - - Depreciation 595 184 - 779
- - - Gain (loss) on exchange (6,887) 2,515 - (4,372)
- - - Provision for damage stock 533 - - 533
- - - Deferred tax 391 483 - 874
Revenue Long-lived
Assets
------------- ----------------
Geographical Information US$ US$
- - ------------------------
Bangkok 93,606 4,130
Northern Thailand region 457 34
Southern Thailand region 1,934 24
------------- ----------------
Total 95,997 4,188
============= ================
43
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
The accounting firm of Deloitte Touche Tohmatsu Jaiyos, the independent
accountants for the Company that was hired on November 15, 1998, was dismissed
as of August 1, 1999, as directed by the Board of Directors.
During the fiscal year ended December 31, 1998, and the subsequent interim
period through August 1, 1999, there have been no disagreements with Deloitte
Touche Tohmatsu Jaiyos on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure or any reportable
events.
Deloitte Touche Tohmatsu Jaiyos's report on the Company's financial statements
for the fiscal year ended December 31, 1998, contained no adverse opinion or
disclaimer of opinion and was not qualified or modified as to uncertainty, audit
scope or accounting principles.
Deloitte Touche Tohmatsu Jaiyos has furnished a letter, dated August 3, 1999,
addressed to the Securities and Exchange Commission stating that it agrees with
the above statements.
Because of the dismissal of the accounting firm of Deloitte Touche Tohmatsu
Jaiyos on August 1, 1999, the Company engaged the accounting firm of Smith,
Jackson, Boyer & Daniell, PLLC (formerly Smith, Jackson, Cooper & Daniell,
PLLC), Dallas, Texas as independent accountants for the Company, effective as of
August 1, 1999.
During the fiscal years ended December 31, 1997 and 1998, and the subsequent
interim period through August 1, 1998, there have been no consultations with
Smith, Jackson, Boyer & Daniell, PLLC (formerly Smith, Jackson, Cooper &
Daniell, PLLC), on any matters of accounting principles to a specific
transaction, either completed or proposed, or the type of audit opinion that
might be rendered on the Company's financial statements.
PART III
ITEM 10 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT
Name Age Position
Vichai Raksriaksorn 42 Group Chairman, Chief Executive
Officer and Director
Viratana Suntaranond 58 Group Chief Financial Officer,
Secretary, Treasurer and Director
Aimon Raksriaksorn 42 Group Deputy Managing Director
and Director
Antares Cheng 43 Director
Dharmnoon Prachuabmoh 66 Director
Suwan Panyapas 55 Director
* Dr. Panya Tantiyavarong 59 Director
* Resigned effective February 1st, 2000 due to his government appointment as
National General Auditor which requires the nominated person to be free from all
employment of both the public and private sectors.
44
Each of these persons is also a director of King Power Duty Free Company Limited
and King Power Tax Free Company Limited.
Set forth below is a description of the backgrounds of the executive officers
and directors of the Company and a listing of their principal occupations for
the past five years.
Vichai Raksriaksorn
1999-Present Acting Group Managing Director of King Power International Group Co., Ltd.
1997-Present Group Chairman, Chief Executive Officer and Director of King Power International Group Co., Ltd.
Managing Director of King Power Duty Free Co., Ltd.
Chairman of King Power On Board Sale & Services Co., Ltd.
1994-Present Chairman of King Power International Co., Ltd.
Chairman of V&A Holdings Co., Ltd.
1993-Present Chairman of King Power Tax Free Co., Ltd.
Chairman of Capitalux Co., Ltd.
1991-Present Chairman of TAT (Phnompenh) Duty Free Co., Ltd.
1989-1999 Managing Director of Downtown D.F.S. (Thailand) Co., Ltd.
Viratana Suntaranond
1997-Present Group Chief Financial Officer, Secretary and Director of King Power International Group Co., Ltd.
Executive Director and Managing Director of King Power Duty Free Co., Ltd.
1994-1997 Director of Big Hand Co., Ltd.
1993-Present Managing Director of King Power Tax Free Co., Ltd.
1992-Present President of U.M.P. Commercial Co., Ltd.
1985-Present President of Niji (Thailand) Co., Ltd.
1984-Present Managing Director of Thai-Tai International Trading Co., Ltd.
Aimon Raksriaksorn
1997-Present Group Deputy Managing Director and Director of King Power International Group Co., Ltd.
Executive Director of King Power On Board Sale & services Co., Ltd.
1996-Present Executive Director of King Power Duty Free Co., Ltd.
1994-Present Executive Director of King Power International Co., Ltd.
Executive Director of TOP Tourist Service Co., Ltd.
1993-Present Executive Director of King Power Tax Free Co., Ltd.
Executive Director of TAT Phnom Penh Co., Ltd.
1989-Present Managing Director of Thai Nishikawa International Co., Ltd.
Antares Cheng
1997-Present Director of King Power International Group Co., Ltd.
1997-1999 Group Managing Director of King Power International Group Co., Ltd.
1995-Present Managing Director of Hong Kong Kai Tak International Airport Duty Free Shop Co., Ltd.
General Manager of King Power Duty Free (Macau) Co., Ltd.
1994-Present Director of China Ferry Terminal GM Shop
1992-Present Managing Director of King Power Group
1989-Present Managing Director of Railway Duty Free, Hong Kong
Suwan Panyapas (Age 55 years: as of year ended 1999 )
1997-Present Director and Group Senior Advisor of King Power International Group Co., Ltd.
1996-Present Senator of Thai National Assembly
1991-Present Advisor to TAT Duty Free Co., Ltd.
1989-Present Advisor & Shareholder of Downtown DFS (Thailand) Co., Ltd.
1989-1991 Managing Director of TAT Duty Free Co., Ltd.
45
Some Special Positions Held:
o Member of Committee Training Successful Candidates appointed to
Juvenile Court.
o Member of Sub-Committee on the Development of Judicial and Ministerial
System.
o Member of Committee/Secretary on Selection Test for Judicial Officer
o Senior Judge of Thonburi Court
o Chief Judge of Udon Thanee District Court
o Chief Judge attached to the Ministry of Justice
Dharmnoon Prachuabmoh
1997- Present Director of King Power International Group Co., Ltd. Life Member,
Pacific Asia Travel Association (PATA)
1995-1996 Member of the Thai Parliament, House of Representatives
Advisor to Deputy Minister, Ministry of Communications and Transport
Vice Chairman, Tourism Committee (House of Representatives)
1988-1995 President of Thailand Incentive and Convention Association (TICA)
1988-1989 President of Pacific Asia Travel Association
1986-1994 Governor of Tourism Authority of Thailand (TAT)
Dr. Panya Tantiyavarong
Currently Retired
Currently Chairman of the Board of Director of Dynasty Ceramic Public Co., Ltd.
Currently Director of Petroleum Authority of Thailand
1998 Director and Advisor to the Executive Director Board of
Bangkok Metropolitan Bank Ltd.
1997-1998 Director and Executive Director of Metropolitan Lift Assurance Co., Ltd.
Director of National Housing Authority
1995-1998 Chairman of State Railway of Thailand
1992-1997 Managing Director of Bangkok Metropolitan Bank Ltd.
1989-1992 Senior Executive Vice President of Krung Thai Bank Ltd.
Directors of the Company hold office until the next annual meeting of
stockholders or until their successors have been elected and qualified. Vichai
Raksriaksorn and Aimon Raksriaksorn are husband and wife. None of the other
directors or executive officers are related. Executive officers are elected by
the Company's Board of Directors to hold office until their respective
successors are elected and qualified.
The Company's bylaws provide that directors may be paid their expenses, if any.
Directors were not paid an annual retainer but they were each paid approximately
$2,000 - $5,000 per annum to attend meetings of the Board of Directors, Board of
Executive Officers, or of its committees held in 1999. All directors attended
100% of the Board Meetings held in 1999.
46
Committees of the Board of Directors
The Board of Directors has two committees: the Audit Committee and Compensation
Committee. The Audit Committee is composed of Vichai Raksriaksorn, Suwan
Panyapas, and Dharmnoon Prachuabmoh with Mr. Raksriaksorn being the Chairman.
The Audit Committee is responsible for recommending the annual appointment of
the Company's auditors, with whom the Audit Committee will review the scope of
audit and non-audit assignments and related fees, accounting principles used by
the Company in financial reporting, internal auditing procedures and the
adequacy of the Company's internal control procedures. The Compensation
Committee is composed of Vichai Raksriaksorn, Suwan Panyapas, and Dharmnoon
Prachuabmoh with Mr. Raksriaksorn being the Chairman. The Compensation Committee
is responsible for reviewing and making recommendations to the Board of
Directors concerning all forms of compensation paid to the Company's executive
officers.
Compliance with Section 16(a) of the securities Exchange Act of 1934
Based solely on the review of Forms 3,4 and 5 and amendments thereto provided to
the Company pursuant to Rule 16a-3(e), no individuals have failed to file on a
timely basis the reports required to be filed under that rule or as required by
Section 16(a) of the 1934 Act during the 1999 fiscal year.
ITEM 11 EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth certain information
about the cash and non-cash compensation paid by the Company to its Executive
Officers for the fiscal year ended December 31, 1996, 1997, 1998 and 1999. None
of the Company's executive officers or directors received cash and/or non-cash
compensation in excess of $100,000 for any of those fiscal years.
Summary Compensation Table
- - ----------------- --------------------------------------------- ------------------------------- -------------
(a) Annual Compensation Long Term
Name and Compensation
Principal Awards Payouts (i)
Position
- - ----------------- -------- --------- --------- ---------------- ------------- ------- --------- -------------
(b) (c) (d) (e) (f) (g) (h)
- - ----------------- -------- --------- --------- ---------------- ------------- ------- --------- -------------
Year Salary Bonus Other Annual Restricted Option/ LTIP All Other
- - ----------------- -------- --------- --------- ---------------- ------------- ------- --------- -------------
Vichai 1999 79,317 - 5,000* - - - -
Raksriaksorn 1998 - - 5,000 - - - -
Group Chairman 1997 - - 6,800 - - - -
& CEO 1996 - - - - - - -
- - ----------------- -------- --------- --------- ---------------- ------------- ------- --------- -------------
Viratana 1999 63,454 - 5,000* - - - -
- - ----------------- -------- --------- --------- ---------------- ------------- ------- --------- -------------
Antares Cheng 1999 - - 2,000** - - - -
Group Managing 1998 - - 2,000 - - - -
Director 1997 - - 6,800 - - - -
1996 - - - - - - -
- - ----------------- -------- --------- --------- ---------------- ------------- ------- --------- -------------
Aimon 1999 63,454 - 2,000** - - - -
Raksriaksorn 1998 53,000 - 2,000 - - - -
Group 1997 - - 6,800 - - - -
Deputy 1996 - - - - - - -
Managing
Director
- - ----------------- -------- --------- --------- ---------------- ------------- ------- --------- -------------
* Both Vichai Raksriaksorn and Viratana Suntaranond received meeting
compensation from the Board of Directors's Meeting and the Board of
Executive Officers' s Meeting.
47
** Both Antares Cheng and Aimon Raksriaksorn received meeting compensation from
the Board of Directors's Meeting.
The Company has no employment agreements with any of its executive officers or
directors.
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of February 29, 2000, with
regard to the beneficial ownership of the Common Stock (i) each person known to
the Company to be beneficial owner of 5% or more of its outstanding Common
Stock, (ii) by the officers, directors and key employees of the Company
individually and (iii) by the officers and director as a group.
(1) (2) (3)
Name and Address Number of Shares Beneficially Owned Percent
Vichai Raksriaksorn (1) 5,748,000 (1) 28.38%
Viratana Suntaranond (2) 3,000,000 (2) 14.81%
Aimon Boonkhundha (3) 3,000,000 (3) 14.81%
Antares Cheng 100,000 *
Dr. Panya Tantiyavarong -0- *
Suwan Panyapas -0- *
Dharmnoon Prachuabmoh -0- *
Niphon Raksriaksorn (4) 1,037,883 (4) 5.12%
TOTAL 8 persons 12,885,883 (1)(2)(3)(4) 63.36%
* less than 1 %
(1) This excludes 3,000,000 shares owned by his wife, Aimon Raksriaksorn, as her
separate property, as well as 446,000 shares owned by his daughter, Voramas
Raksriaksorn. Mr. Raksriaksorn disclaims all beneficial interest in those
shares, as well as any right to vote or control the disposition of those shares.
(2) This excludes 1,000,000 shares owned by his wife, Umaratana Suntaranond, as
her separate property, as well as 150,000 shares in the aggregate owned by his
three children. Mr. Suntaranond disclaims all beneficial interest in those
shares, as well as any right to vote or control the disposition of those shares.
(3) This excludes 5,748,000 shares owned by her husband, Vichai Raksriaksorn, as
his separate property, as well as 5,000 shares owned by her mother, Auemporn
Boonkhant. Ms. Raksriaksorn disclaims all beneficial interest in those shares,
as well as any right to vote or control the disposition of those shares.
(4) This excludes 5,748,000 shares owned by his uncle, Vichai Raksriaksorn, as
his separate property. Mr. Niphon Raksriaksorn disclaims all beneficial interest
in those shares, as well as any right to vote or control the disposition of
those shares.
48
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following companies, which are owned or controlled by one or more
of the directors of the Company, had transactions with the Company during the
1999 fiscal year and are likely to have similar transactions with the Company in
the future. The related amounts are disclosed in Note 12 "Related Parties
Transactions" in Notes To Consolidated Financial Statements. All transactions
were on terms and conditions and at prices substantially similar to those that
these companies would have negotiated with unrelated third parties for the same
goods and services.
Thai Nishikawa International Co., Ltd.
Ms. Aimon Raksriaksorn is a Director and Managing Director of this company,
whose main business is a manufacturer of costume jewelry for exporting.
Lengle (Thailand) Co., Ltd.
Mr. Vichai Raksriaksorn is the Chairman and Mr. Suwan Panyapas is a Director of
this company. Along with Mr. Viratana Suntaranond, and Ms. Aimon Raksriaksorn,
they are stockholders of this company, whose main business was the Central
Buying Office for local merchandise sold to KPT. Other than the existing loan
outstanding owed to KPG's subsidiary, the Company currently has no business
activities.
Thai Sky Travel & Intertrade Co., Ltd.
Messrs. Vichai Raksriaksorn, Viratana Suntaranond, and Dharmnoon Prachuabmoh are
the directors and owners of this company, whose main business is a travel agency
providing traveling arrangement for clients. There have been and continue to be
minimum business activities with this company but principally the Company and
its subsidiaries benefit from the lower prices offered by this company for its
services.
King Power Duty Free (C.B.O.) Limited, Hong Kong
Mr. Antares Cheng is the Managing Director of this company, whose main business
was the Central Buying Office for imported merchandise sold to KPD. Other than
the existing loan owed to KPG's subsidiary, the Company currently has no
business activities.
Niji (Thailand) Co., Ltd.
Mr. Viratana Suntaranond is the President and owner of this company, whose main
business is the manufacture of ballpoint and plastic-tip pens under the brand
name "Niji". Since 1998, when other suppliers raised the cost of shopping bags
to an unacceptable level, KPG's subsidiaries purchased shopping bags from Niji
at a much lower price than offered generally in the market.
Forty Seven Co., Ltd.
Messrs. Viratana Suntaranond, and Dharmnoon Prachuabmoh, Mr. Vichai Raksriaksorn
are shareholders of this company, whose main business is to act as the holding
company for a duty-free operation in Hong Kong. This company's operations are
currently being liquidated and it is in the process of recovering the owners'
investment in this business.
Top China Group Co., Ltd.
Messrs. Viratana Suntaranond, Dharmnoon Prachuabmoh, and Vichai Raksriaksorn are
shareholders of this company, whose main business is acting as the holding
company for a duty-free operation in Mainland China at the Great Wall. This
company operates, as a joint venture with the Forestry Ministry of the Republic
of China, a duty-free business at the Great Wall area under the 50-year license.
49
King Power International Co., Ltd.
Mr. Vichai Raksriaksorn, Mr. Viratana Suntaranond, and Ms. Aimon Raksriaksorn
are Directors of this Company, with Mr. Raksriaksorn being its Chairman. They
are all are shareholders of this Company, whose main business is the operation
of a duty-free store in downtown Bangkok where merchandise is sold to
international travelers.
Downtown D.F.S. (Thailand) Co., Ltd.
Messrs. Vichai Raksriaksorn, Antares Cheng and Suwan Panyapas are shareholders
of this company. The main business of this company is the operation of a
duty-free store in downtown Bangkok. This company is also engaged in selling
general merchandise to the general public.
Airport Authority of Thailand (AAT)
AAT is a governmental agency and it owns five percent of the stock of King Power
Duty Free Co., Ltd.
King Power on Board and Sale Service Co., Ltd.
Mr. Vichai Raksriaksorn and Ms. Aimon Raksriaksorn are the Directors, together
with Mr. Viratana Suntaranond are the shareholders of this company. The main
business of this company is intended in the future to be the operation of
duty-free sales on board the airplanes owned and operated by Thai Airways
International Public Co., Ltd.
Infotel Communication (Thailand) Co., Ltd.
Dr. Panya Tantiyavarong is the shareholders of this company. The main business
of this company, which holds the appropriate license from the Telecommunications
Authorities in Thailand, is to operate an information providing service to the
public.
King Power Development Co., Ltd.
Messrs. Vichai Raksriaksorn and Viratana Suntaranond and Ms. Aimon Raksriaksorn
are the shareholders of this Company, and together with Messrs. Suwan Panyapas,
Dharmnoon Prachuabmoh and Dr. Panya Tantiyavarong* are Directors of this
company. The main business of this company, under an appropriate license, is to
operate souvenir shops, food courts, and recreational facilities at the Bangkok
Zoo.
* Dr. Tantiyavarong resigned on February 10, 2000.
50
PART IV
ITEM 14 EXHIBITS AND REPORTS ON FORM 8-K
There follows a list of all exhibits filed with this Form 10-K (1998), including
those incorporated by reference. .
- - ------------------- ------------------------------------------------------------
Exhibit No. Name or Description
- - ------------------- ------------------------------------------------------------
3.1* Articles of Incorporation of King Power International Group Co., Ltd.
3.2* By-Laws of King Power International Group Co., Ltd.
3.3* Certification Document of King Power Duty Free Co., Ltd.
3.4* Certification Document of King Power Tax Free Co., Ltd.
3.5* Memorandum of Association of King Power International Group Co., Ltd.
10.1* Siam Tower Lease dated 10/17/97
10.2* Contract with Airports Authority of Thailand (AAT) dated 03/06/96
10.3* Contract of Lease - Warehouse with AAT dated 12/13/96
10.4* Contract of Lease - Hatyai Airport with AAT dated 03/03/97
10.5* Office Lease at Chaingmai Airport with AAT dated 07/17/97 (was 10.7)
10.6* Contract of Lease with AAT re: Domestic Terminal of Bangkok Airport
10.7* Contract for Phuket Airport AAT dated 02/10/97 (was 10.17)
10.8* Contract of Lease - Chiangmai Airport AAT dated 07/09/97 (was 10.18)
10.9* Contract of Lease - Bangkok Airport AAT dated 10/02/97 (was 10.19)
10.10* Letter of Guarantee dated 05/08/96 (was 10.25)
10.11* Letter of Guarantee dated 10/18/96 (was 10.26)
10.12* Letter of Guarantee dated 01/24/97 (was 10.27)
10.13* Letter of Guarantee dated 01/24/97 (was 10.28)
10.14* Letter of Guarantee dated 06/13/97 (was 10.29)
10.15* Letter of Guarantee dated 06/13/97 (was 10.30)
10.16* Agreement for Pledge dated 03/04/97 (was 10.35)
10.17* Fee Letter dated 05/07/97 (was 10.44)
10.18** Contract-Permission to Sell- Phuket Airport with AAT dated 02/10/97
10.19** Contract-Permission to Sell- Chaingmai Airport with AAT dated 07/09/97
10.20** Lease of Office - Bangkok International Airport with AAT dated
01/15/97
10.21** Contract- Permission to Sell- Bangkok Airport with AAT dated 10/02/97
10.22** Letter from AAT dated 04/20/98 commence operations & rent payments
10.23** Letter from AAT dated 05/27/98 commence operations & rent payments
10.24** Letter from AAT dated 06/04/98 commence operations & rent
payments-Harrod
10.25** Letter from AAT dated 06/16/98 - display tables
10.26** Letter from AAT dated 08/17/98 - bear symbol-Harrods
10.27** Hiring Contract between Downtown DFS (Thailand) Co., Ltd., as
employer, and King Power Duty Free Co.,
10.28** Computer Terminals Agreement with Logic Company Limited, dated
09/09/98 for King Power Tax Free
10.29** Maintenance & Repairs Agreement with Logic Company Limited, dated
09/01/98 for King Power Tax Free Co., Ltd.
10.30** Computer Terminals Agreement with Logic Company Limited, dated
09/16/98 for King Power Duty Free Co., Ltd.
10.31** Maintenance & Repairs Agreement with Logic Company Limited, dated
09/01/98 for King Power Duty Free
10.32** Software End-User License Agreement with SAP Thailand Ltd. dated
09/16/98
10.33** Memorandum with Thai Military Bank dated 08/21/98
10.34** Guarantee for Thai Military Bank dated 08/21/98
10.35 ** Guarantee for Thai Military Bank dated 08/21/98
10.36** Guarantee for Thai Military Bank dated 08/21/98
10.37** Memorandum with Thai Military Bank dated 11/19/98
10.38** Memorandum with Thai Military Bank dated 11/19/98
10.39** Guarantee for Thai Military Bank dated 11/19//98
10.40** Guarantee for Thai Military Bank dated 11/19//98
10.41** Guarantee for Thai Military Bank dated 11/19//98
10.42** Guarantee for Thai Military Bank dated 11/19//98
10.43** Notice for Deduction with Thai Military Bank dated 11/25/98
10.44** Pledge for Thai Military Bank dated 12/03/98
10.45** Letter of Consent with Thai Military Bank dated 12/03/98
10.46** Letter of Consent with Thai Military Bank dated 12/03/98
10.47** Loan Agreement with Siam City Bank dated 06/23/98
10.48** First Amendment to Loan Agreement with Siam City Bank dated 06/23/98
10.49** Guarantee for Siam City Bank dated 06/23/98
10.50** Guarantee for Siam City Bank dated 11/12/98
10.51** Letter of Consent with Siam City Bank dated 11/27/98
10.52** Pledge for Siam City Bank dated 11/27/98
10.53** Letter of Consent with Siam City Bank dated 12/30/98
10.54** Pledge for Siam City Bank dated 12/30/98
10.55** Guarantee to AAT from Bangkok Metropolitan Bank dated 06/18/98
10.56** Contract of Permission for Operating Business Selling Photo
Developing-Duplicating-Enlarging Services at Bangkok International
Airport KPT#1 Contract No. 6-22/2542
10.57 Contract of Permission for Operating Business Selling Medicines,
** Medical Supplies and Health Products at Bangkok International Airport
** KPT#3 Contract No. 6-24/2542
10.58** Contract of Permission for Operating Business Selling Souvenirs and
** Miscellaneous Items at Domestic Passengers Terminal Bangkok
International Airport KPT#5 Contract No. 6-06/2542
10.59** Lease Agreement Domestic Passengers Terminal Bangkok International
** Airport KPT#6 Agreement No. 1-06/2542
10.60** Lease Agreement Bangkok International Airport KPT#7 Agreement No.
1-104/2542
10.61** Lease Agreement Bangkok International Airport KPT#9 Agreement No.
1-122/2541
10.63** Memorandum Attached to Contract of Permission for Operating Business
of Selling Merchandize and Souvenirs at Bangkok International Airport
No. 6-01/2541 dated 2 October 1997 Amendment 1 KPT#10
10.64 Memorandum Attached to Lease Agreement at Bangkok International
Airport No. 1-01/2541 dated 2 October 1997 Amendment 1 KPT#11
10.65 Hiring Contract - Study, Analysis and Implementation of
Marketing Strategies KPT#12
10.67 Siam Tower Lease KPT dated 11/23/97 KPT#13
10.68** Hiring Contract - Study, Analysis and Implementation of Marketing
Strategies KPD#1
10.69 Letter from AAT dated 12/7/99 Notice of Approval of Renewal of Lease
Agreement of Building 305 KPD#2 No. AAT 6537/2542 (AAT = Tor.Or.Tor)
10.70** Letter from AAT dated 7/29/99 Permission for Renewal of Lease
Agreement KPD#3 No. AAT 3835/2542
10.71** Letter from AAT dated 6/14/99 Commencement of Agreement and Collection
of Rents KPD#4 No. AAT 2911/2542
10.72** Letter from AAT dated 5/25/99 Commencement of Agreement and Collection
of Rents KPD#5 No. AAT 2483/2542
10.73** Letter from AAT dated 6/18/99 Permission for Lease of Area for
Loading/Unloading Merchandize of Bonded Warehouse KPD#6 No. AAT
3020/2542
10.74** Letter from AAT dated 11/20/98 Performance Guarantees KPD#7 No. AAT
6466/2541
10.75** Siam Tower Lease KPD dated 11/23/97 KPD#8
10.76** Letter of Guarantee dated 2/1/99 FN#1 BMB L/G No. L42-0079
10.77** Pledge Agreement of Debenture dated 6/17/99 FN#2 SCC (Siam City Bank)
10.78** Letter of Consent for Bank Deposits Deduction dated 6/17/99 FN#3 SCC
10.79** Extension of Validity of Letter of Guarantee dated 12/14/99 FN#4 BMB
** L/G No. L41-0999
10.80** Letter of Guarantee dated 12/9/99 FN#5 BMB L/G No. L41-0999
21.1** List of Subsidiaries
27.1** Financial Data Schedule
* As filed with the Company's Form 10-KSB/A on May 7, 1998.
** As filed herewith.
Reports on Form 8-K
The Company filed the following reports with the SEC on FORM 8-K
(A) August 3, 1999 - Reporting a change in Company's independent
accountants, with Smith, Jackson, Boyer & Daniell, PLLC
(formerly Smith, Jackson, Cooper & Daniell, PLLC). replacing
Deloitte Touche Tohmatsu Jaiyos Co., Ltd.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, this 30th day of March,
2000.
KING POWER INTERNATIONAL GROUP CO., LTD.
By: /s/ Vichai Raksriaksorn
------------------------
Vichai Raksriaksorn
Group Chairman, Chief Executive Officer and Director
By: /s/ Viratana Suntaranond
-------------------------
Viratana Suntaranond
Group Chief Financial Officer, Secretary, and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Signature Title Date
/s/ Vichai Raksriaksorn Group Chairman, Chief Executive March 30, 2000
------------------- Officer and Director
Vichai Raksriaksorn
/s/ Viratana Suntaranond Group Executive Director, Chief March 30, 2000
-------------------- Financial Officer, Secretary and
Viratana Suntaranond Director
/s/ Aimon Raksriaksorn Group Deputy Managing Director March 30, 2000
------------------ and Director
Aimon Raksriaksorn
/s/ Director March __, 2000
-------------
Antares Cheng
/s/ Dharmnoon Prachuabmoh Director March 30, 2000
---------------------
Dharmnoon Prachuabmoh
/s/ Suwan Panyapas Director March 30, 2000
--------------
Suwan Panyapas