As filed with the Securities and Exchange Commission on September___, 2000
Registration No. 333-11892
================================================================================
AMENDMENT NO. 1 TO
FORM F-4
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
ASIA PROPERTIES INVESTMENTS, INC.
(Exact name of registrant as specified in its charter)
Not applicable
(Translation of registrant's name into English)
British Virgin Islands
(State or other jurisdiction of incorporation or organization)
6512; 6513
(Primary Standard Industrial Classification Code Number)
98-0228537
(I.R.S. Employer Identification Number)
86/14 Sukhumvit 31, Bangkok 10110, Thailand, (66-2) 260-3197
(Address, including zip code, and telephone number, including area code, of
registrant's
principal executive offices)
Daniel S. McKinney, 114 Magnolia Street, Suite 400-115, Bellingham, Washington
98225
(360) 392-2841
(Name, address, including Zip Code, and telephone number, including area code,
of
agent for service)
___________________
Copies to:
Roger V. Davidson, Esq.
Ballard Spahr Andrews & Ingersoll, LLP
1225 17th Street, Suite 2300
Denver, Colorado 80202
(303) 299-7307
<PAGE>
Approximate date of commencement of proposed sale to public: As soon as
practicable after the registration statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] ______________
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ________________
CALCULATION OF REGISTRATION FEE
================================================================================
Proposed Proposed
Title of each Maximum Maximum Amount of
class of securities Amount to be offering price aggregate registration
to be registered registered (1) per share(2) offering price fee(3)
------------------- --------------- ------------- -------------- -----------
Capital shares, $0.01 5,931,434 $5.00 $29,657,170 $7,829.49(4)
par value shares
================================================================================
(1) This registration statement covers an additional indeterminate number of
capital shares which may be issued in accordance with Rule 416.
(2) The proposed maximum offering price is estimated solely for the purpose
of determining the registration fee and calculated pursuant to Rule 457
(f)(1). There is no current trading market for the capital shares of
the registrant, which was formed solely to reincorporate Asia
Properties, Inc., a Nevada corporation, as a British Virgin Islands
company. The sale price for Asia Properties common stock of $5.00 per
share as reported in the pink sheets on April 5, 2000 was used for
the estimate. Bid and asked prices for Asia Properties common stock
are not readily available.
(3) Calculated under Section 6(b) of the Securities Act as .000264 of
$29,657,170.
(4) $7,816.29 previously paid with original filing. $13.20 paid with the
filing of this amendment.
<PAGE>
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
[SUBJECT TO COMPLETION, DATED SEPTEMBER ____, 2000]
ASIA PROPERTIES INVESTMENTS, INC.
PROSPECTUS
This prospectus is for the issuance of Asia Properties Investments, Inc.
capital shares to the shareholders of Asia Properties, Inc. The purpose of this
issuance is to reincorporate Asia Properties as a British Virgin Islands company
through the merger of Asia Properties into Asia Properties Investments. Asia
Properties Investments is a British Virgin Islands company formed by Asia
Properties for the reincorporation of Asia Properties and does not have any
significant assets or operations. Asia Properties is a development stage
company formed as a Nevada corporation to invest in real estate in Southeast
Asia.
In the reincorporation, shares of Asia Properties common stock will
automatically convert into Asia Properties Investments capital shares on a one
share-for-one share basis, and Asia Properties Investments will issue to the
shareholders of Asia Properties a total of 5,931,434 capital shares. Asia
Properties common stock is quoted in the pink sheets under the symbol "ASPZ."
Asia Properties Investments expects that after the reincorporation its shares
will be quoted in the pink sheets under the symbol "______."
The reincorporation of Asia Properties as a British Virgin Islands company
is a condition to the completion of an agreement for Asia Properties Investments
to acquire Northbridge Communities Limited. Northbridge Communities is an
operating company which owns interests in real estate developments in Thailand
and Cambodia. After the reincorporation, Asia Properties Investments expects
to complete the acquisition of Northbridge Communities by issuing 4,600,000
restricted capital shares to the shareholders of Northbridge Communities. This
prospectus does not cover the capital shares to be issued to acquire Northbridge
Communities.
Daniel S. McKinney
President
Asia Properties Investments, Inc.
YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE 12.
NEITHER THE SEC NOR ANY STATE SECURITIES REGULATOR HAS APPROVED OR
DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This prospectus is dated September ____, 2000.
<PAGE>
TABLE OF CONTENTS
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Cautionary Information about Forward-Looking Statements . . . . . . . . . 20
The Reincorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
Background and Reasons for the Reincorporation . . . . . . . . . . .22
The Reincorporation Merger Agreement . . . . . . . . . . . . . . . . .23
Shareholder Approval of the Reincorporation . . . . . . . . . . . . .24
Timing of Closing . . . . . . . . . . . . . . . . . . . . . . . . . . .24
Rights of Dissenting Shareholders . . . . . . . . . . . . . . . . . . 24
Exchange of Share Certificates . . . . . . . . . . . . . . . . . . . .26
Expected Trading Market for Shares After the Reincorporation . . . 27
Interests of Insiders in the Reincorporation . . . . . . . . . . . .27
Comparison of British Virgin Islands and Nevada Corporate Laws and
Asia Properties Investments and Asia Properties Shareholder Rights .27
Tax Consequences of the Reincorporation . . . . . . . . . . . . . . .36
Accounting Treatment of the Reincorporation . . . . . . . . . . . . .38
U.S. Federal Securities Laws Consequences . . . . . . . . . . . . . .38
Asia Properties Investments . . . . . . . . . . . . . . . . . . . . . . . . 38
Business of Asia Properties Investments . . . . . . . . . . . . . . .38
The Pending Acquisition of Northbridge Communities . . . . . . . . .39
Legal Proceedings of Asia Properties Investments . . . . . . . . . .42
Description of Asia Properties Investments Capital Shares . . . . .42
Asia Properties Investments Management's Discussion and Analysis
of Financial Condition and Results of Operations . . . . . . .43
Quantitative and Qualitative Disclosures About Market Risk . . . . 43
Management of Asia Properties Investments . . . . . . . . . . . . . .44
Compensation of Asia Properties Investments Officers and Directors . . . 46
Asia Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
Business of Asia Properties . . . . . . . . . . . . . . . . . . . . . 47
Properties of Asia Properties . . . . . . . . . . . . . . . . . . . . 49
Legal Proceedings of Asia Properties . . . . . . . . . . . . . . . . 49
Market Price and Dividends on Asia Properties Common Stock . . . . . . . 49
<PAGE>
Selected Financial Data of Asia Properties . . . . . . . . . . . . .52
Asia Properties Management's Discussion and Analysis
of Financial Condition and Results of Operations . . . . . . .53
Quantitative and Qualitative Disclosures About Market Risk . . . . .61
Management of Asia Properties . . . . . . . . . . . . . . . . . . . . 61
Compensation of Asia Properties Officers and Directors . . . . . . 61
Interest of Management in Asia Properties Transactions . . . . . . 61
Stock Ownership by Asia Properties Management and Principal
Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . .66
Northbridge Communities . . . . . . . . . . . . . . . . . . . . . . . . . . .71
Business of Northbridge Communities . . . . . . . . . . . . . . . . . 71
Properties of Northbridge Communities . . . . . . . . . . . . . . . . 72
Legal Proceedings of Northbridge Communities . . . . . . . . . . . . 81
Northbridge Communities Management's Discussion and Analysis
of Financial Condition and Results of Operations . . . . . . .82
Where You Can Find More Information . . . . . . . . . . . . . . . . . . .91
Reports to Security Holders . . . . . . . . . . . . . . . . . . . . . . . .92
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .92
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
SEC Position on Indemnification for Securities Act Liabilities . . . . .93
Enforcement of Civil Liabilities Against Foreign Persons . . . . . . . .94
Index to Financial Statements . . . . . . . . . . . . . . . . . . . . . . F-1
Annexes
Annex A - Sections 92A.300 to 92A.500 of the Nevada General Corporation Law .A-1
Annex B - Demand Notice to Assert Dissenters' Rights . . . . . . . . B-1
<PAGE>
SUMMARY
This summary highlights selected information from this document and may not
contain all of the information that is important to you. You should carefully
read this entire document to fully understand:
- the reincorporation of Asia Properties from a Nevada corporation to a
British Virgin Islands company through the merger of Asia Properties
into Asia Properties Investments and the issuance of Asia Properties
Investments capital shares to the Asia Properties shareholders, and
- the expected business of Asia Properties Investments after the
reincorporation through the planned acquisition of Northbridge
Communities.
In addition, see "Where You Can Find More Information" on page 91.
Asia Properties Investments, Inc.
86/14 Sukhumvit 31
Bangkok 10110, Thailand
Telephone: (66-2) 260-3197
Asia Properties Investments is a British Virgin Islands company formed
solely to accomplish the reincorporation of Asia Properties as a British Virgin
Islands company. Asia Properties Investments does not have any significant
assets or operations.
Asia Properties Investments and Asia Properties have entered into an
agreement to acquire Northbridge Communities which is conditioned upon
completion of the reincorporation. Asia Properties Investments plans to continue
the planned business strategy of Asia Properties, including the planned
acquisition of Northbridge Communities, after the reincorporation. After the
acquisition of Northbridge Communities, Asia Properties Investments plans to
continue the current Northbridge Communities business operations.
Asia Properties, Inc.
86/14 Sukhumvit 31
Bangkok 10110, Thailand
Telephone: (66-2) 260-3197
Asia Properties is a development stage company that was formed primarily to
acquire commercial and residential real estate in Southeast Asia. Asia
Properties plans to:
- acquire, manage and develop income-producing commercial and
residential real estate as suitable opportunities arise,
1
<PAGE>
- provide consulting services for international schools in Southeast
Asia, and
- acquire real estate for long-term capital gain.
Asia Properties plans to eventually generate revenues from:
- rental income from properties it acquires,
- management and consulting income, and
- anticipated appreciation of real estate values in Southeast Asia
commercial and residential real estate markets.
Asia Properties has not yet acquired any properties or earned any revenues
from its planned operations and as of March 31, 2000 it had an accumulated
deficit from operations of $(904,532). Asia Properties expects that once
properties are acquired it will incur real estate acquisition and carrying
costs, as well as related management and development costs. Except for the
planned Northbridge Communities acquisition, Asia Properties does not currently
have a planned time frame for:
- acquiring properties,
- receiving revenues,
- liquidating assets, or
- incurring costs.
Asia Properties expects that after the reincorporation and Northbridge
Communities acquisition Asia Properties Investments will continue the
Northbridge Communities business and generate revenues through the current
Northbridge Communities revenue sources.
If the Northbridge Communities acquisition is not completed, Asia
Properties expects that Asia Properties Investments will attempt to acquire
income-producing real property in Southeast Asia. Asia Properties Investments
cannot assure you that it will be able to obtain the necessary financing to do
so or will be able to acquire properties with sufficient revenue streams or at
prices that will allow Asia Properties Investments to become profitable.
2
<PAGE>
Northbridge Communities Limited
8th Floor, TISCO Tower
48 North Sathorn Road
Bangkok 10500 Thailand
(66-2) 266-6677
Northbridge Communities was established in 1994 to develop school-based
residential communities in Asian cities where there was demand for
international-standard housing and schools for resident foreign nationals in
private business, diplomatic posts and development agencies. Northbridge
Communities currently owns interests in residential communities and English
language international schools in Thailand and Cambodia. As of March 31, 2000,
Northbridge Communities had total assets, consisting primarily of real estate
and improvements, of $19,553,981.
THE REINCORPORATION (SEE PAGE 22)
Asia Properties plans to reincorporate from a Nevada corporation to a
British Virgin Islands company through a merger into Asia Properties
Investments. When the reincorporation is completed:
- each outstanding share of Asia Properties common stock will
automatically convert into one Asia Properties Investments capital
share and the Asia Properties shareholders will become the
shareholders of Asia Properties Investments,
- Asia Properties Investments will issue to the shareholders of Asia
Properties a total of 5,931,434 capital shares,
- the name of the surviving company will be "Asia Properties
Investments, Inc.,"
- the Asia Properties Investments memorandum of association and articles
of association in effect immediately before the reincorporation will
be the charter and bylaws of the surviving company, and
- the directors and officers of Asia Properties immediately before the
reincorporation will continue as the Asia Properties Investments
directors and officers, subject to the Northbridge Communities
acquisition agreement which provides that two new directors designated
by Northbridge Communities are to be appointed to the Asia Properties
Investments board of directors upon completion of the Northbridge
Communities acquisition.
3
<PAGE>
Dissenting Shareholder Rights (see page 24)
Under Nevada law, you have dissenting shareholder rights in connection with
the reincorporation. Asia Properties shareholders who dissent to the
reincorporation have a right to obtain in cash the fair value of their shares of
Asia Properties common stock in lieu of Asia Properties Investments capital
shares in the reincorporation.
To exercise dissenting shareholder rights you must by ____________, 2000
submit the following items to the Asia Properties stock transfer agent:
- a properly completed and signed demand notice to assert
dissenter's rights in the form attached to this prospectus as
Annex B, and
- your fully endorsed Asia Properties stock certificates.
The address of the Asia Properties stock transfer agent to which these
items must be sent is:
Computershare Investor Services, Inc.
12039 West Alameda Parkway, Suite Z-2
Lakewood, Colorado 80228
with a copy to:
Roger V. Davidson, Esq.
Ballard Spahr Andrews & Ingersoll, LLP
1225 17th Street, Suite 2300
Denver, Colorado 80202
If you do not follow these instructions you will not be entitled to payment for
your shares under Nevada law. You can find a more detailed discussion of the
dissenting shareholder rights and your obligations if you do not exercise those
rights beginning on page 24.
The material procedures a shareholder must follow to exercise dissenting
shareholder rights are described above. However, this summary is not a complete
statement of the procedures that must be followed by dissenting shareholders who
seek payment of the fair value of their shares of Asia Properties common stock.
Nevada law establishes the procedures to be followed and failure to do so may
result in loss of the dissenters' rights. Therefore, if you desire to exercise
dissenters' rights, you should carefully read and comply with the provisions of
the Nevada dissenters' rights statute, the full text of which is attached to
this prospectus as Annex A, and consult your legal advisor.
4
<PAGE>
Reasons for the Reincorporation
Asia Properties believes that the reincorporation into the British Virgin
Islands should allow it to benefit from reduced corporate income taxes. The
British Virgin Islands generally does not tax income from operations outside the
British Virgin Islands and Asia Properties expects that the business of
Northbridge Communities, which is in Southeast Asia, will be the Asia Properties
Investments business after the acquisition. In addition, Asia Properties
believes the reincorporation should allow it to raise additional capital from
foreign investors because British Virgin Islands law provides more favorable tax
treatment of dividends to foreign investors. Finally, Asia Properties believes
the reincorporation will allow the Northbridge Communities acquisition to be
accomplished without any shareholder recognition of gain for U.S. federal income
tax purposes from the exchange of shares. The Asia Properties board of
directors considered that a British Virgin Islands company may be viewed as less
regulated than a Nevada corporation, but determined that these benefits
outweighed any potential detriment.
Material Income Tax Consequences of the Reincorporation (see page 36)
The U.S. shareholders of Asia Properties will not be required to pay income
tax on any gain on their shares in the reincorporation. Asia Properties will be
required to recognize gain for U.S. federal income tax purposes to the extent
the fair market value of any of its assets exceeds its adjusted basis. Since
substantially all of the assets of Asia Properties consist of cash, Asia
Properties expects that little if any gain should be recognized.
The shareholders of Asia Properties Investments who are not residents of
the British Virgin Islands are exempt from British Virgin Islands income and
withholding tax on dividends paid by Asia Properties Investments. Holders of
Asia Properties Investments capital shares will not be liable for British Virgin
Islands income tax on gains from the sale of Asia Properties Investments capital
shares.
Shareholder Approval of the Reincorporation
Your vote or consent is not required to approve the reincorporation. The
executive officers and directors of Asia Properties and their affiliates
beneficially own a total of 64.3% of the outstanding shares of Asia Properties
common stock and have approved the reincorporation by written shareholder
consent. They did not consent under a voting agreement but were informally
asked for their consent as shareholders. Under Nevada corporate law Asia
Properties is not required to hold a formal shareholder meeting to vote on the
reincorporation or send you any notice of vote or consent except as related to
notice of dissenter's rights.
5
<PAGE>
Regulatory Requirements for the Reincorporation
The reincorporation is not subject to any regulatory requirements other
than U.S. federal securities laws. Asia Properties Investments has filed with
the SEC a registration statement which includes this prospectus to comply with
those requirements.
Comparison of Nevada and British Virgin Islands Law (see page 27)
There are differences between the rights of shareholders under Nevada law
and British Virgin Islands law. For example, under Nevada law any person who
has been a shareholder of record for at least six months is entitled to review
Asia Properties' shareholder list. Under British Virgin Islands law, Asia
Properties Investments may refuse a shareholder's request to view its
shareholder list if the board of directors determines it is in Asia Properties
Investments' best interest to refuse such a request. The shareholder must then
apply for a court order to allow inspection. Under British Virgin Islands law
the directors of Asia Properties Investments will also be able to amend the
memorandum and articles of association without the shareholder approval Nevada
law requires. In addition, there are differences between Asia Properties'
certificate of incorporation and by-laws and Asia Properties' memorandum of
association.
Accounting Treatment of the Reincorporation
The reincorporation will be accounted for at historical cost in a manner
similar to a pooling of interests.
Expected Trading Market for Shares After the Reincorporation
Asia Properties common stock currently trades in the over the counter
market and is quoted in the pink sheets under the symbol "ASPZ". On
________________, 2000, the latest practicable full trading day before the
printing of this prospectus, the high bid price of Asia Properties common stock
was $_______, and the low bid price was $________.
There will not be any public trading market for Asia Properties Investments
capital shares before the reincorporation is completed. Asia Properties
Investments expects that after the reincorporation Asia Properties Investments
capital shares will trade in the over the counter market and be quoted in the
pink sheets under the symbol "_______."
6
<PAGE>
ACQUISITION OF NORTHBRIDGE COMMUNITIES
On February 4, 2000, Asia Properties Investments and Asia Properties
entered into an agreement with Northbridge Communities for the acquisition by
Asia Properties Investments of all of the outstanding shares of Northbridge
Communities stock in exchange for the issuance by Asia Properties Investments of
4,600,000 Asia Properties Investments capital shares to the shareholders of
Northbridge Communities. The Northbridge Communities acquisition is valued at
$20,240,000 based on a value assigned under the acquisition agreement for the
Asia Properties Investments capital shares to be issued in the acquisition of
$4.40 per share. The acquisition of Northbridge Communities is conditioned upon
the completion of the reincorporation of Asia Properties as a British Virgin
Islands company.
Ownership of Asia Properties Investments After the Northbridge Communities
Acquisition
Immediately before the Northbridge Communities acquisition, Asia Properties
shareholders will hold all of the 5,931,434 Asia Properties Investments capital
shares outstanding after the reincorporation is completed. After the issuance
of 4,600,000 Asia Properties Investments capital shares to complete the
Northbridge Communities acquisition, Northbridge Communities shareholders will
own 43.7% of the 10,531,434 Asia Properties Investments capital shares
outstanding.
The Northbridge Communities acquisition agreement currently provides that
if Asia Properties does not by September 11, 2000 raise $15 million at a price
of at least $4.40 per share, Daniel S. McKinney and Nicholas St. Johnston,
executive officers and directors of Asia Properties and Asia Properties
Investments, and their affiliates who together are the majority shareholders of
Asia Properties will have to transfer to the Northbridge Communities
shareholders their interests in 1,750,000 Asia Properties Investments capital
shares that would otherwise be issued to them in the reincorporation. If
1,750,000 Asia Properties Investments capital shares are transferred to the
Northbridge Communities shareholders under this provision, the Northbridge
Communities shareholders will own 60.3% of the 10,531,434 Asia Properties
Investments capital shares outstanding.
The acquisition agreement also provides that if Asia Properties does not
raise the $15 million by February 4, 2001, the majority shareholders of Asia
Properties discussed above will have to transfer to the Northbridge Communities
shareholders their interests in an additional 1,750,000 Asia Properties
Investments capital shares. If Asia Properties raises new capital during the
period from September 12, 2000 until February 4, 2001, there will be a reduction
of the number of shares to be transferred by the majority shareholders of Asia
Properties which is to be proportionate based on the $15 million financing
target. If the maximum number of 1,750,000 Asia Properties Investments capital
shares are transferred to the Northbridge Communities shareholders under this
provision, the Northbridge Communities shareholders will own 76.9% of the
10,531,434 Asia Properties Investments capital shares outstanding.
7
<PAGE>
Although Asia Properties did not raise $15 million in new capital by
September 11, 2000, on August 16, 2000 Asia Properties and The Lester Group
executed a nonbinding term sheet for a proposed $15 million capital financing
through the private placement of 3,000,000 shares of Asia Properties common
stock with The Lester Group at a price of $5.00 per share. On September 5,
2000, Asia Properties was advised by Northbridge Communities that the
Northbridge Communities board of directors was willing to extend the September
11, 2000 deadline to October 17, 2000, and that if part of the $15 million was
raised by October 17, 2000 Northbridge Communities would consider a further
reasonable extension. However, the parties have not yet executed a formal
amendment to the acquisition agreement which reflects any extension. Further,
Asia Properties and Asia Properties Investments cannot assure you that the
proposed financing with The Lester Group will be completed in any amount.
Asia Properties Investments Board of Directors After the Northbridge
Communities Acquisition
Under the Northbridge Communities acquisition agreement, the Asia
Properties Investments board of directors immediately after the Northbridge
Communities acquisition is to consist of Daniel S. McKinney and Nicholas St.
Johnston, both of whom are current directors of Asia Properties, Vorasit
Pokachaiyapat and Dr. Robert Brewitt, both of whom are current directors of
Northbridge Communities, and two outside directors, one of which Mr. McKinney
and Mr. St. Johnston are to designate and the other of which Mr. Pokachaiyapat
and Mr. Brewitt are to designate. Mr. McKinney and Mr. St. Johnston have
designated David W. Diehl to serve as an outside director and Mr. Brewitt and
Mr. Pokachaiyapat have designated David Roberts to serve as an outside director.
Mr. Diehl and Mr. Roberts are both currently on the Asia Properties Investments
board of directors.
The Northbridge Communities acquisition agreement also currently provides
that if Asia Properties does not by September 11, 2000 meet the $15 million
financing requirement discussed above, Mr. McKinney must resign from the board
of directors without replacement. As discussed above, on September 5, 2000 Asia
Properties was advised by Northbridge Communities that the Northbridge
Communities board of directors was willing to extend the September 11, 2000
deadline to October 17, 2000, and that if part of the $15 million was raised by
October 17, 2000 Northbridge Communities would consider a further reasonable
extension. However, the parties have not yet executed a formal amendment to the
acquisition agreement which reflects any extension.
The acquisition agreement further currently provides that if Asia
Properties Investments capital shares are not by November 3, 2000 listed for
trading on the American Stock Exchange or any other market approved by the Asia
Properties Investments board of directors after the Northbridge Communities
8
<PAGE>
acquisition, Mr. McKinney must resign from the board of directors without
replacement. On September 5, 2000 Asia Properties was advised by Northbridge
Communities that the Northbridge Communities board of directors was willing to
extend the November 3, 2000 deadline to February 3, 2001. However, the parties
have not yet executed a formal amendment to the acquisition agreement which
reflects any extension.
Regulatory Requirements
The acquisition of Northbridge Communities must comply with Thai legal
requirements concerning the formalities of transfer of a Thai entity. Asia
Properties Investments does not expect any difficulties in complying with these
requirements. Since Northbridge Communities is a private limited company
registered under Thai laws and the acquisition of Northbridge Communities does
not directly result in any change in the direct equity ownership structures of
its Cambodian subsidiaries and affiliates, Asia Properties Investments does not
believe that Cambodian law is applicable to the Northbridge Communities
acquisition. The issuance of Asia Properties Investment capital shares to the
Northbridge Communities shareholders in exchange for the outstanding shares of
Northbridge Communities will not be deemed a public offering of securities under
Thai securities laws since the shares are not offered to more than 35 persons.
Accounting Treatment of the Northbridge Communities Acquisition
The Northbridge Communities acquisition will be accounted for using the
purchase method of accounting for business combinations.
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following selected unaudited pro forma combined financial data for Asia
Properties has been derived from the unaudited pro forma combined financial
statements included in this prospectus which give effect to the Northbridge
Communities acquisition. This information is based on the historical financial
statements of Asia Properties and Northbridge Communities and gives effect to
the acquisition using the purchase method of accounting for business
combinations. See "Index to Financial Statements" on page F-1. Separate pro
forma combined financial data for Asia Properties which give effect to the
reincorporation and the Northbridge Communities acquisition are not presented
because that data would be identical to the pro forma combined financial data
for Asia Properties which give effect to the Northbridge Communities acquisition
since Asia Properties Investments does not have any significant assets,
liabilities or operations.
9
<PAGE>
This information is for illustrative purposes only. The companies may have
performed differently had the acquisition been completed at the assumed dates.
Therefore, you should not rely on this information as being indicative of the
historical results that would have been achieved had the acquisition been
completed as of the assumed dates for the future results that Asia Properties
Investments will experience after the reincorporation and the Northbridge
Communities acquisition.
Three Months
Ended Year Ended
March 31, 2000 December 31, 1999
---------------- -------------------
Income $ 290,870 $ 881,597
Operating loss $ (248,045) $ (2,711,103)
Net loss $ (389,118) $ (3,615,107)
Loss per share $ (0.04) $ (0.34)
Cash dividends per share $ - $ -
March 31, 2000
----------------
Cash and cash equivalents $ 146,090
Working capital deficit $ (3,800,477)
Total assets $ 22,112,447
Long-term liabilities $ 3,916,576
Stockholders' equity $ 14,141,369
10
<PAGE>
COMPARATIVE PER SHARE DATA
The following table presents comparative per share data for Asia Properties
and Northbridge Communities on an historical basis, and on a pro forma combined
basis to reflect the acquisition of Northbridge Communities under the purchase
method of accounting for business combinations.
<TABLE>
<CAPTION>
Three Months
Ended Year Ended
March 31, 2000 December 31, 1999
---------------- -------------------
<S> <C> <C>
Net loss per share
Asia Properties historical
Basic ($0.01) ($0.11)
Diluted ($0.01) ($0.11)
Northbridge Communities historical
Basic ($0.08) ($0.73)
Diluted ($0.08) ($0.73)
Asia Properties/Northbridge Communities
pro forma combined
Basic ($0.04) ($0.34)
Diluted ($0.04) ($0.34)
Cash dividends per share
Asia Properties historical $ - $ -
Northbridge Communities historical $ - $ -
Asia Properties/Northbridge Communities
pro forma combined $ - $ -
March 31, 2000
----------------
Book value per share
Asia Properties historical ($0.005)
Northbridge Communities historical $ 1.19
Asia Properties/Northbridge Communities
pro forma combined $ 1.344
</TABLE>
11
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RISK FACTORS
In addition to the other information contained in this document, the
following matters should be considered carefully.
THERE IS SUBSTANTIAL DOUBT ABOUT ASIA PROPERTIES' ABILITY TO CONTINUE AS A GOING
CONCERN.
Asia Properties Investments intends to continue Asia Properties' business
after the reincorporation is completed. However, Asia Properties is a
development stage company that has suffered recurring losses from operations.
As of December 31, 1999, Asia Properties had an accumulated deficit of $848,587.
As of March 31, 2000, the accumulated deficit was $904,532. The independent
audit report for the Asia Properties audited financial statements included in
their prospectus contains a separate paragraph about Asia Properties' ability to
continue as a going concern. Asia Properties does not currently have enough
cash to continue operations. Its cash needs are being satisfied through loans
from its current management and shareholders. Asia Properties ability to
continue as a going concern is dependent upon obtaining additional capital from
new investors or continuing to receive capital from its existing shareholders.
We cannot assure you that Asia Properties will be able to obtain such capital.
THE REINCORPORATION INTO A BRITISH VIRGIN ISLANDS COMPANY MAY MATERIALLY AFFECT
SHAREHOLDERS' RIGHTS.
Asia Properties Investments was formed solely to accomplish the
reincorporation of Asia Properties into a British Virgin Islands Company.
British Virgin Islands law may be materially different than Nevada law, under
which Asia Properties is currently incorporated. The majority shareholders of
Asia Properties currently own 64.3% of the outstanding shares of Asia Properties
and will own that same percentage of outstanding Asia Properties Investments
capital shares immediately after the reincorporation. We cannot assure you that
the differences between British Virgin Islands law and Nevada law will not
materially affect the interests of the minority shareholders of Asia Properties
Investments.
ASIA PROPERTIES INVESTMENTS MUST OBTAIN ADDITIONAL FINANCING OR CURTAIL OUR
OPERATIONAL PLANS.
Asia Properties Investments anticipates that it will acquire real estate
interests in Southeast Asia for income-producing purposes and for long-term
capital gain. Asia Properties Investments does not currently own any real
estate properties. We anticipate that the acquisition of real estate properties
will require a substantial amount of new capital. We currently do not have any
current binding commitments for, or readily available sources of, additional
financing. If we do not obtain additional financing we will be forced to
curtail our future operational and expansion plans. We cannot assure you that
additional financing will be available to us when needed or, if available, that
it can be obtained on commercially reasonable terms.
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THE ASIA PROPERTIES INVESTMENTS DIRECTORS AND EXECUTIVE OFFICERS WILL POSSESS
SIGNIFICANT CONTROL OVER ASIA PROPERTIES INVESTMENTS DUE TO THEIR OWNERSHIP OF
ASIA PROPERTIES INVESTMENTS CAPITAL SHARES.
The Asia Properties Investments' directors and executive officers will
beneficially own approximately 36.2% of the Asia Properties Investments
outstanding capital shares immediately after the reincorporation and assuming
the issuance of 4.6 million capital shares to acquire Northbridge Communities.
Those officers and directors will, as a result of their share ownership, be in a
position to significantly control Asia Properties Investments' corporate
actions.
NICHOLAS ST. JOHNSTON AND DANIEL MCKINNEY HAVE AN INTEREST IN THE ACQUISITION OF
NORTHBRIDGE COMMUNITIES.
The acquisition agreement with Northbridge Communities provides that
Nicholas St. Johnston and Daniel McKinney will remain members of the board of
directors of Asia Properties Investments after the acquisition. As members of
the board of directors both before and after the Northbridge Communities
acquisition, Mr. St. Johnston and Mr. McKinney may be deemed to have a conflict
of interest with respect to the Northbridge Communities acquisition. Further,
as both members of the board of directors and significant shareholders in Asia
Properties Investments, Mr. St. Johnston and Mr. McKinney may have the ability
to control Asia Properties Investments after the Northbridge Communities
acquisition and therefore to materially affect the interests of minority
shareholders.
ASIA PROPERTIES INVESTMENTS' OPERATIONS AND FINANCIAL CONDITION MAY BE ADVERSELY
AFFECTED BY THE STATUS OF THE SOUTHEAST ASIAN ECONOMY.
Although Southeast Asia's economy has been characterized in the past decade
by high growth rates, in 1996 and particularly in 1997, economic growth slowed
significantly in relation to historical levels. In late 1997 and throughout
1998, Southeast Asia experienced significant economic weakness, resulting
primarily from declines in the property and finance industries, a sharp
reduction in financial liquidity and a general deterioration in investor
confidence. Inflation in countries of Southeast Asia has increased and interest
rates have remained high in the region. We cannot assure you that this
significant economic weakness will not continue or materially worsen. Moreover,
all of these factors are beyond Asia Properties' control.
Declines in the property and finance industries may significant depress
real estate prices, including those prices at which we intend to sell or lease
properties we develop, which may prevent us from generating sufficient revenues
to become profitable. Rising interest rates may prevent consumers from
financing the purchase of properties we develop, and a deterioration in investor
confidence may decrease demand overall for the properties we plan to develop.
We cannot assure you that if these economic characteristics continue we will be
able to generate sufficient revenues to become profitable or to continue our
plan of operations.
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<PAGE>
OUR RESULTS OF OPERATIONS AFTER THE ACQUISITION OF NORTHBRIDGE COMMUNITIES WILL
BE AFFECTED BY RISKS ASSOCIATED WITH THE EXCHANGE RATE FLUCTUATIONS OF THE
THAILAND BAHT AND OTHER SOUTHEAST ASIAN CURRENCIES.
Northbridge Communities and Asia Properties prepare their financial
statements using U.S. dollars as the reporting currency, and Asia Properties
Investments expects to do the same after the reincorporation and the acquisition
of Northbridge Communities. However, their transactions are generally conducted
in Thailand Baht, except for Northbridge Communities' Cambodian operations which
must be transacted in U.S. dollars. The translation of transactions in Baht
into U.S. dollars for financial statement purposes is performed for balance
sheet accounts using the closing exchange rate in effect at the balance sheet
dates and for revenue and expense accounts using an average exchange rate during
each reporting period, and is thus affected by currency exchange rate
fluctuations. The gains or losses resulting from translation are included in
stockholders' equity separately as cumulative translation adjustments. Total
Northbridge Communities gains and losses from foreign currency transactions
included in its results of operations for the years ended December 31, 1997,
1998 and 1999 were approximately ($521,000), $989,000, and $627,000. Total
Northbridge Communities gains and losses from foreign currency transactions
included in its results of operations for the three months ended March 31, 1998,
1999 and 2000 were approximately $36,000, $15,000, and ($19,000). Due to the
limited nature of its transactions to date, Asia Properties has not experienced
material gains or losses from exchange rate fluctuations.
We cannot assure you that the value of the Thailand Baht or the currencies
of other Southeast Asian countries in which we plan to operate will not decline,
increase or continue to fluctuate widely against the U.S. dollar in the future.
Adverse economic conditions in Thailand and other parts of Southeast Asia
related to the devaluation of the Thai Baht in 1998 may have an adverse effect
on us. As discussed above, fluctuations of the value of the Thailand Baht or
the currencies of other Southeast Asian countries in which we plan to operate
relative to the U.S. dollar may cause us to recognize material foreign exchange
losses which could adversely affect our results of operations and financial
condition. We have not yet identified specific financial instruments in which
to invest to hedge our currency positions against any adverse consequences of
exchange rate fluctuations, but we plan to investigate the possibility of
implementing a hedging program including currency options and futures. However,
we cannot assure you that we will be able to successfully hedge our exchange
rate exposure or that we will be able to hedge the exposure at a satisfactory
cost. Our results of operations, will therefore be affected by risks associated
with the exchange rate fluctuations of the Thailand Baht.
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<PAGE>
TRADING OF ASIA PROPERTIES INVESTMENTS CAPITAL SHARES MAY BE INACTIVE.
Although Asia Properties Investments capital shares will be publicly held
after the reincorporation, there may not be an active trading market for our
capital shares based on the historical trading volumes for Asia Properties
common stock. To the extent that there is trading in our capital shares, our
capital shares will trade in the over-the-counter market and will be quoted in
the pink sheets. Our capital shares will not be quoted on Nasdaq or any
exchange immediately after the reincorporation. You should assume that even
with the pink sheet quotations of our capital shares, there will be an extremely
limited trading market and very little liquidity for our capital shares. We
cannot assure you that if an active trading market for our capital shares
develops it can be maintained. Although we intend to apply to have our capital
shares listed on the American Stock Exchange, we cannot assure you that such
listing will be approved.
THE INITIAL TRADING MARKET FOR ASIA PROPERTIES INVESTMENTS CAPITAL SHARES WILL
BE LIMITED DUE TO THE APPLICABLE SEC "PENNY STOCK" REGULATIONS.
The SEC's penny stock regulations will apply to our capital shares. Penny
stocks generally are equity securities with a price of less than $5.00 which are
not quoted on a national exchange, such as the American Stock Exchange, or the
Nasdaq system, or which do not qualify for other exemptions from the definition.
Our capital shares currently do not qualify for those exemptions since they will
be quoted in the pink sheets. The penny stock rules require a broker/dealer to
deliver before a transaction in a penny stock a standardized risk disclosure
document prescribed by the SEC and provide the potential purchaser of a penny
stock the following information:
- information about penny stocks,
- the nature and level of risk in the penny stock market,
- the bid and offer quotations for the stock, and
- other burdensome and detailed information.
Those delivery and disclosure requirements tend to reduce the level of
interest of broker/dealers in dealing with penny stocks, which could have the
effect of reducing the level of trading activity in the secondary market for our
capital shares. The penny stock regulations could reduce the liquidity of our
capital shares and make it more difficult for investors to sell our capital
shares.
15
<PAGE>
INVESTORS IN OUR CAPITAL SHARES WILL PROBABLY NOT DERIVE ANY PROFITS FROM
DIVIDENDS ON OUR CAPITAL SHARES.
Investors in our capital shares will probably not derive any profits from
their investment for the foreseeable future other than through potential price
appreciation of the capital shares. We have not previously paid any cash or
other dividends on our capital shares and do not anticipate payment of any
dividends for the foreseeable future. We anticipate that any earnings would be
retained by us to finance our operations and future growth and expansion.
YOU MAY NOT BE ABLE TO ENFORCE A U.S. JUDGMENT AGAINST ASIA PROPERTIES
INVESTMENTS IN THE BRITISH VIRGIN ISLANDS.
Asia Properties Investments is a British Virgin Islands company and some of
Asia Properties Investments officers and directors are residents of various
jurisdictions outside the U.S. All or a substantial portion of the assets of
those officers and directors and substantially all of Asia Properties
Investments' assets after the proposed acquisition of Northbridge Communities
will be located in jurisdictions outside the U.S. Asia Properties Investments
has appointed Daniel S. McKinney, an executive officer and director of Asia
Properties Investments, at 114 Magnolia Street, Suite 400-115, Bellingham, WA
98225 as agent for service of process with respect to actions based on offers
and sales of Asia Properties Investments capital shares made through this
prospectus.
Nevertheless, it could be difficult for you to effect service of process
within the U.S. on our directors and officers who reside outside the U.S. or to
recover against us or such directors and officers on judgments of U.S. courts
predicated upon civil liabilities under U.S. federal securities laws.
THE SUCCESS OF ASIA PROPERTIES INVESTMENTS AFTER THE REINCORPORATION IS
DEPENDENT ON ITS KEY PERSONNEL.
Asia Properties Investments will be dependent on the continued employment
of Nicholas St. Johnston, its chief executive officer, and Daniel S. McKinney,
its president. If either Mr. St. Johnston or Mr. McKinney is unable or
unwilling to continue in his present position, the financial condition and
results of operations of Asia Properties Investments could be materially
adversely affected.
THE ACQUISITION OF NORTHBRIDGE COMMUNITIES MAY NOT BE COMPLETED.
Neither Asia Properties nor Asia Properties Investments has ever generated
revenues from operations, nor does Asia Properties or Asia Properties
Investments own any real estate interests in Southeast Asia. Our current
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<PAGE>
business plan is to acquire Northbridge Communities, which currently owns real
estate interests in Thailand and Cambodia. If the Northbridge Communities
acquisition is not completed, we will have to reevaluate our current business
plan to identify other suitable acquisition candidates or to acquire other real
estate interests.
IF THE NORTHBRIDGE COMMUNITIES ACQUISITION IS NOT COMPLETED, WE WILL NOT BE
SUCCESSFUL IF WE ARE UNABLE TO PURCHASE REAL ESTATE INTERESTS AT REASONABLE
PRICES.
If we are unable to complete the Northbridge Community acquisition, our
business will fail, unless we can acquire real estate interests at reasonable
prices in Southeast Asia. Our success is dependent on our ability to acquire
real estate interests at reasonable prices supported by third party independent
appraisals. We have experienced appraisers within our management team but in
Southeast Asia, and specifically in Thailand, there are limited opportunities to
acquire real estate interests at reasonable prices. We cannot assure you that
any properties will be available at reasonable prices.
NORTHBRIDGE COMMUNITIES HAS EXPERIENCED SUBSTANTIAL OPERATING LOSSES AND OUR
OPERATIONS MAY BE ADVERSELY AFFECTED BY THOSE LOSSES IF THE PLANNED ACQUISITION
OF NORTHBRIDGE COMMUNITIES IS COMPLETED.
For the fiscal year ended December 31, 1999, Northbridge Communities had
losses from operations of $2,010,500. Northbridge Communities' continued
operations are dependent upon the willingness of current shareholders to
contribute additional capital, the availability of new investors, and the speed
of the economic recovery and political stability in Southeast Asia. We cannot
assure you that additional capital will be available to Northbridge Communities
or that there will be a continued economic recovery or political stability in
Southeast Asia.
NORTHBRIDGE COMMUNITIES EXPERIENCES FLUCTUATIONS IN ITS OPERATING RESULTS.
Northbridge Communities generally experiences fluctuations in its operating
results because of the nature of its business. The international schools in
which Northbridge Communities owns interests receive approximately 90% of their
recovery during August, January and May, the first months of their school terms.
Moreover, rental payments are generally received on either a monthly or
quarterly basis depending upon the nature of the lease arrangement. As result,
Northbridge Communities results of operations may vary widely throughout the
course of any given year.
INCREASES IN CONSTRUCTION AND LABOR COSTS MAY MATERIALLY ADVERSELY AFFECT OUR
DEVELOPMENT PLANS.
After the completion of the Northbridge Communities acquisition, we plan to
finish the development of residential real estate projects in Cambodia and
Thailand. Our plans to complete these developments may be materially adversely
17
<PAGE>
affected by shortages in construction materials or qualified laborers. These
shortages may lead to increased costs of development and an inability to
complete construction in a timely manner. We cannot assure you that
construction materials and labor will be available at costs which would allow us
to complete Northbridge Communities' projects.
AFTER THE NORTHBRIDGE COMMUNITY ACQUISITION, WE MAY FACE SUBSTANTIAL COMPETITION
IN THE MARKETS IN WHICH WE INTEND TO OPERATE.
There are numerous real estate investment, development and management
companies in Thailand, Cambodia and throughout Southeast Asia with which we
anticipate we will compete after we acquire Northbridge Communities. For
example, the International School Eastern Seaboard we will acquire near Bangkok,
Thailand competes with three other international schools. These schools offer
British curricula, in contrast to the International Baccalaureate curriculum
International School Eastern Seaboard offers. In Cambodia, there are
approximately 12 integrated golf course housing developments with which
Northbridge Communities' property competes. Based on current demand, there is
an oversupply of housing and condominium units in the area in Cambodia in which
Northbridge Communities owns its interests. Our competitors may be more
established companies with completed projects and may have substantially greater
resources, including financial resources, than Asia Properties Investments.
OUR OPERATIONS AND FINANCIAL CONDITION MAY BE ADVERSELY AFFECTED BY THE
POLITICAL SITUATION IN THAILAND AND SOUTHEAST ASIA IF THE PLANNED ACQUISITION OF
NORTHBRIDGE COMMUNITIES IS COMPLETED.
The political situation in Thailand has been unstable from time to time in
recent years and future political and economic instability in Thailand could
have an adverse effect on our business and results of operations. Approximately
90% of Northbridge Communities' revenues from operations are derived from
operations in Thailand. A political, economic and legal environment that
differs significantly from that which prevails in the U.S will govern those real
estate interests in Thailand. Thailand has experienced several changes of
government and changes in its political system since World War II. We cannot
assure you that Thailand's current government or political system will continue
unchanged for the foreseeable future. We also cannot assure you that any future
change in the government will be the result of democratic processes.
WE WILL BE SUBJECT TO THE POLITICAL RISKS OF CAMBODIA IF THE PLANNED ACQUISITION
OF NORTHBRIDGE COMMUNITIES IS COMPLETED.
A rapid pace of political and social change characterizes the Cambodian
market. Recent political reforms have inevitably resulted in new economic and
social tensions. The possibility of continuing instability and even a reaction
against market reforms cannot be discounted. There is a particular risk that
guarantees of investor protection may not always be honored, and that policies
encouraging foreign investment may be abandoned or reversed. At worst, this
could lead to re-nationalization of privatized industries and expropriation of
18
<PAGE>
private property without compensation. While the foreign investment laws of
Cambodia state that the Cambodian government cannot undertake a nationalization
policy, which adversely affects private property of investors, there is no such
provision for business property. In addition, a new Cambodian government may
overturn these laws.
ASIA PROPERTIES INVESTMENTS WILL BE AFFECTED BY THE NATURE OF THE CAMBODIAN
ECONOMIC INFRASTRUCTURE IF THE PLANNED ACQUISITION OF NORTHBRIDGE COMMUNITIES IS
COMPLETED.
If the planned acquisition of Northbridge Communities is completed, our
investment performance in Cambodia can be affected by the nature of the
underlying economic infrastructure of Cambodia. That infrastructure is
significantly less developed than in mature economies. The poor
telecommunications and transport systems and inefficient banking sectors in
Cambodia may hinder business development.
A LACK OF FOREIGN INVESTMENT WILL NEGATIVELY AFFECT NORTHBRIDGE COMMUNITIES'
REAL ESTATE INTERESTS.
If the planned acquisition of Northbridge Communities is completed, Asia
Properties Investments' business will consist primarily of income-producing
school and residential properties designed for foreign nationals residing in
Southeast Asia. The operation of English language schools resulted in income of
$453,218, and the leasing of property to large multi-national corporations, such
as General Motors (Thailand), Ltd. generated $4,287,379 for the year ended
December 31, 1999. If foreign investment in Southeast Asia substantially
decreases or if large, multi-national corporations relocate or close their
operations in Southeast Asia, there may be fewer foreign nationals who use
English language schools and who may lease international standard housing,
thereby materially adversely affecting Northbridge Communities' business.
THE OWNERSHIP RIGHTS OF REAL AND PERSONAL PROPERTY OWNED BY NORTHBRIDGE IN
CAMBODIA ARE UNCERTAIN.
Northbridge Community owns interests in land in Cambodia. Under the land
laws of Cambodia, land must be majority Cambodian owned. The use of land by
foreign investors is permitted and investors may be granted leases for a period
of up to seventy years, renewable on request. Effectively, this means that the
lease may be granted for one hundred forty years. Where a lease is granted, it
appears that foreign investors may be entitled to own real or personal property
situated on the land. However, the scope of this right is unclear as the right
is stated to be limited to the rights as may be permitted by law. Cambodian
land law is not clear on this issue and, even if it does currently permit
ownership by a foreign entity, the regulations regarding land may change.
19
<PAGE>
CAUTIONARY INFORMATION ABOUT FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that concern Asia
Properties Investments intent to acquire the business of Northbridge
Communities. All statements, other than statements of historical facts,
included in this prospectus that address activities, events or developments that
any of those companies expects, believes or anticipates will or may occur in the
future, including the following matters are forward looking statements:
- Asia Properties Investments' ability to complete the acquisition of
Northbridge Communities,
- Asia Properties Investments' expectations about the time-frame and
cost of development of Northbridge Communities' international schools
and golf course-based residential communities,
- the costs of real property, labor and materials necessary to develop
Northbridge Communities' business,
- Asia Properties Investments' ability to capture market share in the
international school and golf course-based residential community
markets,
- the size of the international school and golf course-based community
markets in which Asia Properties Investments intends to compete, and
- Asia Properties Investments' ability to continue to develop
Northbridge Communities' interests in real property at prices and in
time-frames such that Asia Properties Investments can generate income
and ultimately profit from such operations.
These statements are based on assumptions and analyses made in light of
management experience and perception of the following:
- historical trends,
- current conditions,
- expected future developments, and
20
<PAGE>
- other factors believed to be appropriate in the circumstances.
Those statements are affected by a number of risks and uncertainties
including the following:
- the uncertain acceptance in Thailand, Cambodia and other Southeast
Asian countries of Northbridge Communities' golf community projects,
- general economic and business conditions in Southeast Asia,
- fluctuations in currency exchange rates between the Thailand Baht and
the U.S. Dollar,
- the availability of properties for development by Northbridge
Communities,
- the ability of Northbridge Communities to acquire properties or to
complete development of existing projects on a commercially reasonable
basis,
- the availability of project financing on favorable conditions,
- Northbridge Communities' relative lack of experience in doing business
in Southeast Asian countries,
- restrictions on land ownership in Cambodia and the potential for
material changes in laws or regulations which are beyond management
control,
- the loss of services of those key employees, including Nicholas St.
Johnston and Vorasit Pokachiyapat, who have experience developing real
estate in Southeast Asia,
- the potential for overseas tax exposure because Northbridge
Communities is subject to various taxes from more than one tax
authority in Southeast Asia, and
- existing management's control over Northbridge Communities.
We caution you that any forward-looking statements are not guarantees of
future performance and that actual results or developments may differ materially
from those expressed or implied in the forward-looking statements. Significant
21
<PAGE>
factors that could prevent us from achieving our stated goals include the
factors contained in "Risk Factors." The risk factors contained in this
prospectus should be considered in connection with any subsequent written or
oral forward-looking statements that may be issued by us or persons acting on
our behalf.
THE REINCORPORATION
GENERAL
The Asia Properties board of directors and holders of over a majority of
the outstanding shares of Asia Properties common stock and the Asia Properties
Investments board of directors have approved the reincorporation of Asia
Properties from a Nevada corporation to a British Virgin Islands company through
the merger of Asia Properties into Asia Properties Investments. After the
reincorporation is completed, Asia Properties Investments expects to complete
the pending acquisition of Northbridge Communities and to carry on Northbridge
Communities' business of ownership, management and development of English
language international schools and international standard housing projects for
resident foreign nationals in Thailand, Cambodia, and potentially other parts of
Southeast Asia.
BACKGROUND AND REASONS FOR THE REINCORPORATION
Asia Properties Investments plans to engage in real estate investment
activities in Southeast Asia. Asia Properties has, and Asia Properties
Investments will continue to have, executive offices in Bangkok, Thailand. The
Asia Properties board of directors believes that the reincorporation of Asia
Properties in the British Virgin Islands should allow it to benefit from more
favorable business, regulatory, tax and financing environments and to benefit
from an enhanced ability to compete. Therefore, the Asia Properties board of
directors believes the reincorporation should have a favorable impact on the
conduct of Asia Properties Investments' future business operations. In
particular, the Asia Properties board of directors approved the reincorporation
for the following reasons:
- Its tax advisors are of the opinion that the acquisition of
Northbridge Communities would be taxable to Asia Properties
shareholders so long as Asia Properties is incorporated in Nevada. The
board of directors believes, based upon advice from its British Virgin
Islands counsel, that the Northbridge Communities acquisition will not
be taxable to Asia Properties Investments shareholders after the
reincorporation.
- It believes that reincorporation in the British Virgin Islands will
over a period of time reduce corporate income taxes because, unlike
the U.S. tax system which imposes corporate income tax on the
worldwide income of U.S. corporations, the British Virgin Islands
generally impose no corporate income taxes on foreign income. Income
taxes will therefore be reduced to the extent operations are conducted
after the reincorporation outside of the U.S. and outside of other
countries with significant corporate taxes.
22
<PAGE>
- It believes that the change of domicile may, in some circumstances,
have a favorable effect on the ability to raise additional capital in
the future from non-U.S. investors. The distributions with respect to
stock in a U.S. corporation to non-resident aliens are generally
subject to withholding taxes under the U.S. Internal Revenue Code.
Generally, British Virgin Islands law does not currently provide for
withholding taxes on distributions to non-resident aliens in respect
of stock of a British Virgin Islands company.
The board of directors of Asia Properties considered that the
reincorporation to a British Virgin Islands company may be detrimental because
potential customers, business partners or investors may view British Virgin
Islands companies as being regulated less than U.S.-based companies. The board
of directors nevertheless believes that the advantages to the reincorporation
described above and the reporting obligations of Asia Properties Investments
under the U.S. securities laws outweigh any potential detriment from the
reincorporation.
THE REINCORPORATION MERGER AGREEMENT
Under the reincorporation merger agreement:
- Asia Properties will merge with and into Asia Properties Investments,
and Asia Properties Investments will be the surviving company.
- Each outstanding share of Asia Properties common stock will
automatically be converted into one Asia Properties Investments
capital share.
- The Asia Properties Investments memorandum of association and articles
of association in effect immediately before the reincorporation will
be the charter and bylaws of the surviving company.
- the directors and officers of Asia Properties immediately before the
reincorporation will continue as the Asia Properties Investments
directors and officers.
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SHAREHOLDER APPROVAL OF THE REINCORPORATION
Over a majority of the shareholders of Asia Properties have approved the
reincorporation by written consent. Asia Properties is using this document as a
notice to the shareholders of their right to dissent to the reincorporation and
receive the fair value of their shares in cash.
TIMING OF THE CLOSING
On ___________, 2000, the corporate existence of Asia Properties will cease
upon the filing of articles of merger with the Nevada Secretary of State and the
Registrar of Companies in the British Virgin Islands.
RIGHTS OF DISSENTING SHAREHOLDERS
If you dissent to the reincorporation you are entitled to be paid in cash
the fair value of your shares in accordance with Section 92A.300 through 92A.500
of the Nevada General Corporation Law. A brief summary of the provisions of
Sections 92A.300 through 92A.500 is set forth below and the complete text of the
sections is set forth in Annex A.
Since the reincorporation was approved by a majority of the stockholders of
Asia Properties, each owner of shares of Asia Properties common stock who
asserts dissenters' rights and who strictly follows the procedures set forth in
Sections 92A.300 through 92A.500 of the Nevada General Corporation Law will be
entitled to have his, her or its shares of Asia Properties common stock
purchased by Asia Properties for cash at their fair value.
To dissent you must by ____________, 2000 give notice of your dissent to
our stock transfer agent at the following address:
Computershare Investor Services, Inc.
P.O. Box 1596
Lakewood, Colorado 80201
with a copy to:
Roger V. Davidson, Esq.
Ballard Spahr Andrews & Ingersoll, LLP
1225 17th Street, Suite 2300
Denver, Colorado 80202
on or before 5:00 p.m., Denver time on ____________, 2000, by use of the notice
attached to this prospectus as Annex B, and you must deposit your certificates
fully endorsed, with Computershare Investor Services, Inc. at the above address.
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You must also certify whether you acquired beneficial ownership of the shares
before __________ ___, 2000. If you do not follow these instructions you will
not be entitled to payment for your shares under the Nevada General Corporation
Law.
Within 30 days after receipt of a demand for payment, Asia Properties will
pay each dissenter who complies with these requirements the amount estimated to
be the fair value of their shares, plus accrued interest computed from the
effective date of the reincorporation until the date of payment. Payment must
be accompanied by:
- the balance sheet of Asia Properties as of the end of a fiscal
year ending not more than 16 months before the date of payment, a
statement of income for that year, a statement of changes in the
stockholders' equity for that year and the latest available
interim financial statements, if any,
- a statement of Asia Properties' estimate of the fair value of the
shares,
- an explanation of how the interest was calculated,
- a statement of the dissenter's rights to demand payment under
Section 92A.480 of the Nevada General Corporation Law, and
- a copy of Sections 92A.300 through 92A.500 of the Nevada General
Corporation Law.
Under Section 92A.470 of the Nevada General Corporation Law, Asia
Properties may withhold payment unless you were the beneficial owner of the
shares before ____________ ____, 2000. If Asia Properties withholds payment
under Section 92A.470, it will estimate the fair value of the shares, plus
accrued interest, and will offer to pay this amount to each dissenter who agrees
to accept it in full satisfaction of his, her or its demand. The offer will
contain a statement of the estimate of the fair value, an explanation of how the
interest was calculated, and a statement of dissenters' rights under Section
92A.480. As a dissenter, you may notify Asia Properties in writing of your
estimate of the fair value of the shares and the amount of interest due and
demand payment of this estimate, less any payment previously made by us under
Section 92A.460, or you may reject the offer made under 92A.470 and demand
payment of the fair value of your shares and interest due. You will waive your
right to demand payment unless you make your demand in writing within thirty
days after Asia Properties has made or offered payment for your shares.
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If any demand for payment remains unsettled, Asia Properties will commence
a proceeding within sixty days of the dissenter's demand with the district court
in the County of Clark, State of Nevada, which is the location of Asia
Properties' registered office, petitioning the court to determine the fair value
of the shares and accrued interest. All dissenters whose demands remain
unsettled, whether or not residents of Nevada, must be made parties to the court
action and must be served with a copy of the petition. Nonresidents may be
served by registered or certified mail or by publication as provided by law. If
Asia Properties does not petition the court within this sixty-day period, it
must pay all unsettled demands. Each dissenter who is a party to the proceeding
is entitled to a judgment for the amount, if any, by which the court finds the
fair value of his shares, plus interest, exceeds the amount Asia Properties
paid, or for the fair value, plus accrued interest, of his after-acquired shares
for which Asia Properties elected to withhold payment under Section 92A.470. The
court will assess costs against Asia Properties except to the extent that it
assesses costs against dissenters, as it finds equitable.
The material procedures a dissenting shareholder must follow are described
above. However, this summary is not a comprehensive statement of the procedures
that must be followed by a dissenting stockholder who seeks payment of the fair
value of his, her or its shares of Asia Properties common stock. The Nevada
General Corporation Law establishes the procedures to be followed and failure to
do so may result in your loss of all dissenters' rights. Therefore, if you
desire to exercise dissenters' rights, you should carefully consider and comply
with the provisions of the dissenters' rights statute, the full text of which is
set forth in Annex A to this prospectus, and consult your legal advisor.
EXCHANGE OF SHARE CERTIFICATES
At the closing of the reincorporation, the stockholders of Asia Properties
immediately before the effective time will automatically become the owners of
Asia Properties Investments capital shares and cease to be owners of Asia
Properties common stock. Stock certificates representing Asia Properties common
stock will upon completion of the reincorporation automatically represent Asia
Properties Investments capital shares. Holders of Asia Properties common stock
will not be required to exchange their stock certificates as a result of the
reincorporation. If a shareholder desires to sell some or all of his, her or
its capital shares, delivery of the stock certificate or certificates which
previously represented shares of Asia Properties common stock will be
sufficient.
Certificates bearing the name of Asia Properties Investments will be issued
in the normal course upon surrender of outstanding Asia Properties common stock
certificates for transfer or exchange. If any shareholder surrenders a
certificate representing shares of Asia Properties common stock for exchange or
transfer and the new certificate is to be issued in a name other than that
appearing on the surrendered certificate, it will be a condition to such
exchange or transfer that the surrendered certificate be properly endorsed and
otherwise be in proper form for transfer.
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EXPECTED TRADING MARKET FOR SHARES AFTER THE REINCORPORATION
Asia Properties Investments expects that its capital shares will trade in
the over-the-counter market and be quoted in the pink sheets under the symbol
"________."
INTERESTS OF INSIDERS IN THE REINCORPORATION
The executive officers and directors of Asia Properties, Daniel S.
McKinney, Nicholas St. Johnston, David W. Diehl and David Roberts, and the
affiliates of those persons currently hold 64.3% of the outstanding shares of
Asia Properties common stock and should hold an equal percentage of Asia
Properties Investments capital shares immediately after the reincorporation ,
but before Asia Properties Investments' acquisition of Northbridge Communities.
All executive officers and directors of Asia Properties will continue to be Asia
Properties Investments executive officers and directors in the same capacities
after the reincorporation.
COMPARISON OF BRITISH VIRGIN ISLANDS AND NEVADA CORPORATE LAWS AND ASIA
PROPERTIES INVESTMENTS AND ASIA PROPERTIES SHAREHOLDER RIGHTS
Asia Properties Investments is a British Virgin Islands company and the
rights of its shareholders are governed by British Virgin Islands corporate law
and the Asia Properties Investments memorandum and articles of association.
Asia Properties is a Nevada corporation and the rights of its shareholders are
governed by Nevada corporate law and the Asia Properties articles of
incorporation and bylaws. Under the reincorporation merger agreement, Asia
Properties shareholders will become Asia Properties Investments shareholders and
as such their rights will be governed by British Virgin Islands corporate law
and the Asia Properties Investments memorandum and articles of association.
The following chart is a summary of the general corporate governance
provisions and material differences between British Virgin Islands and Nevada
corporate laws and Asia Properties Investments and Asia Properties shareholder
rights. However, the summary in the chart is not intended to be complete and is
qualified by reference to:
- British Virgin Islands corporate law,
- Nevada corporate law,
- the Asia Properties Investments memorandum and articles of
association, and
- the Asia Properties articles of incorporation and bylaws.
Under both British Virgin Islands and Nevada corporate law, a company's
governing documents, such as the Asia Properties Investments memorandum and
articles of association and the Asia Properties articles of incorporation and
bylaws, may often lawfully impose stricter standards and procedures than
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provided by the governing corporate law. The Asia Properties Investments
memorandum and articles of association and the Asia Properties articles of
incorporation and bylaws have been filed with the SEC as exhibits to the
registration statement which includes this prospectus. See "Where You Can Find
More Information" on page 91.
<TABLE>
<CAPTION>
BRITISH VIRGIN ISLANDS LAW - NEVADA LAW -
ASIA PROPERTIES INVESTMENTS SHAREHOLDER RIGHTS ASIA PROPERTIES SHAREHOLDER RIGHTS
<S> <C>
General Corporate Governance
The rights of Asia Properties Investments The rights of Asia Properties shareholders are
shareholders are governed by British Virgin Islands governed by Nevada corporate law and the
corporate law and the Asia Properties Investments Asia Properties articles of incorporation and
memorandum and articles of association. bylaws. Upon completion of the
reincorporation, the Asia Properties
shareholders will become Asia Properties
Investments shareholders and their rights will
be governed by British Virgin Islands
corporate law and the Asia Properties
Investments memorandum and articles of
association.
Authorized Capital Stock
The Asia Properties Investments memorandum of The Asia Properties articles of incorporation
association authorizes Asia Properties Investments authorize Asia Properties to issue up to
to issue up to 500,000,000 capital shares. 50,000,000 shares of common stock.
Board of Directors Structure
A British Virgin Islands company is managed by a A Nevada corporation is managed by a board
board of directors which can include both natural of directors consisting of natural persons.
persons and companies. The Asia Properties The Asia Properties bylaws do not fix the
Investments articles of association provide that its number of Asia Properties directors.
board will consist of at least one but not more than
ten directors elected by the shareholders.
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BRITISH VIRGIN ISLANDS LAW - NEVADA LAW -
ASIA PROPERTIES INVESTMENTS SHAREHOLDER RIGHTS ASIA PROPERTIES SHAREHOLDER RIGHTS
Vote Required for Board of Directors Approval
Under British Virgin Islands law, unless the Under Nevada law, unless otherwise provided
memorandum or articles of association provide by the articles of incorporation or bylaws any
otherwise approval of a resolution by the board of action approved by a majority of the votes at a
directors at a meeting requires the affirmative vote meeting of the board of directors shall be a
of a simple majority of those directors present and valid act of the board of directors. The Asia
who vote and do not abstain at a meeting at which a Properties articles of incorporation and
quorum exists. Under the Asia Properties articles bylaws do not contain any contrary
of association, the presence in person or by provisions.
alternate of at least one half of the total number of
directors constitutes a quorum for a board of Under Nevada law, resolutions of directors
directors meeting. approved by written consent without a
meeting require the unanimous consent of all
Under British Virgin Islands law, resolutions of directors.
directors consented to in writing without a meeting
require the written consent of at least an absolute
majority of all directors. The Asia Properties
Investments articles of association provide that
when resolutions of directors are consented to in
writing, the affirmative votes of all directors are
necessary.
Quorum to Hold a Shareholder Meeting
Under British Virgin Islands law, a company's The Asia Properties bylaws provide that the
memorandum and articles of association generally presence at a meeting in person or by proxy of
establish what constitutes a quorum for a meeting the holders of a majority of the shares entitled
of shareholders. to vote at the meeting is a quorum.
The Asia Properties Investments articles of
association provide that a quorum exists at a
shareholder meeting if at least fifty percent of the
votes of the shares or class of shares entitled to vote
are present in person or by proxy at the meeting.
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BRITISH VIRGIN ISLANDS LAW - NEVADA LAW -
ASIA PROPERTIES INVESTMENTS SHAREHOLDER RIGHTS ASIA PROPERTIES SHAREHOLDER RIGHTS
Vote Required for Shareholder Approval
Under British Virgin Islands law, unless the Nevada law and the Asia Properties articles of
memorandum or articles of association provide incorporation and bylaws require an
otherwise a simple majority of affirmative votes of affirmative vote of the majority of shares
shareholders, or of each class of shareholders as the entitled to vote on a matter and represented
case may be, represented at a proper shareholder either in person or by proxy at a meeting of
meeting and who actually vote is required for shareholders at which a quorum is present.
shareholder approval of a matter.
Under Nevada law, unless otherwise provided
Under British Virgin Islands law, unless the by the articles of incorporation or bylaws any
memorandum or articles of association provide shareholder action may be taken without a
otherwise resolutions of shareholders consented to meeting if written consent to the action is
in writing require an absolute majority of signed by shareholders holding at least a
affirmative votes of all shareholders entitled to majority of the voting. Neither the Asia
vote. Further, unless the memorandum or articles Properties articles of incorporation nor bylaws
of association provide otherwise, all shares vote as contain any contrary provisions.
one class and each whole share has one vote. The
Asia Properties Investments memorandum and
articles of association do not contain any contrary
provisions.
Class Voting
Unless stated otherwise in a company's Under Nevada law, class voting is not
memorandum and articles of association, British required except with respect to an amendment
Virgin Islands law provides that all shares vote as to the articles of incorporation which would
one class and each whole share has one vote. The alter or change any preferences or any relative
Asia Properties Investments memorandum and or other right given to any class or series of
articles of association do not provide otherwise. outstanding shares. Such amendment must be
approved by a vote, in addition to the
affirmative vote otherwise required, of the
holders of shares representing a majority of
the voting power of each class or series
affected by the amendment regardless of
limitations or restrictions on the voting power
thereof.
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BRITISH VIRGIN ISLANDS LAW - NEVADA LAW -
ASIA PROPERTIES INVESTMENTS SHAREHOLDER RIGHTS ASIA PROPERTIES SHAREHOLDER RIGHTS
Amendments to Governing Documents
Under British Virgin Islands law, the directors of a Under Nevada law, the board of directors
company may be empowered by that company's must adopt a resolution setting forth the
memorandum or articles of association to amend amendment proposed and declaring its
such without stockholder approval. However, the advisability. The board of directors must call
Asia Properties Investments memorandum and a meeting of the holders of the outstanding
articles of association provide that any such shares entitled to vote. The amendment must
amendments must be made by resolution of the be approved by a majority of such
directors and only with the written consent of a shareholders voting in person or by proxy, or
majority of all Asia Properties Investments by a greater proportion of the voting power as
shareholders. may be required in the case of a vote by
classes or series.
Shareholder's Right to Inspect Corporate Books
and Records
Under British Virgin Islands law, a shareholder Under Nevada law, any person who has been
may, in person or by attorney and in furtherance of a stockholder of record of any corporation not
a purpose reasonably related to the shareholder's listed and traded on any recognized stock
interest as a shareholder, request permission in exchange and who owns not less than fifteen
writing to inspect during normal business hours the percent of all of the issued and outstanding
share register of the company or the books, records, shares of the stock of such corporation or has
minutes and consents kept by the company and to been authorized in writing by the holders of at
make copies or extracts therefrom. least fifteen percent of all its issued and
outstanding shares, upon at least five days
written demand, is entitled to inspect in
person or by agent or attorney, during normal
business hours, the books of account and all
financial records of the corporation, to make
extracts therefrom, and to conduct an audit of
such records to the extent such inspection is
related to his interest in the corporation as a
stockholder.
Any person who has been a stockholder of
record of the corporation for at least six
months immediately preceding the demand,
or any person holding, or authorized in
writing by the holders of, at least five percent
of all of its outstanding shares, upon at least
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BRITISH VIRGIN ISLANDS LAW - NEVADA LAW -
ASIA PROPERTIES INVESTMENTS SHAREHOLDER RIGHTS ASIA PROPERTIES SHAREHOLDER RIGHTS
five days written demand is entitled to inspect
in person or by agent or attorney, during usual
business hours, the stock ledger of the
corporation and make copies therefrom.
Limitation of Director Liability
Under British Virgin Islands law, no provisions in
the memorandum or articles of association of the Under Nevada law, a corporation's articles of
British Virgin Islands company or in any agreement incorporation may include a provision that no
between the British Virgin Islands company and a director or officer of the corporation will be
director will relieve a director from any personal liable to a corporation or its shareholders for
liability in connection with his management of the damages for breach of fiduciary duty. As a
business and affairs of the British Virgin Islands director or officer except for:
company.
- acts or omissions which involve
intentional misconduct, fraud or a
knowing violation of law, or
- authorizing unlawful dividend
payments.
The Asia Properties articles of incorporation
do not contain a provision which eliminates
the liability of a director or officer to Asia
Properties or its shareholders for breach of
fiduciary duty.
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BRITISH VIRGIN ISLANDS LAW - NEVADA LAW -
ASIA PROPERTIES INVESTMENTS SHAREHOLDER RIGHTS ASIA PROPERTIES SHAREHOLDER RIGHTS
Indemnification of Officers and Directors
Unless its memorandum or articles of association Under Nevada law, a corporation may
provide otherwise, a British Virgin Islands indemnify officers, directors, employees and
company may indemnify a person against all agents against expenses, including attorney's
expenses, including legal fees, and against all fees, judgments, fines and amounts paid in
judgments, fines and amounts paid in settlement settlement actually and reasonably incurred in
and reasonably incurred in connection with legal, connection with an action, suit or proceeding
administrative or investigative proceedings, where if he acted in good faith and in a manner
such person which he reasonably believed to be in or not
opposed to the best interest of the corporation,
- is or was a party or is threatened to be made and with respect to criminal action or
a party to any threatened, pending or proceeding had no reasonable cause to believe
completed proceedings, whether civil, his conduct was unlawful.
criminal, administrative or investigative, by
reason of the fact that the person is or was a A corporation shall indemnify expenses
director, an officer or liquidator of the actually incurred when the individual being
British Virgin Islands company, or indemnified has successfully defended any
action, claim, issue or matter therein, on the
- is or was, at the request of the British Virgin merits or otherwise.
Islands company serving as a director,
officer or liquidator of, or in any other Expenses incurred by an officer or director in
capacity is or was acting for, another defending an action may be paid in advance
company or partnership, joint venture, trust under Nevada law if such director or officer
or other enterprise, all provided that such undertakes to repay such amounts if it is
person acted honestly and in good faith with ultimately determined that he or she is not
a view to the best interests of the British entitled to indemnification.
Virgin Islands company and, in the case of
criminal proceedings, the person had no
reasonable cause to believe that his conduct
was unlawful.
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<PAGE>
BRITISH VIRGIN ISLANDS LAW - NEVADA LAW -
ASIA PROPERTIES INVESTMENTS SHAREHOLDER RIGHTS ASIA PROPERTIES SHAREHOLDER RIGHTS
Removal of Directors
The Asia Properties Investments articles of Directors of the corporation may be removed
association provide that a director may be removed without cause by a vote of stockholders
from office with or without cause by a resolution of representing not less than two-thirds of the
the shareholders. voting power of the issued and outstanding
stock entitled to vote at a special meeting,
unless the articles of incorporation provide for
the election of directors by cumulative voting,
then directors may be removed by a vote of
stockholders owning sufficient shares to have
prevented his election to office in the first
instance. If a director was elected by a voting
group of shareholders, only the shareholders
of that group may participate in the vote to
remove that director.
Dissolution
British Virgin Islands law requires either a Under Nevada law the directors must
resolution of shareholders or a resolution by the recommend the dissolution of the corporation
board of directors for voluntary dissolution. to the stockholders. The corporation shall
However, the Asia Properties Investments notify each stockholder entitled to vote on the
memorandum and articles of association require a dissolution and the stockholders entitled to
resolution of the shareholders. vote must approve the dissolution.
Redemption of Minority Shares
Under British Virgin Islands law, subject to any There are no specific provisions for the
limitations in the memorandum or articles of redemption of minority shares under Nevada
association, upon a merger or consolidation law.
shareholders of a British Virgin Islands company
holding ninety percent of the votes of the
outstanding shares entitled to vote and the votes of
the outstanding shares of each class and series
entitled to vote as a class or series may on a merger
or consolidation give written instructions to the
British Virgin Islands company directing the British
Virgin Islands company to redeem the shares held
by the remaining shareholders. The British Virgin
Islands company must then initiate the compulsory
redemption procedure set forth in the British Virgin
Islands Ordinance. Any dissenting shareholders are
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<PAGE>
BRITISH VIRGIN ISLANDS LAW - NEVADA LAW -
ASIA PROPERTIES INVESTMENTS SHAREHOLDER RIGHTS ASIA PROPERTIES SHAREHOLDER RIGHTS
entitled to payment for the fair value of their shares.
The Asia Properties Investments memorandum and
articles of association do not limit application of
this provision of the British Virgin Islands
Ordinance.
Shareholder Derivative Lawsuits
Under British Virgin Islands Law, a minority Under Nevada law, a shareholder may bring a
shareholder may bring a derivative action in his own derivative lawsuit for a claim on behalf of the
name to remedy a wrong done to the company, where corporation where the corporation has been
the company refuses to bring the action because the damaged and refuses to itself pursue a remedy
wrongdoers or controllers of the company prevent for that damage.
the action from being brought by the company itself.
Class Action Lawsuits
Under British Virgin Island Law, one or more Under Nevada and U.S. federal laws, one or
shareholders may bring a representative or more shareholders as representatives of a
class action against the company on behalf of class of all similarly situated shareholders
themselves and other shareholders whose personal may bring a class action lawsuit against a
rights as members are being infringed. All of the corporation for a claim that the shareholders
shareholders in a representative action must have a in the class have been damaged by wrongful
common interest, common grievance and the relief acts of the corporation. This type of lawsuit
sought is in its nature beneficial to all of the eliminates the need join every affected
shareholders whom the plaintiffs represent. This shareholder in the litigation.
type of action eliminates the need for every
shareholder to join every affected shareholder in
the litigation.
</TABLE>
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TAX CONSEQUENCES OF THE REINCORPORATION
The following is a summary of anticipated material U.S. federal income tax
consequences of the reincorporation of Asia Properties from Nevada to the
British Virgin Islands and the related issuance of Asia Properties Investments
capital shares. The summary does not address all possible tax consequences
relating to the issuance of Asia Properties Investments capital shares and does
not purport to deal with the tax consequences applicable to all categories of
shareholders, some of which, such as dealers in securities, insurance companies
and tax-exempt entities may be affected by special rules. In particular, the
discussion does not address the tax consequences under state, local and other
national, non-U.S. tax laws. Therefore, you should consult your own tax advisor
regarding the particular tax consequences to you of the reincorporation and the
issuance of Asia Properties Investments capital shares. The following discussion
is based upon laws and relevant interpretations in effect as of the date of this
prospectus, all of which may change, and on the opinion of Ballard Spahr Andrews
& Ingersoll, LLP with respect to the tax consequences of the reincorporation
under U.S. federal income tax law and the opinion of O'Neal Webster O'Neal Myers
Fletcher & Gordon, with respect to the tax consequences of the reincorporation
under British Virgin Islands tax law.
Tax Consequences to Asia Properties
Under current U.S. federal income tax law, the reincorporation of Asia
Properties to the British Virgin Islands constitutes a taxable disposition of
each of Asia Properties' assets under Internal Revenue Code Section 367(a) and
the regulations thereunder with respect to which gain but not loss will be
recognized. Therefore, Asia Properties will be required to recognize taxable
gain to the extent the fair market value of any of its assets exceeds its
adjusted basis, without offset for the recognition of loss with respect to any
other asset. Since substantially all of the assets of Asia Properties consist
of cash, it is anticipated generally that little, if any, gain should be
recognized.
Tax Consequences to the U.S. Holders of Asia Properties Common Stock
The reincorporation is not a taxable event to the U.S. shareholders of Asia
Properties and those shareholders will not be required to pay income tax on any
gain with respect to their shares of Asia Properties as a consequence of the
reincorporation.
U.S. Federal Income Taxation
A U.S. shareholder receiving a distribution with respect to Asia Properties
Investments capital shares will be required to include that distribution in
gross income as a taxable dividend, to the extent of Asia Properties
Investments' current or accumulated earnings and profits as determined under
U.S. federal income tax principles. Any distributions in excess of Asia
36
<PAGE>
Properties Investments' earnings and profits will first be treated for U.S.
federal income tax purposes as a nontaxable return of capital to the extent of
the U.S. shareholders' adjusted tax basis in Asia Properties Investments capital
shares, and then as gain from the sale or exchange of a capital asset, provided
that the capital shares constitute a capital asset in the hands of the U.S.
shareholder.
Gain or loss on the sale or exchange of Asia Properties Investments capital
shares will be treated as capital gain or loss if the U.S. shareholder holds
Asia Properties Investments capital shares as a capital asset. That capital gain
or loss will be long-term capital gain or loss if the U.S. shareholder has held
the capital shares for more than one year at the time of the sale or exchange.
"Backup withholding" at the rate of 31 percent may apply to a holder of
Asia Properties Investments capital shares with respect to dividends paid on the
capital shares if the dividends are paid inside the U.S. or by a U.S. payor or
U.S. middleman outside the U.S. In addition, backup withholding may apply to
the proceeds of the sale, exchange or redemption of the capital shares, if the
proceeds in the U.S. or if the proceeds are paid outside the U.S. by a U.S.
payor or a U.S. middleman.
Backup withholding may be avoided by the holder of Asia Properties
Investments capital shares if the holder:
- is a corporation or comes within other exempt categories, or
- provides a correct taxpayer identification number, certifies that
backup withholding does not apply to the holder and otherwise
complies with the backup withholding rules.
In addition, holders of Asia Properties Investments capital shares who are
not U.S. persons are generally exempt from backup withholding, although the
holders may be required to comply with certification and identification
procedures to prove their exemption.
British Virgin Islands Taxation
Under the International Business Companies Act of the British Virgin
Islands, a holder of Asia Properties Investments capital shares who is not a
resident of the British Virgin Islands is exempt from British Virgin Islands
income tax on dividends paid with respect to the capital shares and all holders
of capital shares are not liable for British Virgin Islands income tax on gains
realized during that year on a sale or disposal of those shares. The British
Virgin Islands does not impose a withholding tax on dividends paid by companies
incorporated under the International Business Companies Act. There are no
37
<PAGE>
capital gains, gift or inheritance taxes levied by the British Virgin Islands on
companies incorporated under the International Business Companies Act. In
addition, transfer taxes, stamp duties or similar charges do not apply to Asia
Properties Investments capital shares. There is no income tax treaty or
convention currently in effect between the U.S. and the British Virgin Islands.
ACCOUNTING TREATMENT OF REINCORPORATION
The merger of Asia Properties into Asia Properties Investments in
connection with the reincorporation will be accounted for at historical cost in
a manner similar to a pooling of interests.
U.S. FEDERAL SECURITIES LAWS CONSEQUENCES
This prospectus does not cover any resales of Asia Properties Investments
capital shares to be received by Asia Properties stockholders in the
reincorporation. No person is authorized to use this prospectus in connection
with any such resale.
All shares received by you in the reincorporation will be freely
transferable, unless you are deemed to be an "affiliate" of Asia Properties
under U.S. federal securities laws at the time the reincorporation is completed.
If you are deemed to be an "affiliate" of Asia Properties, the capital shares
received by you in the reincorporation may be resold by you only in transactions
permitted by Rule 145 under the Securities Act of 1933 or as otherwise permitted
under the Securities Act of 1933.
Persons who may be deemed to be affiliates of Asia Properties for those
purposes generally include individuals or entities that control, are controlled
by, or are under common control with, Asia Properties and may include officers,
directors and principal stockholders of Asia Properties.
ASIA PROPERTIES INVESTMENTS
BUSINESS OF ASIA PROPERTIES INVESTMENTS
Asia Properties Investments is a newly formed British Virgin Islands
company formed solely to accomplish the reincorporation of Asia Properties.
Asia Properties Investments currently has no significant assets or operations.
Asia Properties Investments plans to continue the business of Asia Properties
after the reincorporation and to complete the pending acquisition of Northbridge
Communities, through which Asia Properties Investments is to acquire real estate
properties in both Thailand and Cambodia.
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Asia Properties Investments is not directly or indirectly owned or
controlled by any foreign government. Asia Properties Investments currently is
a wholly-owned subsidiary of Asia Properties.
Employees
Asia Properties Investments does not currently have any employees. After
the reincorporation the two full time employees and three consultants of Asia
Properties will become employees and consultants of Asia Properties Investments.
THE PENDING ACQUISITION OF NORTHBRIDGE COMMUNITIES
On February 4, 2000, Asia Properties Investments and Asia Properties
entered into an acquisition agreement with Northbridge Communities for the
acquisition by Asia Properties Investments all of the outstanding shares of
Northbridge Communities stock in exchange for the issuance by Asia Properties
Investments of 4,600,000 Asia Properties Investments capital shares to the
shareholders of Northbridge Communities. The acquisition cannot be completed
until after Asia Properties is reincorporated as a British Virgin Islands
company by its merger into Asia Properties Investments. The original agreement
provided that the closing of the purchase and sale of those capital shares must
occur before August 2, 2000. On July 25, 2000, Northbridge Communities and Asia
Properties agreed to extend the date for closing of the acquisition to October
15, 2000.
Asia Properties Investments estimates that the value of the Northbridge
Communities capital shares to be acquired is approximately U.S. $20 million.
Under the acquisition agreement, Asia Properties Investments plans to issue to
the shareholders of Northbridge Communities 4,600,000 Asia Properties
Investments capital shares valued at U.S. $4.40 per share. Under the terms of a
subsequent arrangement among the Northbridge Communities shareholders, Asian
Frontier Holdings, an affiliate of Northbridge Communities, will receive
1,200,000 Asia Properties Investments capital shares in exchange for forgiveness
of a portion of a loan payable by Northbridge Communities. The shareholders of
Northbridge Communities, including Asian Frontier Holdings, will receive the
remaining 3,400,000 Asia Properties Investments capital shares in proportion to
their Northbridge Communities ownership interests. Asia Properties Investments
has also been informed that Asian Frontier Holdings has entered into an
agreement with another Northbridge Communities shareholder, N.B.C. Holdings,
under which Asian Frontier Holdings will receive all of the 1,734,000 capital
shares of Asia Properties Investments to which N.B.C. Holdings is entitled under
the Share Purchase and Sale Agreement in exchange for Asian Frontier Holdings
forgiveness of a loan payable from N.B.C. Holdings.
The acquisition agreement includes the following principal terms:
- Asia Properties Investments must restructure its board of directors
upon the closing of the transaction so that its directors will be
Daniel S. McKinney, Nicholas St. Johnston, David Diehl, David Roberts
and two appointees of Northbridge Communities.
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- Asia Properties Investments must use its best efforts to raise U.S.
$15 million in cash by September 11, 2000.
- The rights to 3,500,000 of Asia Properties Investments capital shares
to be held by the following persons after the reincorporation in the
amounts indicated below have been transferred into an escrow account
by way of delivery of certificates for the corresponding shares of
Asia Properties common stock:
- Daniel S. McKinney - 800,000 shares,
- Nicholas St. Johnston - 900,000 shares,
- Crestview Associates Limited - 700,000 shares,
- Lim Gaik Im - 600,000 shares, and
- Milliard Limited - 500,000 shares.
- In the event that Asia Properties Investments is able to raise U.S.
$15 million in cash by September 11, 2000, the 3,500,000 capital
shares in the escrow account will be surrendered back to Mr. McKinney,
Mr. St. Johnston, Ms. Gaik Im, Crestview Associates Limited and
Milliard Limited.
- In the event Asia Properties Investments is unable to raise U.S. $15
million by September 11, 2000, 1,750,000 capital shares in the escrow
account will be transferred to the former shareholders of Northbridge
Communities and Mr. McKinney will be required to resign from the board
of directors.
- during a period from September 12, 2000 until February 4, 2001 the
shareholders who delivered the 3,500,000 shares into the escrow
account will be entitled to clawback their proportionate interest of
1,750,000 of those shares if Asia Properties Investments raises
additional capital. Those shares not clawed back will be transferred
to the former shareholders of Northbridge Communities. The number of
shares that may be clawed back will be equal to the product of:
- the amount of capital raised divided by U.S. $15 million
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<PAGE>
- multiplied by 1,750,000.
- If Asia Properties Investments fails to list its capital shares on the
American Stock Exchange before November 3, 2000, Mr. McKinney will be
required to resign from its board of directors.
Although Asia Properties did not raise $15 million in new capital by
September 11, 2000, on August 16, 2000, Asia Properties and The Lester Group
executed a letter of intent which proposes the terms under which The Lester
Group will purchase in a private placement 3,000,000 shares of common stock of
Asia Properties at $5.00 per share for an aggregate amount of U.S. $15,000,000.
Under the contemplated transaction, Asia Properties would place 3,000,000 shares
of common stock into escrow to be issued to The Lester Group as funds are
received at $5.00 per share. The term sheet further contemplates that The
Lester Group would be entitled to appoint one member to Asia Properties' board
of directors upon payment of no less than $3,000,000. If by January 1, 2001,
The Lester Group has not paid U.S. $15,000,000, its nominee to the board of
directors will resign and the remaining shares not purchased will be returned to
Asia Properties. Asia Properties believes that if a binding agreement is
executed, this arrangement will satisfy the $15,000,000 funding requirement set
forth in the Northbridge Communities acquisition agreement and on September 5,
2000, Asia Properties was advised by Northbridge Communities that the
Northbridge Communities board of directors was willing to extend the September
11, 2000 deadline to October 17, 2000, and that if part of the $15 million was
raised by October 17, 2000 Northbridge Communities would consider a further
reasonable extension. However, the parties have not yet executed a formal
amendment to the acquisition agreement which reflects any extension. Further,
Asia Properties and Asia Properties Investments cannot assure you that the
proposed financing with The Lester Group will be completed in any amount.
Currently, Asia Properties and The Lester Group are continuing to negotiate
the terms of the proposed transaction. No definitive contract has been
executed. Asia Properties cannot assure you that the funding arrangement
contemplated by the term sheet with The Lester Group will result in execution of
a definitive agreement and that the contemplated agreement with The Lester Group
will satisfy the requirements of the Northbridge Communities acquisition
agreement.
After the reincorporation of Asia Properties into Asia Properties
Investments and the acquisition of Northbridge Communities, Asia Properties
Investments' operations will consist of the operations of Northbridge
Communities. Northbridge Communities principally owns interests in gated
community developments near Bangkok, Thailand and Phnom Penh, Cambodia. Because
Northbridge Communities' operations will constitute all of Asia Properties
Investments' operations after the acquisition, a description of those operations
is included below. See "Northbridge Communities" beginning on page 71. The
historical financial statements of Northbridge Communities and pro forma
financial information combining the historical results of Asia Properties and
Northbridge Communities are included elsewhere in this prospectus.
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LEGAL PROCEEDINGS OF ASIA PROPERTIES INVESTMENTS
Asia Properties Investments is not currently a party to any legal
proceeding.
DESCRIPTION OF ASIA PROPERTIES INVESTMENTS CAPITAL SHARES
Asia Properties Investments' authorized capital stock consists of
500,000,000 capital shares, of which 5,931,434 shares will be outstanding
immediately after the reincorporation and before the issuance of 4,600,000
capital shares to acquire Northbridge Communities. Holders of Asia Properties
Investments capital shares are entitled to one vote for each whole share on all
matters to be voted on by Asia Properties Investments shareholders, including
the election of directors. Holders of capital shares do not have cumulative
voting rights in the election of directors. All capital shares are equal to each
other with respect to liquidation and dividend rights. Holders of capital shares
are entitled to receive dividends if and when declared by the board of directors
out of funds legally available under British Virgin Islands law. In the event of
the liquidation of Asia Properties Investments, all assets available for
distribution to the holders of capital shares are distributable among them
according to their respective holdings. Holders of capital shares have no
preemptive rights to purchase any additional, unissued capital shares.
Asia Properties Investments may, with the written consent of a majority of
shareholders, amend the memorandum and articles of association by a resolution
of directors.
Dividend Policy
Asia Properties Investments does not anticipate payment of any dividends on
its capital shares for the foreseeable future. Asia Properties Investments
anticipates that any earnings after the reincorporation would be retained to
finance operations and future growth and expansion.
Transfer Agent and Registrar
The transfer agent and registrar for Asia Properties Investments capital
shares will be Computershare Investor Services, formerly known as American
Securities Transfer & Trust, Inc. in Lakewood, Colorado.
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ASIA PROPERTIES INVESTMENTS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Asia Properties Investments is a British Virgin Islands company formed
solely to accomplish the reincorporation of Asia Properties as a British Virgin
Islands company. As of August 31, 2000, Asia Properties Investments did not
have any significant assets or results of operations.
After the reincorporation of Asia Properties into Asia Properties
Investments, Asia Properties Investments plans to continue the business strategy
of Asia Properties, including the planned acquisition of Northbridge
Communities. Once Asia Properties Investments completes the acquisition of
Northbridge Communities, Asia Properties Investments plans to continue the
business of Northbridge Communities.
For a discussion and analysis of Asia Properties' financial condition and
results of operations, please see "Asia Properties -- Asia Properties
Management's Discussion and Analysis of Financial Condition and Results of
Operations" beginning on page 53. For a description of Northbridge Communities'
business, please see "Northbridge Communities" beginning on page 71.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Since its inception in December 1999 Asia Properties Investments has not
purchased or sold any market risk sensitive instruments or entered into any
transaction relating to those instruments. Asia Properties Investments will be
affected by the market risk associated with the fluctuating exchange rate of the
currencies of the Southeast Asian countries in which it plans to operate
relative to the U.S. dollar after the acquisition of properties in those
countries through the planned acquisition of Northbridge Communities because the
Asia Properties Investments financial statements will be prepared using U.S.
dollars as the reporting currency. Asia Properties Investments may from time
to time hedge its currency positions to attempt to avert any adverse
consequences of exchange rate fluctuations. However, Asia Properties
Investments cannot assure you that it will be able to successfully hedge its
exchange rate exposure or that it will be able to hedge that exposure at
satisfactory cost.
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MANAGEMENT OF ASIA PROPERTIES INVESTMENTS
Current Executive Officers and Directors of Asia Properties Investments
The following table sets forth the name, age and position of each of the
executive officers and directors of Asia Properties Investments as of the date
of this prospectus and the month and year in which the directors were first
elected to the board. The same individuals also serve in identical positions as
the executive officers and directors of Asia Properties.
Name Age Title Director Since
---- --- ----- --------------
Daniel S. McKinney 39 President, Secretary December 1999
and a Director
Nicholas St. Johnston 38 Chief Executive Officer, December 1999
Chief Financial Officer
and a Director
David W. Diehl 73 Director February 2000
David Roberts 52 Director February 2000
________
DANIEL S. MCKINNEY has been President and a director of Asia Properties
since its inception in April 1998. Mr. McKinney was the Chief Executive
Officer of Asia Properties from April 1998 until November 1999. Since 1982, Mr.
McKinney has been the sole proprietor of McKinney International, a company
located in Hong Kong and engaged in the business of manufacturing jewelry.
Since 1989, Mr. McKinney has been a director of Coldway Ltd., an investment
banking firm. Since 1994, Mr. McKinney has been a director of Cement Services,
Ltd., a construction company. Since October 1999, Mr. McKinney has served as a
director of Sunflower (USA), Ltd., a publicly traded company. Mr. McKinney has
many years of experience in consulting governments and new businesses and most
recently has focused on the areas of investment banking and business
development. Mr. McKinney majored in Chemistry and Biology at Houston Baptist
University from 1979 to 1981, and graduated from Hong Kong International School
in 1979.
NICHOLAS ST. JOHNSTON has been the Chief Executive Officer of Asia
Properties since November 1999, its Chief Financial Officer since July 1999, and
a director of Asia Properties since April 1998. Mr. St. Johnston was the
Executive Director of Asia Properties from August 1998 until November 1999.
Since July 1998, Mr. St. Johnston has been the Managing Director of BDNSJ
Limited, a company engaged in the business of leasing office and residential
real estate in Thailand. From March 1995 until July 1997, Mr. St. Johnston was
the Senior Vice President of Wave Development, Ltd., a real estate development
44
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company based in Thailand. In his position with Wave Development, Ltd., Mr. St.
Johnston was responsible for the analysis and preparation of research reports
about investment opportunities for acquisitions in Thailand. Mr. St. Johnston
is a Chartered Surveyor and has over 15 years of experience in the real estate
industry, including 13 years in Asia. Mr. St. Johnston founded the Thai branch
of the Royal Institution of Chartered Surveyors in 1990 and remains an active
member of that committee. That committee currently is acting as advisors to the
Thai SEC on aspects of real estate property valuation in Thailand. Mr. St
Johnston received a Bachelor of Science degree with honors in Urban Estate
Surveying from Trent University in Nottingham, United Kingdom in 1983
DAVID W. DIEHL has been a director of Asia Properties since February 2000.
Since 1988, Mr. Diehl has been the Chairman of Diehl & St. Johnston Ltd., which
is an investment bank specializing in cross border acquisitions. Mr. Diehl
received an MA and LLB in 1950 from Trinity College, Dublin.
DAVID ROBERTS has been a director of Asia Properties since February 2000.
Beginning in 1990, Mr. Roberts was a director of the Hoare Govett Asia Group of
Companies, which are now known as ABN AMRO Asia. He is currently a member of
the board of directors of ABN AMRO Asia Hong Kong Ltd. and ABN AMRO Asia
Securities, PLC. In addition, Mr. Roberts is a council member of the Hong Kong
Stock Exchange, serves on the Exchange's Listing Committee and represents the
Exchange as a director of the Hong Kong Securities Clearing Company. Mr.
Roberts is also a member of the board of directors of Northbridge Communities
Limited.
Changes to the Asia Properties Investments Board of Directors Under the
Northbridge Communities Acquisition Agreement
Under the Northbridge Communities acquisition agreement, the Asia
Properties Investments board of directors after the acquisition is completed is
to consist of Mr. McKinney, Mr. St. Johnston and Vorasit Pokachaiyapat and
Robert W. Brewitt, who are members of Northbridge Communities management, and
two outside directors, who currently are Mr. Roberts and Mr. Diehl.
A description of the recent business experience of Mr. Brewitt and Mr.
Pokachaiyapat is set forth below:
ROBERT W. BREWITT, age 51, joined Northbridge Communities in 1995 and was
named Managing Director in 1998. He was instrumental in creating the
Northbridge School system and founding the schools and communities in Thailand
and Cambodia. Dr. Brewitt earned his Doctorate Degree at Washington State
University. Before joining Northbridge, he was Superintendent of the
International School Bangkok where he provided the input necessary for
completing the design specifications for International School Bangkok's new
campus and faculty housing complex. He has more than twenty-four years
experience in international education as a School Director in Thailand and
Austria and as a teacher, counselor and principal at schools in Norway, The
Netherlands and Belgium.
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VORASIT POKACHAIYAPAT, age 36, is a director of Northbridge Communities and
is a co-founder and Executive Director of Finansa Ltd. He worked in Thailand
for Thai Investment and Securities now TISCO Finance, and in 1990 was promoted
to head the Securities Research Department. In August 1990, he left TISCO to
join the Capital Markets Group of Chase Manhattan (Thailand) Ltd., where he
worked until co-founding Finansa Ltd. Mr. Pokachaiypat is a director of Nation
Multimedia Group pcl, SE-ED pcl. Mr. Pokachaiypat received a B.S. in Industrial
Management and Economics from Carnegie-Mellon University and an M.S. from
Bentley College in Computer Sciences. He is a citizen of Thailand.
The Northbridge Communities acquisition agreement also currently provides
that if Asia Properties does not by September 11, 2000 raise $15 million at a
price of at least $4.40 per share, Mr. McKinney must resign from the board of
directors without replacement. Although Asia Properties did not meet this $15
million financing requirement by September 11, 2000, on September 5, 2000 Asia
Properties was advised by Northbridge Communities that the Northbridge
Communities board of directors was willing to extend the September 11, 2000
deadline to October 17, 2000, and that if part of the $15 million was raised by
October 17, 2000 Northbridge Communities would consider a further reasonable
extension. However, the parties have not yet executed a formal amendment to the
acquisition agreement which reflects any extension.
The acquisition agreement further currently provides that if Asia
Properties Investments capital shares are not by November 3, 2000 listed for
trading on the American Stock Exchange or any other market approved by the Asia
Properties Investments board of directors after the Northbridge Communities
acquisition, Mr. McKinney must resign from the board of directors without
replacement. On September 5, 2000 Asia Properties was advised by Northbridge
Communities that the Northbridge Communities board of directors was willing to
extend the November 3, 2000 deadline to February 3, 2001. However, the parties
have not yet executed a formal amendment to the acquisition agreement which
reflects any extension.
COMPENSATION OF ASIA PROPERTIES INVESTMENTS OFFICERS AND DIRECTORS
Asia Properties Investments has not directly paid any monetary compensation
to any of its directors or officers. However, Asia Properties did pay
consulting fees to consulting companies owned by some of its officers and
directors and issued Asia Properties common stock to some of its officers and
directors during 1999. See "Asia Properties -- Interest of Management In Asia
Properties Transactions" on page 61.
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Asia Properties agreed to pay David W. Diehl U.S. $15,000 per year
beginning November 15, 2000 and all of his out-of-pocket expenses to attend four
board of director meetings scheduled during 2000. Asia Properties also agreed
to pay David Roberts U.S.$ 15,000 per year beginning in February 2000 and all of
his out-of-pocket expenses to attend board of director meetings during 2000.
ASIA PROPERTIES
BUSINESS OF ASIA PROPERTIES
Asia Properties was formed in 1998 to acquire residential and commercial
real estate in Southeast Asia. Asia Properties is a development stage company
that does not own any property and has not generated any revenues from
operations. Asia Properties currently plans to:
- acquire, manage, and develop income-producing real property in
Southeast Asia,
- to provide consulting and management for international schools in
Southeast Asia, and
- to acquire real property in Southeast Asia for long-term capital gain.
Asia Properties' current plan of operations includes identifying suitable
companies who own income-producing property for purposes of acquisition.
Asia Properties' principal executive office is located at 86/14 Sukhumvit
31, Bangkok 10110, Thailand. The telephone number at that address is (66-2)
260-3197.
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Bangkok Real Estate Fund
On July 16, 1998 the Thai SEC approved an application to register the
Bangkok Real Estate Fund, a closed-end Thai property fund under the Securities
and Exchange Act of Thailand. On July 17, 1998, Asia Properties acquired the
right to establish Bangkok Real Estate Fund from persons affiliated with Asia
Properties. See "The Reincorporation -- Interest of Insiders in the
Reincorporation" on page 27. Asia Properties however failed to fund Bangkok
Real Estate Fund with approximately U.S. $_______million before July 16, 1999 as
required by the Thai SEC. Asia Properties therefore was required to obtain
approval to register a new property fund. On July 15, 1999, the Thai SEC
approved Asia Properties' application to register a second closed-end Thai
property fund-the Bangkok RE Fund. The Thai SEC has permitted the establishment
of property funds like the Bangkok RE Fund for the purpose of resolving
financial institutional problems through the recapitalizing of the real estate
industry in Thailand with funds from abroad.
In order to complete the registration of the Bangkok RE Fund, Asia
Properties must have satisfied conditions mandated by the Thai SEC. For
example, Asia Properties and a minimum of nine other persons classified as
qualified institutional investors under the Securities and Exchange Act of
Thailand must have purchased before July 15, 2000 a minimum of fifty million
units of Bangkok RE Fund at a price of ten Thai Baht per unit for a total of
five hundred million Thai Baht, or approximately U.S. $________million as of
July 15, 2000. The Securities and Exchange Act of Thailand defines a qualified
institutional investor to include investors who do not have a domicile in
Thailand and who deposit investment money from foreign countries with a
custodian and a manager of a Thai property fund. Each of the qualified
institutional investors are required to appoint in writing a custodian or a
manager to manage their investments in Bangkok RE Fund. Each investor in
Bangkok RE Fund must have invested a minimum of one million Thai Baht, or
approximately U.S. $_________.
As of July 15, 2000, Asia Properties did not obtain the funding necessary
to register the Bangkok RE Fund. As a result, the period for Asia Properties to
register the Bangkok RE Fund with the Thai SEC expired. Asia Properties
decision not to register the Bangkok RE Fund was the result of several factors.
The regulations governing Thai closed-end property funds prohibit encumbering
real estate the property fund owns. These regulations would have effectively
prohibited Bangkok RE Fund from obtaining purchase money financing for the
acquisition of properties. Asia Properties initially believed it would be able
to raise the 500 million Thai Baht from qualified institutional investors on the
basis that Asia Properties would be able to raise additional debt financing on
the corporate level. Asia Properties held informal discussions with several
possible funding sources, both in connection with the 500 million Thai Baht
required to register Bangkok RE Fund and debt financing for purposes of
acquiring properties. During those discussions, Asia Properties reviewed the
potential for the Bangkok RE Fund and determined that there were insufficient
growth opportunities. Based on the risk and the prospects for growth in the
Bangkok RE Fund, Asia Properties was unable to obtain the equity or debt
financing it believed necessary to operate Bangkok RE Fund.
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Asia Properties believes that the principal benefit to owning real estate
through a Thai property fund -- a corporate income tax exemption -- is currently
offset by additional expenses necessary to operate such a fund, such as asset
management fees and trustee fees. Accordingly, Asia Properties has decided not
to acquire Thailand real estate through a registered Thai property fund. Asia
Properties management believes that should the benefits of owning a Thai
property fund increase, there may be opportunities to acquire other property
funds through approximately February 2001.
As a result of Asia Properties' decision not to register the Bangkok RE
Fund, Asia Properties business, and the business of Asia Properties Investments
after the reincorporation, will consist solely of the operations of Northbridge
Communities after that acquisition is completed.
Employees
Asia Properties has two full time employees and three consultants who will
become the employees and consultants of Asia Properties Investments after the
reincorporation.
PROPERTIES OF ASIA PROPERTIES
The principal executive office of Asia Properties is located in a 250
square foot office space at 86/14 Sukhumvit 31, Bangkok, Thailand. BDNSJ
Limited permits Asia Properties to occupy that space on a rent-free basis.
BDNSJ Limited is owned by Nicholas St. Johnston, an executive officer and
director of Asia Properties. Asia Properties also has a representative office
located at 114 West Magnolia, Suite 400-115, Bellingham, WA 98225, which is a
5,000 square foot facility. That space is occupied under a one-year lease from
an unaffiliated party for $200 per month. That lease terminates February 1,
2001.
LEGAL PROCEEDINGS OF ASIA PROPERTIES
Asia Properties is not currently a party to any legal proceeding.
MARKET PRICE AND DIVIDENDS ON ASIA PROPERTIES COMMON STOCK
Market Information
Asia Properties common stock began trading in the U.S. over the counter
market on January 25, 1999 and since that time has been the subject of limited
and sporadic quotations in the pink sheets under the symbol "ASPZ". Asia
Properties Investments expects that after the reincorporation its capital
shares will be quoted in the pink sheets under the symbol "________." Asia
Properties Investments capital shares and Asia Properties common stock are not
traded in any non-U.S. trading market. Asia Properties Investments intends to
apply to have its capital shares listed on the American Stock Exchange.
However, Asia Properties Investments cannot assure you that an American Stock
Exchange listing will be approved.
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The following table shows the high and low per share price quotations of
Asia Properties common stock as reported in the pink sheets for the periods
presented. These quotations reflect interdealer prices, without retail mark-up,
mark-down or commissions, and may not necessarily represent actual transactions.
HIGH LOW
---- ---
Year Ended December 31, 1999:
First Quarter (since January 25, 1999) . . . . . . . . . . $5.25 $1.50
Second Quarter . . . . . . . . . . . . . . . . . . . . . $7.50 $4.00
Third Quarter . . . . . . . . . . . . . . . . . . . . . . $6.50 $3.25
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . $5.50 $2.00
Year Ending December 31, 2000:
First Quarter . . . . . . . . . . . . . . . . . . . . . . $5.50 $2.00
Second Quarter . . . . . . . . . . . . . . . . . . . . . $5.50 $3.00
Third Quarter (through ___________, 2000) . . . . . . . . . $____ $____
The last sales price of Asia Properties common stock was $_________ per
share on ___________, 2000, the last date before the date of this prospectus for
which there was a trade, as quoted in the pink sheets.
Holders
As of July 16, 2000 there were 50 holders of record of Asia Properties
common stock. Persons residing in the U.S. were holders of record of 1,397,984
shares, or 23.6% of the 5,931,434 outstanding shares of Asia Properties common
stock as of that date. Asia Properties believes, based on information provided
by its stock transfer agent, that as of that date. Those persons will own an
equal number of Asia Properties Investments capital shares immediately after the
reincorporation.
Dividends - Exchange Controls and Other Limitations
There are no exchange control restrictions in Thailand and Cambodia, the
countries in which Asia Properties Investments currently plans to operate after
the reincorporation and the acquisition of Northbridge Communities, on the
remittance of dividends by subsidiaries to the parent company. In addition,
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there are no material British Virgin Islands laws that impose foreign exchange
controls on Asia Properties Investments or that affect the payment of dividends,
interest or other payments to nonresident holders of Asia Properties Investments
capital shares. British Virgin Islands law and the Asia Properties Investments
memorandum and articles of association impose no limitations on the right of
nonresident or foreign owners to hold or vote our capital shares.
While Asia Properties Investments currently has no intention of paying
dividends for the next six years or longer, should Asia Properties Investments
decide in the future to do so, its ability to pay dividends depends on the
receipt of dividends or other payments from its subsidiaries and its other
holdings and investments. In addition, operating subsidiaries may be affected
by restrictions on their ability to make distributions to the parent company,
including as a result of restrictive covenants in loan agreements, restrictions
on the conversion of local currency into U.S. dollars or other currency and
other regulatory restrictions.
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SELECTED FINANCIAL DATA OF ASIA PROPERTIES
The selected historical financial and pro forma data presented below of
Asia Properties was derived from the historical and pro forma financial
statements and related notes included in this prospectus. See "Index to
Financial Statements" at page F-1. The pro forma financial data gives effect to
the proposed acquisition of Northbridge Communities. You should read the
selected financial data together with those historical and pro forma financial
statements. Asia Properties used U.S. generally accepted accounting principles
to prepare its financial statements.
The unaudited pro forma financial information for the periods indicated
below were prepared by combining the historical results of Asia Properties and
Northbridge Communities using the purchase method of accounting for business
combinations. This is described in notes accompanying the pro forma financial
statements and related notes included in this prospectus. See Index to
Financial Statements at page F-1. The pro forma financial information is
presented to give you a better picture of what Asia Properties' business might
have looked like if Asia Properties had owned Northbridge Communities during the
periods indicated. Those companies may have performed differently if their
operations had been combined. You should not rely on the unaudited pro forma
information as being indicative of the historical results that Asia Properties
would have had or the future results that Asia Properties Investments will
experience after the reincorporation and acquisition of Northbridge Communities.
The historical financial statements of Northbridge Communities and related notes
are also included in this prospectus. See Index to Financial Statements at page
F-1.
<TABLE>
<CAPTION>
THREE
MONTHS
FOR THE PERIOD FROM ENDED YEAR ENDED
PERIOD FROM APRIL 6, 1998 MARCH 31, DECEMBER 31,
JANUARY 1 TO YEAR ENDED THROUGH 2000 1999
MARCH 31, DECEMBER 31, DECEMBER 31, PRO FORMA PRO FORMA
STATEMENT OF OPERATIONS DATA 2000 1999 1998 (UNAUDITED) (UNAUDITED)
---------------------------- ------------- --------------- -------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Income $ - $ - $ - $ 290,870 $ 881,597
Operating loss $ (55,945) $ (660,550) $ (187,722) $ (248,045) $(2,711,103)
Net loss $ (55,945) $ (660,954) (187,633) $ (389,118) $(3,615,107)
Loss per share $ (0.01) $ (0.11) $ (0.06) $ (0.04) $ (0.34)
Weighted average shares
outstanding 5,921,434 5,886,017 2,925,300 10,521,434 10,521,434
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, DECEMBER
2000 31, 1999
MARCH 31, DECEMBER 31, DECEMBER 31, PRO FORMA PRO FORMA
BALANCE SHEET DATA 2000 1999 1998 (UNAUDITED) (UNAUDITED)
------------------------------ ----------- ---------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 40,448 $ 33,979 $ 423,912 $ 146,090 $ 134,945
Working capital (deficit) $ (72,494) $ (29,601) $ 410,308 $ (3,800,477) $(3,814,305)
Total assets $ 93,278 $ 98,649 $ 473,349 $ 22,112,447 $22,248,920
Long-term liabilities $ - $ - $ - $ 3,916,576 $ -
Stockholders' equity (deficit) $ (28,386) $ 27,560 $ 453,967 $ 14,141,369 $14,531,361
</TABLE>
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Asia Properties Investments financial information is not presented because
Asia Properties Investments will not have significant assets or capitalization
and will not have engaged in any business or activities before the
reincorporation.
Pro forma financial statements reflecting the reincorporation of Asia
Properties as a British Virgin Islands company through the merger into Asia
Properties Investments are not presented because Asia Properties Investments is
currently a corporate shell formed solely to accomplish the reincorporation and
has no significant assets or operations.
ASIA PROPERTIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion of the financial condition and results of
operations of Asia Properties should be read together with the Asia Properties
financial statements included in this prospectus. See "Index to Financial
Statements" at page F-1. Those financial statements have been prepared in
accordance with U.S. generally accepted accounting principles.
Overview
Asia Properties is a development stage company which was formed in 1998
with plans to invest in real estate in Southeast Asia. Asia Properties has
devoted most of its efforts to date toward organization and fund raising for
planned Southeast Asian real estate investments, and no revenues have yet been
generated from any operations. Asia Properties has experienced recurring losses
from operations since its inception and as of December 31, 1999, Asia Properties
had a working capital deficit of $(29,601) and an accumulated deficit from
operations of $(848,587). As of March 31, 2000, the working capital deficit was
$(72,494) and the accumulated deficit from operations was $(904,532). As noted
in the independent audit report for the audited Asia Properties financial
statements included in this prospectus, these factors raise substantial doubt
about the ability of Asia Properties to continue as a going concern. The Asia
Properties financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
The ability of Asia Properties to continue as a going concern depends on
obtaining adequate levels of additional financing from new investors or existing
shareholders. Asia Properties is endeavoring to obtain new sources of
financing. However, Asia Properties is currently dependent on loans from
management to pay current general and administration expenses necessary for Asia
Properties to continue.
In February 2000, Asia Properties entered into an agreement for the
acquisition of Northbridge Communities by Asia Properties Investments through
the issuance of 4.6 million shares of Asia Properties Investments common stock.
Northbridge Communities owns interests in exclusive real estate developments in
Thailand and Cambodia. The completion of the acquisition agreement is subject
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to completion of the reincorporation of Asia Properties as a British Virgin
Islands company through its merger into Asia Properties Investments. See "Asia
Properties Investments - The Pending Acquisition of Northbridge Communities" on
page 39.
Asia Properties currently plans to reincorporate as a British Virgin
Islands company through a merger into Asia Properties Investments, and then
complete the acquisition of Northbridge Communities. If the acquisition of
Northbridge Communities is completed, the combined financial condition and
results of operations will be materially different from Asia Properties' current
financial condition and results of operations, and will be subject to the same
business trends and uncertainties that apply to Northbridge Communities. You
should read the discussion in the Northbridge Communities section below for an
analysis of their financial condition and results of operations and the business
trends and uncertainties applicable to Northbridge Communities. See
"Northbridge Communities - Northbridge Communities Management's Discussion and
Analysis of Financial Condition and Results of Operations" on page 82.
Results of Operations
Comparison of Year Ended December 31, 1999 with Period from April 6, 1998
(date of inception) through December 31, 1998.
General and Administration Expenses
General and administration expenses increased by $478,828 to $666,550 for
the year ended December 31, 1999 from $187,722 for the period from April 6, 1998
to December 31, 1998. This represents an increase of approximately 255 percent.
This increase was primarily attributable to the following factors:
- increased expenses incurred in connection with efforts devoted
toward establishing Asia Properties' planned real estate business
in Southeast Asia, including increased expenses for:
- legal, accounting and consulting fees in the total increased
amount of approximately $178,400
- due diligence property evaluations for possible Southeast
Asian real estate acquisitions in the total increased amount
of approximately $111,020 and
- organizational, marketing and related travel expenses in the
total increased amount of approximately $101,250
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- increased rent expense in the amount of approximately
$16,000 for office space which was first leased beginning in
early 1999 and
- the longer operating period of the full 12 months ended
December 31, 1999 versus the period of 8 months from April
6, 1998 to December 31, 1998, which resulted in increased
operating expenses of approximately $72,000.
Total cash used in operations of $621,055 during 1999 and $173,875 for the
period from April 6, 1998 to December 31, 1998 was primarily for the payment of
general and administration expenses. The sources of cash for the payment of
these amounts were from the following private placements of Asia Properties
common stock:
- In June 1998, Asia Properties issued 3,200,000 shares of
common stock to Daniel S. McKinney, Nicholas St. Johnston
and Simon Landy, the three founders of Asia Properties, in
exchange for cash of $3,200
- In June 1998, Asia Properties issued 20,000 shares of common
stock each to Jay Lanning and Gary Killoran, then officers
of Asia Properties, in exchange for cash of $200
- In June 1998, Asia Properties issued 700,000 shares of
common stock to Crestview Associates Limited, an affiliate
of Daniel S. McKinney, in exchange for cash of $7,000
- In July 1998, Asia Properties issued 3,000,000 shares of
common stock to Daniel S. McKinney, Nicholas St. Johnston
and Simon Landy in exchange for cash totaling $30,000 and
assignment of the rights to establishing the Bangkok Real
Estate Fund, which have terminated
- During September through November 1998, Asia Properties
issued 330,600 shares of common stock through a private
offering under Regulation D of the Securities Act of 1933 to
various investors, in exchange for cash of $661,200
- In March 1999, Asia Properties issued 30,000 shares of
common stock to a consultant in exchange for cash of
$96,000
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<PAGE>
- In May 1999, Asia Properties issued 500 shares of common
stock to and employee in exchange for cash of $1,600
- In June 1999, Asia Properties issued 6,500 shares of common
stock to a consultant in exchange for cash of $22,100 and
- In July 1999, Asia Properties issued a total of 33,834
shares of common stock to two employees in exchange for cash
in the total amount of $114,847.
Asia Properties also used $60,000 from the cash raised as discussed above
in the repurchase of 1,400,000 shares of common stock from Simon Landy in
November 1998.
Net loss
Net loss increased by $473,321 from $187,633 for the period April 6, 1998
(date of inception) to December 31, 1998 to $660,954 for the year ended December
31, 1999. This increase was primarily attributable to the increase in general
and administration expenses discussed above.
Comparison of Quarters Ended March 31, 2000 and 1999
General and Administration Expenses
General and administration expenses decreased by $165,033 to $55,945 for
the quarter ended March 31, 2000 from $220,978 for the comparable period in
1999. This represents a decrease of approximately 75 percent. The decrease is
mainly due to the following factors:
- initial organizational set-up expenses incurred in the
quarter ended March 31, 1999 but not in the quarter
ended March 31, 2000
- decreased legal, accounting and consulting fees in the
total decreased amount of approximately $80,000
- decreased due diligence property evaluation fees for
possible Southeast Asian real estate acquisitions in
the total decreased amount of approximately $30,000
and
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<PAGE>
- decreased general organizational and marketing expenses
in the total decreased amount of approximately $30,000.
Total cash provided by operations for the quarter ended March 31, 2000 was
$6,469. This amount was primarily attributable to the increase in accounts
payable and decrease in other deferred assets during that period which exceeded
the amount of net loss incurred. Total cash used in operations for the quarter
ended March 31, 1999 was $218,088. This amount was primarily for the payment of
general and administration expenses. The sources of cash for the payment of
this amount were from the private placements of Asia Properties common stock
discussed above.
Net loss
Net loss decreased by $162,116 to $55,945 for the quarter ended March 31,
2000 from $218,061 for the comparable period in 1999. This decrease was
primarily attributable to the decrease in general and administration expenses
discussed above.
Liquidity and Capital Resources
Liquidity and future capital requirements
As discussed above, Asia Properties is a development stage company which
has not generated any revenues from operations and has experienced recurring
losses from operations since its inception. As noted in the independent audit
report for the audited Asia Properties financial statements included in this
prospectus, these factors raise substantial doubt about the ability of Asia
Properties to continue as a going concern. The ability of Asia Properties to
continue as a going concern depends on obtaining adequate levels of additional
financing from new investors or existing shareholders.
As of March 31, 2000, Asia Properties had a working capital deficit of
$(72,494). Asia Properties is currently dependent on loans from management to
pay current general and administration expenses. In July 2000, Asia Properties
received 8% loans from Daniel S. McKinney and Nicholas St. Johnston, executive
officers and directors of Asia Properties, and their affiliated entities in the
total amount of approximately $230,000. These loans are payable on demand, and
if Asia Properties is unable to repay the loans in cash, Asia Properties must
issue shares of common stock in repayment of the loans at a conversion of $4.41
per share. Asia Properties believes that this financing will on a short-term
basis be sufficient to allow the completion of the reincorporation and the
planned acquisition of Northbridge Communities. Asia Properties does not
currently have any commitments for material capital expenditures.
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<PAGE>
The capital requirements to conduct Asia Properties' planned business after
the reincorporation and the acquisition of Northbridge Communities are expected
to be significant. See "Northbridge Communities - Northbridge Communities
Management's Discussion and Analysis of Financial Condition and Results of
Operations" beginning on page 82. As of March 31, 2000, Northbridge Communities
had a working capital deficit of $(3,725,551) and a long-term debt obligation to
an affiliate of Northbridge Communities in the amount of $9,196,576. As
indicated in the Asia Properties pro forma financial statements included in this
prospectus which give effect to the prospective acquisition of Northbridge
Communities, Asia Properties expects to have a working capital deficit of
approximately $(4,200,000) and a long-term debt obligation to the Northbridge
Communities affiliate of approximately $3,900,000 if the acquisition is
completed. The pro forma long-term debt obligation reflects the agreement of
the affiliate to convert $5,280,000 of its loan to Northbridge Communities into
1,200,000 Asia Properties Investments capital shares upon completion of the
Northbridge Communities acquisition.
The Northbridge Communities acquisition agreement contemplates that Asia
Properties is to raise $15 million in capital by September 11, 2000 through the
sale of stock for at least $4.40 per share for the purposes of:
- financing new investments by Northbridge Communities,
- repaying or reducing Northbridge Communities borrowings, and
- financing new projects in Asia separate from Northbridge
Communities' current projects.
Asia Properties is currently endeavoring to obtain the capital
financing contemplated by the acquisition agreement and in view of the
significant Northbridge Communities capital requirements discussed above.
However, Asia Properties cannot assure you that it will be able to obtain this
or any other financing necessary in connection with the acquisition of
Northbridge Communities in sufficient amounts or on favorable terms. If the
financing contemplated by the acquisition agreement is not obtained by September
11, 2000, the Northbridge Communities acquisition may still be completed but
under the current provisions of the acquisition agreement current majority
shareholders of Asia Properties will have to deliver a total of 1,750,000 shares
of Asia Properties common stock owned by them to the current shareholders of
Northbridge Communities. The acquisition agreement also currently provides that
if Asia Properties does not raise the $15 million by February 4, 2001, the
majority shareholders of Asia Properties will have to transfer to the
Northbridge Communities shareholders the equivalent of an additional 1,750,000
shares of Asia Properties common stock. If Asia Properties raises new capital
during the period from September 12, 2000 until February 4, 2001, there will be
a reduction of the number of shares to be transferred by the majority
shareholders of Asia Properties which is to be proportionate based on the $15
million financing target.
Although Asia Properties did not raise $15 million in new capital by
September 11, 2000, in August 2000 Asia Properties and The Lester Group executed
a nonbinding term sheet for a proposed $15 million equity financing arrangement
for Asia Properties and Asia Properties Investments through the private
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<PAGE>
placement of 3,000,000 shares of Asia Properties or Asia Properties Investments
stock with the Lester Group for $5.00 per share. The term sheet contemplates
that the funding will be in multiple installments concluding no later than
January 1, 2001. Asia Properties believes that if a binding agreement is
executed, this arrangement will satisfy the $15 million funding requirement in
the Northbridge Communities acquisition agreement and on September 5, 2000, Asia
Properties was advised by Northbridge Communities that the Northbridge
Communities board of directors was willing to extend the September 11, 2000
deadline to October 17, 2000, and that if part of the $15 million was raised by
October 17, 2000 Northbridge Communities would consider a further reasonable
extension. However, the parties have not yet executed a formal amendment to the
acquisition agreement which reflects any extension. Further, Asia Properties
and Asia Properties Investments cannot assure you that the proposed financing
with The Lester Group will be completed in any amount.
Cash flows
During the period from April 6, 1998 (date of inception) to December 31,
1998, Asia Properties raised net cash through financing activities of $641,600
from private placements of its common stock. A total of $234,547 was similarly
raised during the year ended December 31, 1999, $96,000 of which was raised
during the quarter ended March 31, 1999. There were no cash flows from
financing activities during the quarter ended March 31, 2000. As of December
31, 1999, Asia Properties had $33,979 of cash and cash equivalents. As of March
31, 2000, Asia Properties had cash and cash equivalents of $40,448.
Net cash used in operating activities during the year ended December 31,
1999 was $621,055, of which $221,418 was used during the quarter ended March 31,
1999. Net cash used in operating activities for the period from April 6, 1998
to December 31, 1998 was $173,875. Net cash used in operating activities
primarily consisted of the payment of general and administration expenses. A
total of $6,469 in cash was provided by operating activities during the quarter
ended March 31, 2000, primarily as a result of the increase in accounts payable
and decrease in other deferred assets during that period which exceeded the
amount of net loss incurred.
Net cash used in investing activities was $3,425 for the year ended
December 31, 1999 and $43,813 for the period from April 6, 1998 through December
31, 1998. These amounts consisted of purchases of property and equipment and a
$27,000 investment in BREF during 1998. Asia Properties' rights with respect to
BREF expired in July 2000 and the investment currently has no value and will be
written off in the quarter ending September 30, 1999. There were no cash flows
from investing activities during the quarters ended March 31, 2000 and 1999.
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<PAGE>
Foreign currency
Asia Properties prepares its financial statements using U.S. dollars as the
reporting currency. However, its transactions are conducted in Thailand
currency - Baht, which is the functional currency. Transactions in Baht are
translated into U.S. dollars as the financial reporting currency. Foreign
currency transactions are translated at the applicable rates of exchange
prevailing at the dates of the transactions. Assets and liabilities are
denominated at applicable rates prevailing at the balance sheet date.
Currently, the exchange rate of Baht to U.S. dollars is stable and Asia
Properties does not expect any major fluctuation in the currency rate which
would affect the comprehensive income result of exchange gains and losses.
Inflation
Asia Properties intends to acquire and develop real estate projects in
Southeast Asia. Real estate values are inflation sensitive and fluctuate from
time to time, depending on factors such as the general economic conditions in
Southeast Asia. Asia Properties believes that the real estate values in
Southeast Asia are currently low. Any future inflation in real estate values
will affect Asia Properties' planned real estate development operations.
Year 2000
Asia Properties has implemented a Year 2000 program aimed at ensuring that
its computer systems and software will function properly in the Year 2000 and
beyond. Since all of Asia Properties' computers and software programs were
purchased in 1998 and 1999, Asia Properties considers its own computers and
software programs to be Year 2000 compliant. Due to the nature and stage of Asia
Properties' planned business, it does not have any other machinery or equipment
which may be affected by any Year 2000 technology problems. Asia Properties
believes that Year 2000 technology issues will not have a significant impact on
Asia Properties. Since Asia Properties plans to continue upgrading its computer
systems and software when necessary, it has not allocated a material amount of
resources to address Year 2000 compliance. However, Asia Properties plans to
continue assessing and testing newly purchased computer hardware and software to
ensure that those items are Year 2000 compliant.
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<PAGE>
New Accounting Standard
Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities, was issued in June 1998 and will
be effective for all fiscal quarters for all fiscal years which began after June
15, 2000. This standard established accounting and reporting standards for
derivative financial instruments and for hedging activities. Asia Properties
does not currently engage in any activities that would be covered by this
standard.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Since its inception in April 1998 Asia Properties has not purchased or sold
any market risk sensitive instruments or entered into any transaction relating
to those instruments.
MANAGEMENT OF ASIA PROPERTIES
The executive officers and directors of Asia Properties Investments also
serve in identical positions as the executive officers and directors of Asia
Properties. "Asia Properties Investments - Management of Asia Properties
Investments" on page 44 for a table, which sets forth the name, age and position
of each of the executive officers and directors of Asia Properties Investments,
as a well as a description of their business experience.
COMPENSATION OF ASIA PROPERTIES OFFICERS AND DIRECTORS
Asia Properties did not directly pay any monetary compensation to any of
its directors and officers during 1999. However, Asia Properties did pay
consulting fees to consulting companies owned by some of its officers and
directors and issued Asia Properties common stock to some of its officers and
directors during 1999. See "Interest of Management In Asia Properties
Transactions."
Asia Properties agreed to pay David W. Diehl U.S. $15,000 per year
beginning November 15, 2000 and all of his out-of-pocket expenses to attend four
board of director meetings scheduled during 2000. Asia Properties also agreed
to pay David Roberts U.S.$ 15,000 per year beginning in February 2000 and all of
his out-of-pocket expenses to attend board of director meetings during 2000.
INTEREST OF MANAGEMENT IN ASIA PROPERTIES TRANSACTIONS
Asia Properties has engaged in transactions with its current and former
officers and directors in which they were interested during the period from
April 6, 1998 through the date of this prospectus. Other than with respect to
the reincorporation agreement and the Northbridge Communities acquisition
agreement, Asia Properties Investments has not engaged in any transactions in
which any of its officers or directors had an interest.
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<PAGE>
On July 17, 1998, Asia Properties issued 3,000,000 shares of its common
stock to each of Daniel S. McKinney, Simon J. Landy and Nicholas St. Johnston in
exchange for the right to establish the Bangkok Real Estate Fund and for a
$3,000 note payable by Messrs. McKinney, Landy and St. Johnston. The U.S.
$3,000 note was subsequently paid. Mr. Landy is a former director of Asia
Properties, Inc. who resigned from that position on January 1, 1999.
Before that transaction Messrs. McKinney, Landy and St. Johnston
collectively owned the right to establish the Bangkok Real Estate Fund. Prior
to the establishment of the Bangkok Real Estate Fund and Asia Properties,
Messrs. McKinney and St. Johnston paid all expenses and fees related to the
formation of both entities. These expenses included airfare, hotels, long
distance telephone charges, and consulting and legal fees. The total amount of
these costs was U.S. $30,000. Asia Properties engaged Coldway Ltd, and
Milliard Ltd, under consulting contracts for work carried out by Messrs.
McKinney and St. Johnston.
Mr. McKinney performs all functions of the office of president of Asia
Properties, including a heavy travel schedule around Asia and North America,
promoting Asia Properties business, and discussing and negotiating arrangements
for additional financing for Asia Properties. Mr. St. Johnston, as chief
executive officer of Asia Properties, performs similar functions, including
traveling in Asia and north America, inspecting potential properties, including
those properties in which Northbridge Communities owns an interest, identifying
and analyzing potential acquisitions and other activities in an effort to raise
additional capital for Asia Properties. Messrs. McKinney and St. Johnston
received 1,000,000 shares each of Asia Properties for assigning the right to
establish the Bangkok Real Estate Fund. Messrs. McKinney and St. Johnston
spent substantial time with consultants, lawyers, businessmen, and the Thai SEC
in connection with the formation of the Bangkok Real Estate Fund.
Transactions with Current Directors and Officers
Daniel S. McKinney
On June 12, 1998, Asia Properties issued 600,000 shares of common stock Lim
Gaik-Im, Mr. McKinney's spouse, and 700,000 shares of common stock to Crestview
Associates, Ltd. for Mr. McKinney's efforts in organizing Asia Properties,
expenses paid on behalf of Asia Properties and cash in total amount of $10,200.
Crestview Associates is controlled by Mr. McKinney.
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<PAGE>
On July 17, 1998, Asia Properties issued 1,000,000 shares of common stock
to Mr. McKinney in exchange for his interests in the rights to establish the
Bangkok Real Estate Fund and for a $1,000 note payable by Mr. McKinney. The
$1,000 note was subsequently paid.
On August 25, 1998, Asia Properties entered into a one-year consulting
contract with Coldway Limited under which Coldway was paid $5,000 per month
commencing September 1, 1998 for providing management consulting services to
Asia Properties. Mr. McKinney is a director of Coldway. Asia Properties paid
Coldway U.S. $20,000 under that contract during 1998 and U.S. $40,000 during
1999.
In July 2000, Asia Properties entered into a loan agreement with Mr.
McKinney under which Asia Properties borrowed $10,000 from Mr. McKinney for
working capital purposes. Interest on the loan is payable at the rate of 8% per
annum. The loan is repayable upon written demand by Mr. McKinney. If Asia
Properties is unable to repay the loan in cash, Asia Properties must issue
shares of common stock to Mr. McKinney to repay all outstanding amounts under
the loan. The number of shares to which Mr. McKinney is entitled under the loan
agreement is equal to the outstanding balance under the loan agreement divided
by $4.41 per share. The $4.41 per share valuation is equivalent to the exchange
rate set forth in the Northbridge Communities acquisition agreement.
In July 2000, Asia Properties entered into a loan agreement with Coldway
under which Asia Properties borrowed $97,000 from Coldway for working capital
purposes. Interest on the loan is payable at the rate of 8% per annum. The
loan is repayable upon written demand by Coldway. If Asia Properties is unable
to repay the loan in cash, Asia Properties must issue shares of common stock to
Coldway to repay all outstanding amounts under the loan. The number of shares
to which Coldway is entitled under the loan agreement is equal to the
outstanding balance under the loan agreement divided by $4.41 per share. The
$4.41 per share valuation is equivalent to the exchange rate reflected in the
Northbridge Communities acquisition agreement.
Nicholas St. Johnston
On June 12, 1998, Asia Properties issued 500,000 shares of common stock to
Milliard Limited, an entity controlled by Mr. St. Johnston, for consulting
services provided by Mr. St. Johnston to Asia Properties and for expenses paid
by Mr. St. Johnston on behalf of Asia Properties.
On July 17, 1998, Asia Properties issued 1,000,000 shares of its common
stock to Mr. St. Johnston in exchange for his interests in the rights to
establish the Bangkok Real Estate Fund and for a $1,000 note payable by Mr. St.
Johnston. The $1,000 note was subsequently paid.
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<PAGE>
Asia Properties entered into a one year consulting contract with Milliard
Limited on August 25, 1998, under which Milliard Limited was paid $5,000 per
month commencing on September 1, 1998 for providing management consulting
services to Asia Properties. Mr. St. Johnston owns all of the outstanding
interests of Milliard Limited. Asia Properties paid Milliard Limited U.S.
$20,000 under that contract during 1998 and U.S. $40,000 in 1999.
In July 2000, Asia Properties entered into a loan agreement with Nicholas
St. Johnston under which Asia Properties borrowed $25,766.90 from Mr. St.
Johnston for working capital purposes. Interest on the loan is payable at the
rate of 8% per annum. The loan is repayable upon written demand by Mr. St.
Johnston. If Asia Properties is unable to repay the loan in cash, Asia
Properties must issue shares of common stock to Mr. St. Johnston to repay all
outstanding amounts under the loan. The number of shares to which Mr. St.
Johnston is entitled under the loan agreement is equal to the outstanding
balance under the loan agreement divided by $4.41 per share. The $4.41 per
share valuation is equivalent to the exchange rate reflected in the Northbridge
Communities acquisition agreement.
In July 2000, Asia Properties entered into a loan agreement with Milliard
under which Asia Properties borrowed $97,000 from Milliard for working capital
purposes. Interest on the loan is payable at the rate of 8% per annum. The
loan is repayable upon written demand by Milliard. If Asia Properties is unable
to repay the loan in cash, Asia Properties must issue shares of common stock to
Milliard to repay all outstanding amounts under the loan. The number of shares
to which Milliard is entitled under the loan agreement is equal to the
outstanding balance under the loan agreement divided by $4.41 per share. The
$4.41 per share valuation is equivalent to the exchange rate reflected in the
Northbridge Communities acquisition agreement.
Asia Properties Investments and Asia Properties currently occupy office
space at 86/14 Sukhumvit 31, Bangkok, Thailand. BDNSJ Limited, an entity
Nicholas St. Johnston owns, allows Asia Properties and Asia Properties
Investments to occupy this space rent-free.
Transactions With Individual to Become Director Upon Acquisition of
Northbridge Communities
On June 12, 1998, Asia Properties issued 100,000 shares of its common stock
to Finansa Ltd. in exchange for $200,000 in consulting services. Vorasit
Pokachaiyapat, who under the Northbridge Communities acquisition agreement is to
become a director of Asia Properties Investments upon the completion of the
acquisition of Northbridge Communities, is an executive director of Finansa Ltd.
Under the Northbridge Communities acquisition agreement, Vorasit
Pokachaiyapat is to become a director of Asia Properties Investments upon the
completion of the acquisition of Northbridge Communities
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<PAGE>
Transactions With Former Directors and Officers
Gary L. Killoran
On June 12, 1998, Asia Properties issued ten thousand shares of its common
stock to Gary L. Killoran, a former director and executive officer of Asia
Properties, in exchange for a note receivable in the amount of $100 and services
rendered. Mr. Killoran repaid the note receivable on October 9, 1998.
On October 13, 1998, Asia Properties entered into a consulting agreement
with Camden Financial Group, Inc., under which Camden Financial Group provided
management consulting services to Asia Properties at a rate of $65 per hour.
That agreement terminated on January 31, 1999. Asia Properties had paid Camden
Financial Group $1,455 during 1998 and nothing during 1999 under that agreement.
Mr. Killoran is an officer of Camden Financial Group, Inc.
Jay C. Lanning
On June 12, 1998, Asia Properties issued 10,000 shares of its common stock
to Jay C. Lanning in exchange for a note receivable in the amount of $100 and
services rendered. Mr. Lanning repaid the note receivable on October 9, 1998.
Mr. Lanning was formerly the chief financial officer for Asia Properties who
resigned from that position on May 25, 1999.
On October 23, 1998, Asia Properties entered into a consulting agreement
with Mr. Lanning under which Mr. Lanning acted as chief financial officer for
Asia Properties at an hourly rate of $60. Mr. Lanning received a total of
$17,700 from Asia Properties as compensation through May 25, 1999.
Simon J. Landy
On June 12, 1998, Asia Properties issued 500,000 shares of its common stock
to Mr. Landy for consulting services provided by Mr. Landy to Asia Properties.
On July 17, 1998, Asia Properties issued 1,000,000 shares of its common
stock to Mr. Landy in exchange for his interests in the rights to establish the
Bangkok Real Estate Fund and for a $1,000 note payable by Mr. Landy. The $1,000
note was subsequently paid.
On November 24, 1998, Asia Properties entered into an agreement with Mr.
Landy under which:
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- Mr. Landy and his wife surrendered to Asia Properties 1,400,000 shares
of Asia Properties common stock previously held by them,
- Asia Properties paid Mr. Landy $60,000 for his services to Asia
Properties, and
- Mr. Landy agreed to resign from the Asia Properties board of directors
effective as of January 1, 1999.
STOCK OWNERSHIP BY ASIA PROPERTIES MANAGEMENT AND PRINCIPAL SHAREHOLDERS
The following table shows the beneficial ownership of Asia Properties
common stock as of July 16, 2000. Those persons will own an equal number of our
capital shares immediately after the reincorporation. The table also shows our
beneficial ownership on a pro forma basis to give effect to the planned issuance
of 4,600,000 capital shares to acquire Northbridge Communities. The table
shows:
- each person known to us who owns beneficially more than five percent
of the outstanding common stock of Asia Properties based on 5,931,434
shares being outstanding as of July 16, 2000, and
- the total amount of common stock of Asia Properties owned by its
directors and executive officers as a group.
- the total amount of common stock of Asia Properties Investments on a
pro forma basis to be held by the shareholders of Northbridge
Communities who own beneficially more than five percent of Asia
Properties Investments after giving effect to the planned issuance of
4,600,000 capital shares to acquire Northbridge Communities.
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<PAGE>
<TABLE>
<CAPTION>
AMOUNT PERCENT
ACTUAL ACTUAL OWNED OF CLASS
AMOUNT PERCENT OF PRO PRO
IDENTITY OF PERSON OR GROUP OWNED CLASS FORMA(3) FORMA
---------------------------------- ------------ ----------- ---------- ---------
<S> <C> <C> <C> <C>
Daniel S. McKinney 2,324,263(1) 39.0% 2,324,263 22.0%
13976 Marine Drive
White Rock, BC V4B1A5
Canada
Nicholas St. Johnston 1,527,838(2) 25.6% 1,527,838 14.5%
86/14 Sukhumvit 31
Bangkok 10110, Thailand
David W. Diehl 10,000 (4) 10,000 (4)
65 Duke Street
London W1M 6AJ
David Roberts 10,000 (4) 222,500(5) (4)
5B Kennedy Heights
10 Kennedy Row
Hong Kong
Officers and Directors as a Group 3,872,101 64.7% 4,084,601 38.7%
(Four persons)
Lim Gaik-Im 2,324,263(1) 39.0% 2,324,263 22.0%
P.O. Box 98842, TST
Hong Kong
Crestview Associates Limited (6) 700,000(1) 11.8% 700,000 6.7%
908 Universal Commercial Bldg.
69 Peking Road, TST
Hong Kong
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
ACTUAL ACTUAL PERCENT OF
AMOUNT PERCENT OF AMOUNT OWNED CLASS PRO
IDENTITY OF PERSON OR GROUP OWED CLASS PRO FORMA (3) FORMA
-------------------------------- --------- ----------- ------------- ----------
<S> <C> <C> <C> <C>
N.B.C. Holdings (7) -- -- 1,734,000 16.5%
Attn: Managing Director
48/13 TISCO Tower 8th Floor
North Sathorn Road
Kwaeng Silom, Khet Bangrak
Bangkok 10500, Thailand
Asian Frontier Holdings (7) 3,415,100(7) 32.4%
48/13 TISCO Tower 8th Floor
North Sathorn Road
Kwaeng Silom, Khet Bangrak
Bangkok 10500, Thailand
Nikhil Srinivasan 680,000 6.4%
623 Mooban Lakeside Villa
Bangna-Trad Road, K.M. 5.5
Amphur Bangplee
Samutprakarn Province, Thailand
Robert W. Brewitt -- -- 1,734,000(9) 16.5%
48/13 TISCO Tower 8th Floor
North Sathorn Road
Kwaeng Silom, Khet Bangrak
Bangkok 10500, Thailand
Vorasit Pokachaiyapat -- -- 3,564,020(10) 33.8%
48/13 TISCO Tower 8th Floor
North Sathorn Road
Kwaeng Silom, Khet Bangrak
Bangkok 10500, Thailand
Eugene Davis -- -- 3,776,520(11) 35.9%
48/13 TISCO Tower 8th Floor
North Sathorn Road
Kwaeng Silom, Khet Bangrak
Bangkok 10500, Thailand
Shareholders of Northbridge
Communities as a Group -- -- 4,600,000 43.7%
</TABLE>
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Rule 13d-3 under the Securities Exchange Act of 1934, involving the
determination of beneficial owners of securities, includes as beneficial owners
of securities, any person who directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise has, or shares, voting
power and/or investment power with respect to the securities, and any person who
has the right to acquire beneficial ownership of the security within sixty days
through means including the exercise of any option, warrant or conversion of a
security.
(1) The shares shown as being beneficially owned by Daniel S. McKinney include:
- 1,000,000 shares held in his name,
- 700,000 shares held by Crestview Associates Limited,
- 600,000 shares held by Lim Gaik-Im, Mr. McKinney's spouse, and
- a total of 24,263 shares which may be acquired under loan agreements
between Asia Properties and Mr. McKinney and Coldway Limited for a
total amount of $107,000 which may be converted into shares of Asia
Properties common stock at the rate of $4.41 per share.
Mr. McKinney and Ms. Gaik-Im own all of the outstanding ownership interests of
Crestview Associates. Mr. McKinney is a director of Coldway. The shares shown
as being beneficially owned by Ms. Gaik-Im include the same shares shown as
being beneficially owned by Mr. McKinney. Ms. Gaik-Im is a citizen of Malaysia
and not a resident of the U.S. The shares of which Ms. Gaik-Im is the record
holder have therefore been treated as being held of record by a non-U.S.
resident.
(2) The shares shown as being beneficially owned by Nicholas St. Johnston
include:
- 1,000,000 shares held in his name,
- 500,000 shares held by Milliard Limited, and
- a total of 27,838 shares which may be acquired under loan agreements
between Asia Properties and Mr. St. Johnston and Milliard for a total
amount of $122,766.90 which may be converted into shares of Asia
Properties common stock at the rate of $4.41 per share. Mr. St.
Johnston owns all of the outstanding ownership interests of Milliard.
(3) Pro forma to give effect to the issuance of 4,600,000 Asia Properties
Investments capital shares to the shareholders of Northbridge Communities
in the acquisition by Asia Properties Investments of Northbridge
Communities. Does not give effect to current provisions of the Northbridge
Communities acquisition agreement which may take effect whereby:
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- if Asia Properties does not by September 11, 2000 raise $15 million at
a price of at least $4.40 per share, Daniel S. McKinney and Nicholas
St. Johnston and their affiliates will have to transfer to the
Northbridge Communities shareholders their interests in 1,750,000 Asia
Properties Investments capital shares that would otherwise be issued
to them in the reincorporation.
- if Asia Properties does not raise the $15 million by February 4, 2001,
the majority shareholders of Asia Properties discussed above will have
to transfer to the Northbridge Communities shareholders their
interests in an additional 1,750,000 Asia Properties Investments
capital shares. If Asia Properties raises new capital during the
period from September 12, 2000 until February 4, 2001, there will be a
reduction of the number of shares to be transferred by the majority
shareholders of Asia Properties which is to be proportionate based on
the $15 million financing target.
Although Asia Properties did not raise $15 million in new capital by
September 11, 2000, on August 16, 2000 Asia Properties and The Lester Group
executed a nonbinding term sheet for a proposed $15 million capital
financing through the private placement of 3,000,000 shares of Asia
Properties common stock with The Lester Group at a price of $5.00 per
share. On September 5, 2000, Asia Properties was advised by Northbridge
Communities that the Northbridge Communities board of directors was willing
to extend the September 11, 2000 deadline to October 17, 2000, and that if
part of the $15 million was raised by October 17, 2000 Northbridge
Communities would consider a further reasonable extension. However, the
parties have not yet executed a formal amendment to the acquisition
agreement which reflects any extension. Further, Asia Properties and Asia
Properties Investments cannot assure you that the proposed financing with
The Lester Group will be completed in any amount.
(4) Less than one percent.
(5) Includes 212,500 shares to be owned by Siam Investment Fund, of which Mr.
Roberts is a director.
(6) Daniel S. McKinney and Lim Gaik-Im control Crestview Associates and
exercise voting and dispositive powers over shares held of record by
Crestview Associates.
(7) Vorasit Pokachaiyapat is a director and a principal shareholder of N.B.C.
Holdings and Asian Frontier Holdings. Asia Properties Investments has been
informed that on August 15, 2000, N.B.C. Holdings agreed to transfer all of
its shares to Asian Frontier Holdings in exchange for reduction of a loan
payable by N.B.C. Holdings.
(8) Includes 1,200,000 shares to be received in exchange for a reduction in a
loan payable by Northbridge Communities and 481,100 Asia Properties
Investments capital shares to be issued to Asian Frontier Holdings under
the Northbridge Communities acquisition agreement in proportion to Asian
Frontier Holdings' ownership of Northbridge Communities capital shares.
Also includes 1,734,000 shares to be received from N.B.C. Holdings in
exchange for reduction in a loan payable.
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<PAGE>
(9) Includes 1,734,000 shares owned by N.B.C. Holdings. Mr. Brewitt is a
director of N.B.C. Holdings.
(10) Includes 3,415,100 shares to be owned by Asian Frontier Holdings, and
148,920 shares to be owned by Finansa Investment Advisor, Ltd. Mr.
Pokachaiyapat is a principal shareholder and director in each of these
entities.
(11) The shares shown as being beneficially owned by Eugene Davis include:
- 3,415,100 to be owned by Asian Frontier Holdings, of which Mr.
Davis is a director,
- 148,900 to be owned by Finansa Investment Advisor, Ltd., of which
Mr. Davis is a director, and
- 212,500 to be owned by Siam Investment Fund, of which Mr. Davis
is also a director.
NORTHBRIDGE COMMUNITIES LIMITED
BUSINESS OF NORTHBRIDGE COMMUNITIES
Northbridge Gated Schools and Communities
Northbridge Communities owns interests in companies that operate and
develop English-language, school-based residential real estate properties in
Southeast Asia. The chart below describes the interests in those operating
entities that Northbridge Communities owns. A narrative description of
Northbridge Communities' ownership interests follows. For the year ended
December 31, 1999, Northbridge Communities had revenues from operations of
$881,597. Northbridge Communities' revenues derived from rentals in the amount
of $428,379 and income from student enrollment at schools Northbridge
Communities or its subsidiaries operates in the amount of $453,218. As a
general matter, Northbridge Communities relies upon the collection of rental
payments and management fees on an ongoing, monthly basis. Neither Asia
Properties nor Asia Properties Investments owns any interests in any of
Northbridge Communities' properties. Asia Properties Investments intends to
obtain interests in Northbridge Communities' properties solely through the
acquisition of Northbridge Communities. It is anticipated that after the
acquisition Northbridge Communities will generate revenue from the development
and sale of residential and other properties, from the receipt of tuition
payments, management and consulting fees, and from rental amounts paid to lease
residential real estate.
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<PAGE>
NORTHBRIDGE COMMUNITIES LIMITED (THAI)
--------------------------------------
|
----------------------------------------------------------------------
| | | | |
25% 45% 100% 90% 90%
ISE Palanamai Northbridge KC Land Northbridge-KC
Thai Ltd. Management Cambodian Development
Thai Services Ltd.HK Co.,
---- ---------- --------------- --------- --------------
|
|
100%
NISC
Cambodian
Employees
As of June 30, 2000, Northbridge Communities had five employees.
PROPERTIES OF NORTHBRIDGE COMMUNITIES
A description of Northbridge Communities' primary properties follows.
The Phnom Penh Property
Northbridge Communities owns ninety percent of the capital shares of
Northbridge-KC Development Co., Ltd., which is a development company.
Northbridge-KC Development has entered into a joint venture with Mr. Khaou
Chuly, a Cambodian national, to develop a planned community with an accredited
international school near Phnom Penh. Khaou Chuly owns the remaining ten
percent of the outstanding capital shares of Northbridge-KC Development.
Northbridge Communities owns 49 percent of the outstanding capital shares of
Khaou Chuly Land Company Limited. Khaou Chuly Land Company is the owner of 58
hectares located within six kilometers of Phnom Penh on which the planned
community will be developed. Khaou Chuly Land Company also owns 19 hectares
near Phnom Penh, which are undeveloped and are currently being used as landfill
sites only. There are currently no plans to develop that 19 hectares after
completion of the proposed share exchange with Northbridge Communities.
Khaou Chuly Land Company plans to lease the 58 hectares to Northbridge
Communities Limited or Northbridge-KC Development. The terms of that lease have
not been determined as of the date of this prospectus. The initial phase of the
project on that land will consist of an international school and residential
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<PAGE>
housing units. Only the school, which has 5,438 square meters of space for
education, has been built as of the date of this prospectus. The school opened
in August 1997 and is operated by International School Cambodia Limited, which
is a wholly-owned subsidiary of Northbridge Communities Limited. Northbridge
Communities anticipates it will receive management fees from the International
School Cambodia in connection with its efforts to ensure the school operates at
its optimum level once the school is able to pay management fees. Management
believes that fees may be paid in year 2003. International School Cambodia is
run by a board of directors which Northbridge Communities, through its ownership
of International School Cambodia Limited, controls. Northbridge Communities
also controls the operations of Northbridge-KC Development Co. and Khaou Chuly
Land Company. Although construction of other buildings in the project have not
begun, it is anticipated that the development once fully developed will include:
- 235 single family units,
- 192 multi-family units,
- the international school,
- a sports club,
- a commercial area,
- a hospital, and
- common areas.
Northbridge Communities estimates that it will cost approximately U.S.
$90,000,000 to fully develop the project. Funding has been approved from both
Cambodian Public Bank and Standard Chartered Bank for 1.7 million dollars to
complete Phase IA1 of the residential community, which comprises 21 apartment
units. An investor has supplied cash collateral. In addition, five house lots
have been sold. The cash raised from these sales has paid for the construction
of the swimming pool and food kiosk. Construction will be complete on the
swimming area at the end of June 2000. It is expected that construction for the
first two apartment buildings will begin in July 2000. We have not determined
what method of financing we will use to fully develop the project after we
acquire Northbridge Communities. There are currently no real estate development
projects with which the Northbridge-KC Development competes. However, we cannot
make assurances that if the real estate development project is successful, other
competitors, including competitors with financial or other resources greater
than ours will not enter the market.
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<PAGE>
Under Cambodian law, land must be majority Cambodian owned. The use of
land by foreign investors is permitted and investors may be granted leases for a
period of up to seventy years, renewable on request for an additional seventy
years. Where a lease is granted, foreign investors may be entitled to own real
or personal property situated on the land. However, there can be no assurance
that foreign investors would be entitled to such a right and Cambodian law may
change in this regard even if foreign investors are entitled to own improvements
and personal property situated on the land.
Since over a majority of the Northbridge-KC Development is owned by persons
who are not Cambodian, Northbridge-KC Development ownership rights to the
buildings constructed on the land is not clear under Cambodian law. See "Risk
Factors - The ownership rights of real and personal property in Cambodia are
uncertain" on page 19. Northbridge Communities has obtained an opinion of
counsel with respect to Cambodian law on this issue and management believes
foreign investors are permitted under Cambodian law to own improvements to real
property.
Khaou Chuly Land Company's interest in the 58 hectares and Northbridge-KC
Development's interest in the school building constructed on the land are not
encumbered by any liens or mortgages. We also believe that the school building
is adequately insured against loss.
Generally, the Cambodian Investment Board assesses a twenty- percent tax on
net profits. Net profits are calculated by subtracting operating costs and
depreciation from Northbridge-KC Development's gross profit. The Cambodian
Investment Board, however, has awarded Northbridge-KC Development "Investment
Status" and therefore the applicable tax rate is 9%. In addition, the Cambodian
Investment Board has granted a five-year tax moratorium from July 13, 1995 to
July 13, 2000. Northbridge-KC Development is assessed a minimum tax of 1% of
its annual revenues. The Cambodian Investment Board further assesses a
value-added tax of 10% of the value of goods and services on non-exempt items.
In the past, the Cambodian Investment Board has granted value-added tax
exemptions for some school-related items. Rental income is exempted from
value-added tax. There is a 10% service tax that each tenant will pay in
addition to the stated rents. There is no further withholding tax on rental
income in Cambodia. We anticipate that Northbridge-KC Development may also
receive an exemption from value-added taxes in the future. However, there can
be no assurances Northbridge-KC Development will receive such an exemption. No
taxes were paid on the school building for the fiscal year ended June 30, 1999.
The school building will be depreciated over 20 years using the straight-line
method at a rate of 5% per year.
Northbridge Communities has not received any income from the Northbridge-KC
Development project. There are currently no dividend policies under which
International School Cambodia Limited pays Northbridge Communities or
Northbridge KC Development dividends. We expect International School Cambodia
Limited to pay dividends in the future to the extent available. Any dividends
will be paid in proportion to the ownership interests in International School
Cambodia.
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<PAGE>
The Bangkok Property
Northbridge Communities owns 25 percent of the outstanding capital shares
of International School Eastern Seaboard Limited and 45 percent of the
outstanding capital shares of Palanamai Limited. Those entities have developed
a project on the Eastern Seaboard of Thailand located at Burapha Golf Club
within one hundred kilometers of Bangkok, Thailand. The Burapha Golf Club is a
36-hole golf course and community with tennis courts, a swimming pool, a driving
range, a restaurant and a clubhouse. That project consists of approximately four
hundred house plots as well as the International School Eastern Seaboard and
four separate housing developments including the Northbridge Villas, Palanamai,
Eastwood and JHL. Northbridge Communities does not own any interest in either
Eastwood or JHL. There are approximately ten houses in Eastwood and six houses
and forty townhouses in JHL.
The International School Eastern Seaboard
The International School Eastern Seaboard offers a quality program to
dependents of foreign nationals living in the Eastern Seaboard region of
Thailand. International School Eastern Seaboard opened in August 1994 and
consists of a 15 hectare campus, which is owned by International School Eastern
Seaboard Limited. International School Eastern Seaboard Limited has constructed
on that campus and owns one three-story building and eleven one-story buildings,
all of which have approximately 8,254 square meters of space. The campus
includes:
- separate primary and secondary school buildings,
- two gymnasiums,
- a cafeteria,
- a theater, and
- athletic fields.
International School Eastern Seaboard is fully accredited by the Western
Association of Schools and Colleges, the United States Accrediting Agency for
Schools in the Asia-Pacific Region and a member of the East Asia Regional
Council of Overseas Schools. International School Eastern Seaboard has a
pre-kindergarten program for 3 and 4 year old children, an elementary school,
middle school and high school. There are 343 students currently enrolled in the
international school. Northbridge Communities Limited owns 25 percent of the
outstanding capital shares of International School Eastern Seaboard and also has
a management role in that company.
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<PAGE>
The buildings located on the land owned by International School Eastern
Seaboard Limited are encumbered by two mortgages. These mortgages secure
payment of 23 promissory notes in favor of Thai Farmers Bank each in the
principle amount of Baht 3,000,000. Eighteen of the promissory notes' original
maturity dates were October 20, 1999. Three of the promissory notes' original
maturity date was October 27, 1999. Two promissory notes' original maturity
dates were November 19, 1999. All of the promissory notes are automatically
renewable subject to acknowledgment signatures every three months. All of the
promissory notes are personally guaranteed by one of the shareholders of the
International School of Bangkok, but not by Northbridge Communities. The
promissory notes bear interest at a rate of 2% over the fixed deposit rate. As
of September 30, 1999, the fixed deposit rate was approximately 6%.
There are currently no realty taxes assessed on the International School
Eastern Seaboard school building. International School Eastern Seaboard is
assessed a corporate income tax of thirty percent (30%) of net profits, subject
to any loss carried forward. Currently, International School Eastern Seaboard
is carrying forward losses from prior years and pays no corporate income tax.
We anticipate that in the future International School Eastern Seaboard will be
required to pay corporate income tax. The school building will be depreciated
over 20 years using the straight-line method at a rate of 5% per year. We
believe the physical school building and other property are currently protected
from loss by adequate insurance.
There are other schools in the region with which the International School
Eastern Seaboard may compete. The International School Pattaya serves mainly as
a private Thai school up to the 9th grade. The International School of the
Regents is a stand-alone school development without an integrated housing
development. As a result, we believe the International School Eastern Seaboard
has a competitive advantage over the International School of the Regents.
Eastern Star is based in the area of Map Ta Phud on the southern end of the
Eastern Seaboard and was developed as school accommodations for the oil refinery
industry in the area. The St. Andrews School is part of a group of schools
based in Thailand. St. Andrews, Eastern Star and the International School of
the Regents all offer a British curriculum, in contrast to the American
accredited International Baccalaureate curriculum the International School
Eastern Seaboard offers.
The Northbridge Villas
The Northbridge Villas are a residential community with western style
townhouses and single family homes that offer attractive surroundings and
quality western designs. The development is marketed to expatriate and Thai
families who work with multi-national corporations located in the area. There
currently are 20 residential houses and seventeen townhouses in the Northbridge
Villas. Northbridge Communities currently owns fourteen of the residential
houses. Palanamai Limited owns seven of the residential houses and sixteen
townhouses located on 10 plots, which are owned by Palanamai. Northbridge
Communities and Palanamai compete with two other major housing developers in the
area which as previously discussed have constructed 56 houses in Eastwood and
JHL.
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<PAGE>
Each townhouse consists of two end units and two middle units. Both types
of units have three bedrooms with total living area of not less than three
hundred square meters. The variety of designs for the residential houses offer
four or five bedrooms, entertainment and family space, a large kitchen and a
separate area for a housekeeper.
Houses Owned by Northbridge Communities Limited
Thirteen of the houses owned by Northbridge Communities have four hundred
square meters of living space and one house has six hundred square meters of
living space. The total square meters for all of the houses is five thousand
eight hundred square meters.
One of the houses owned by Northbridge Communities in Northbridge Villas
was completed in December 1997. Nine of the other houses were completed in
1998. Those ten houses, which include a total of four thousand two hundred
square meters of living space, have been occupied one hundred percent of the
time since their completion under a lease with General Motors (Thailand)
Limited. The annual rent per square meter for those houses was:
- U.S. $23.25 in 1997,
- U.S. $106.71 in 1998 and from January 1, 1999 through July 31, 1999,
and
- U.S. $94.28 from August 1, 1999 to December 31, 1999.
All of the leases for those houses expire in 2003. The tenants, as prepaid
rent made the payments. The funds were used for the construction of the houses
and the purchase of the land. The remaining four houses are under development
and have not yet been rented. Because only ten of the fourteen houses
Northbridge Communities owns were completed and delivered to General Motors
(Thailand), Unique Building Concepts Co., Ltd. alleged a Northbridge Communities
subsidiary, Keltic Ltd, breached the lease agreement between Unique Building
Concepts Co., Ltd and General Motors (Thailand). Unique Building Concepts has
filed a lawsuit against Northbridge Communities seeking approximately Baht
23,242,335 for an alleged breach of a construction agreement between Unique
Building Concepts and Northbridge Communities Limited.
In October 1998, General Motors (Thailand), Northbridge Communities and
Keltic entered into an amendment to the lease agreement providing for
Northbridge Communities to repay U.S.$ 621, 984.93 of prepaid rent to General
Motors (Thailand), together with penalties under the lease agreement and some
costs General Motors (Thailand) incurred to obtain replacement housing. The
total amount due to General Motors (Thailand) is payable in eighteen monthly
installments of U.S.$ 36,837.62, with the last payment due in November 2000.
The houses Northbridge Communities own secure the repayment of General Motors'
(Thailand) prepaid rent. The amount owed in August 1999 was US $626,683.26.
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<PAGE>
That is carried on our books at Baht 16,001,573. We pay Baht 1,454,688.52 each
month. So at the end of March 2000 we have paid Baht 10,182,819.64. Therefore,
the outstanding amount owed is Baht 5,818,754.36. The difference in the dollar
amount is a factor of the Baht/dollar exchange rate. As of _________, 2000, the
amount due to General Motors (Thailand) was $_____________.
The approximate cost of fully developing those houses is U.S.$40,000, and
it is expected that development of those houses will be completed by the end of
2000 if we are able to obtain appropriate financing. All of the houses
Northbridge Communities owns are adequately insured against loss at the present
time.
The houses owned by Northbridge Communities in the Northbridge Villas are
encumbered by the following mortgages:
AMOUNT OUTSTANDING AS OF DECEMBER 31,
-------------------------------------
DESCRIPTION OF MORTGAGES 1999 IN U.S. DOLLARS
-------------------------- -----------------------
First Amendment to Lease Agreement dated $621,984.93
October 2, 1998 providing for refund of
Prepaid rent from four undelivered houses.
The realty tax rate on the houses owned by Northbridge Communities is 12.5
percent of the rent charged for the floor space and fixtures of the houses,
which is typically eighty percent of the total rent for the house. The
remaining portion of the total rent is for services. Northbridge Communities
provides property management services, including common area maintenance and
cleaning, security guards, common area lighting, and general maintenance and
repairs to the fabric of the houses and furnishings. The realty tax was
approximately $U.S. 40,000 for the fiscal year ended June 30, 1999. The tax
basis of the houses owned by Northbridge Communities is $U.S. _________ and will
be depreciated over twenty years using the straight-line depreciation method at
a rate of five percent per year. The tax basis for the fixtures in those houses
is $U.S. _________and will be depreciated over five years using the
straight-line depreciation method at a rate of twenty percent per year. A
value-added tax of seven percent of the value of any improvements made to the
properties in Thailand is also assessed. For the fiscal year ended June 30,
1999, the amount of the value added tax was approximately $US ______________.
Houses Owned by Palanamai
The houses owned by Palanamai in Northbridge Villas consist of 16 townhouse
units in four different buildings and seven freestanding single family houses,
totaling 7,123 square meters of living space. Northbridge Communities owns 45%
of Palanamai Limited, but does not direct the operations of Palanamai.
Northbridge Communities has received no income from these houses and townhouses.
One house with 268 square meters of living space was completed in 1995 and
occupied one hundred percent during that year. Houses with a total of 2,928
square meters were completed in 1996 and occupied one hundred percent during
that year. All of the houses were completed by 1997 and were occupied:
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- 83.41 percent in 1997,
- 88.71 percent in 1998 and
- 88.71 percent in 1999.
The annual rent per square meter for those houses was:
- U.S. $90.27 in 1995,
- U.S. $87.75 in 1996,
- U.S. $72.98 in 1997,
- U.S. $75.36 in 1998, and
- U.S. $71.51 in 1999.
International School of the Eastern Seaboard currently rents houses from
Palanamai with 1,182 square meters of living space, or 17 percent of the living
space of all of the houses. No other person occupies more than ten percent of
the living space rented by Palanamai. The following table shows the schedule of
the expiration of the current 15 leases for the houses:
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENT OF GROSS
TENANTS WHOSE SQUARE METERS ANNUAL RENT ANNUAL RENT
LEASES WILL COVERED BY COVERED BY THE COVERED BY THE
YEAR EXPIRE LEASES LEASES LEASES
---- -------------- ---------------- --------------- ---------------
<C> <C> <C> <S> <C>
1999 6.7% 268 U.S. $ 19,355 5%
2000 93.3% 19,355 U.S. $367,419 95%
</TABLE>
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The properties and leases owned by Palanamai are encumbered by the
following mortgages:
<TABLE>
<CAPTION>
APPROXIMATE AMOUNT OUTSTANDING AS OF
------------------------------------
DESCRIPTION OF MORTGAGES DECEMBER 31, 1999 IN U.S. DOLLARS
------------------------ ---------------------------------
<S> <C>
Credit facility with Multi-Credit Corporation $1,673,751.66
Finance and Securities Public Company Limited.
Interest at SIBOR plus 4.5 percent per annum.
Credit may be drawn down only once and must be
repaid in full one year from the due date of the
drawdown. Palanamai drew down 48 million Thai
Baht under the facility on October 3, 1996.
Palanamai is in default with this loan and the loan
is under the control of Legacy Co., Ltd. This loan
is secured by 6,612 square meters of the 10 plots
Palanamai owns and by two leases owned by
Palanamai which could be foreclosed in order to
satisfy the amounts outstanding.
Loan with Phattra Thanakit Public Company $ 314,069.75
Limited for 12,540,000 Thai Baht. Interest at
MLR plus 1.5 percent per annum, due in 180
installments in the amount of 173,366 Thai Bahts
started April 15, 1995 and ending March 15, 2010.
This loan is secured by approximately 1,764
square meters of the 10 plots Palanamai owns.
Loan with Phatra Thanakit Public Company $ 911,010.30
Limited for 38,000,000 Thai Baht. Interest at
MLR plus one percent per annum, due in 120
installments in the amount of 601,490 Thai Bahts
started May 9, 1997 and ending April 9, 2007.
This loan is secured by approximately 8,272
square meters of the 10 plots Palanamai owns.
</TABLE>
The realty tax rate on the houses owned by Palanamai is 12.5 percent of the
rent charge for the floor space and fixtures of the houses, which is typically
eighty percent of the total rent for the house. The remaining portion of the
total rent is for services. Northbridge Communities provides property
management services, including common area maintenance and cleaning, security
guards, common area lighting, and general maintenance and repairs to the fabric
of the houses and furnishings. The cost of this service typically amounts to
13% of the rental. In 1999, this was approximately U.S. $80,000.00 total for
the ten houses leased to General Motors (Thailand). No realty taxes have been
paid on the houses Palanamai owns for the fiscal year ended June 30, 1999 since
no demand has been made by the taxing authorities and in that jurisdiction taxes
typically are not paid unless and until a demand is made and the amount is
settled. The tax basis of the houses owned by Palanamai is $U.S. _________ and
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will be depreciated over twenty years using the straight-line depreciation
method at a rate of five percent per year. The tax basis for the fixtures in
those houses is $U.S. ________and will be depreciated over five years using the
straight-line depreciation method at a rate of twenty percent per year. A value
added tax of seven percent of the value of any improvements made to properties
in Thailand will be assessed. We believe the houses owned by Palanamai are
adequately insured against loss.
Competition
There are numerous housing alternatives that compete with Northbridge
Communities in attracting residents. The Burapha Golf Community, in which the
Northbridge Villas and Palanamai are located, competes with approximately 12
integrated golf course housing developments in the Thai eastern seaboard area.
Currently, we believe there is an over supply of housing and condominium units
available in the Pattaya region at competitive rental rates. All of the
approximately 12 integrated golf course housing developments with which Burapha
competes provide for some sort of integrated living either in condominiums,
detached houses or villa type housing that are low rise attached homes. In
addition, several of the golf courses maintain hotels of varying degrees and
most offer new housing construction through the developer. The number of
competition properties in a particular area could have a material effect on our
business strategy. In addition, many or all of the developers for the
integrated golf course housing developments with which Burapha competes have
greater financial or other resources than we do.
LEGAL PROCEEDINGS OF NORTHBRIDGE COMMUNITIES
On May 26, 1998, Unique Building Concepts Co., Ltd. initiated a lawsuit
against Northbridge Communities in the South Bangkok (Thailand) Civil Court.
Unique Building Concepts alleges that Northbridge Communities breached a
construction contract and seeks damages in the total amount of $628,170. Also
on May 26, 1998, Northbridge Communities initiated a lawsuit against Unique
Building Concepts to recover approximately $590,000 in damages due to
nonperformance by Unique Building Concepts of the contract. Although the
ultimate outcome of these proceedings cannot be determined at this time,
Northbridge Communities believes that this claim by Unique Building Concepts
will not have a material adverse effect on its financial condition or results of
operations due to the effect of the applicable statute of limitations.
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NORTHBRIDGE COMMUNITIES LIMITED MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Northbridge Communities' management has been working diligently to expand
its operations and to improve its results of operations. In the current year,
management has a) successfully increased the number of students enrolled in its
schools, thus improving its school income from $258,452 to $453,218, b)
identified a window of opportunity and traded a large sum of securities with
warrants, thus realizing $ 2,118,243 in capital gains. This tax-free capital
gain made a positive contribution to Northbridge Communities' bottom line in
1999. The management has decided to write off the advance to the joint venture
for the Vietnam project as the board of directors has approved the write- off in
December 1999. As the property market has been in decline since starting of the
Asian financial crisis in 1997, the value of Palanamai Ltd. and International
School Eastern Seaboard Limited are decreased. On the conservative basis, the
management adopted a provision for diminution in value in order to write-down
the value of the Investment Account. The result of written off the advance to
joint venture amounting to US $1,552,670 and the provision for diminution in
value of investment amounting to US $764,530, Northbridge Communities' net loss
has been increased by 18%, or $452,114, in the current year. The continuing
operational losses led to increased borrowings, which eroded shareholders'
equity. In summary, the 1999 net loss of $2,902,296 put additional burden on
Northbridge Communities' future operations.
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The following table sets forth selected operational data for the years
ended December 31, 1999 and 1998 and the quarter ended March 31, 2000 and the
quarter ended March 31, 2000.
<TABLE>
<CAPTION>
Quarter Ended Year Ended December 31, Increase/Decrease
March 31, 2000 1999 1998 Amount Percentage
-------------- ----------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Rental income $ 99,364 $ 428,379 $ 381,860 $ 46,519 12.18%
School income 191,506 453,218 258,452 194,766 75.35%
----------- ------------- ------------- ------------ --------
Total income 290,870 881,597 640,312 241,285 37.68%
General & administrative expenses 482,970 2,934,234 2,513,276 420,958 16.75%
----------- ------------- ------------- ------------ --------
Operating loss (192,100) (2,052,637) (1,872,964) 179,673 9.59%
Other income and expenses
Interest income 40,814 52,394 58,682 (6,288) (10.72%)
Interest expenses (181,887) (763,037) (737,333) 25,704 3.49%
Written off the advance to joint venture - (1,552,670) - 1,552,670 -
-----------
Provision foe diminution in value of
investment (764,530) - 764,530 -
Gains on sales of securities - 2,118,243 - 2,118,243 -
----------- ------------- ------------- ------------ --------
Net income/(loss) (333,173) (2,962,237) (2,551,615) 410,622 (16.09%)
Other comprehensive income
Gains/(losses) from foreign currency
transaction (22,370) (41,701) (12,429) 29,272 235.51%
----------- ------------- ------------- ------------ --------
Comprehensive income before minority
interests (355,543) (3,003,938) (2,564,044) (439,894) (17.16%)
Minority interests 21,495 101,642 113,862 12,220 10.73%
----------- ------------- ------------- ------------ --------
Net comprehensive income after
minority interests ($334,048) ($2,902,296) ($2,450,182) $ 452,114 18.45%
----------- ------------- ------------- ------------ --------
</TABLE>
Income
School income for the fiscal year 1999 increased to $453,218 from $258,452
for fiscal year 1998 is due to continuing increase of student enrollment, from 7
students in 1998 to 80 students, in the Cambodia international school NISC
operations in 1999. The rental incomes is slightly increased by 12% since the
lease term was started in 1998 and the rental income for 1998 did not cover 12
months.
General and Administrative Expenses
Northbridge Communities' continuous expansion of its international school
operations led to an increase of $420,958, or 16.8%, of general and
administrative expenses to a total of $2,934,234 in 1999, from $2,513,276 in
1998. As the 1999 income has increased by 36.68%, the current 16.8% increase of
expenses appears reasonable.
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<PAGE>
Interest Income
As the Asian economic recovery continues, the interest rate started to drop
in 1999. As a result, Northbridge Communities' interest income generated from
loans to others decreased by $6,288, or 11%, to $52,394 in 1999, from $58,682 in
1998. Northbridge Communities' increase of prepayments to its vendors,
increasing security deposits, $63,992 in 1999 vs. $42,895 in 1998, as well as a
$60,426 increase of cash and cash equivalents, from $40,540 in 1998 to $100,966
in 1999, on hand for its expanding needs, did not improve Northbridge
Communities' interest earning abilities since prepayments generate no interest
while cash and cash equivalent generate little interest.
Interest Expenses
Interest expenses increased 3%, or $25,000, from $737,333 in 1998 to
$763,037 in 1999. This slight increase was due to the additional $1 million in
loans from a related party bearing interest at LIBOR plus. Due to the additional
loans, Northbridge Communities' long-term obligations increased from $7.9
million in 1998 to $8.9 million in 1999.
Gain on sales of securities
The sales of securities of 1.5 million of common stock and warrants of a
local company TISCO on the Thailand stock market resulted in a profit of
$2,118,243 in 1999. There were no capital gains on the sale of securities
during in 1998.
Translation Loss on Foreign Currency
Northbridge Communities records its book in Thailand Baht, the functional
currency, the translation of the financial statements of subsidiaries into
United States dollars is performed for balance sheet accounts using the closing
exchange rate in effect at the balance sheet dates and for revenue and expense
accounts using an average exchange rate during each reporting period. The gains
or losses resulting from translation are included in stockholders' equity
separately as cumulative translation adjustments. The loss resulting from
translation for the years ended December 31, 1997, 1998 and 1999 were
approximately U.S. $41,701; U.S. $12,429; U.S. $150,730.
Foreign Currency Transactions
Transactions in foreign currencies are translated at exchange rates ruling
at the transactions dates. Aggregate gains and losses from foreign currency
transactions included in the results of operations for the years ended December
31, 1997, 1998 and 1999 were approximately ($162,000), $76,000 and 32,000
respectively.
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The Baht devaluated from its high of 25 Baht to a U.S. dollar to a low of
55 Baht to a U.S. dollar in October and November of 1997 and fluctuated
dramatically as the Asian financial crisis started in Thailand at the end of
1997. In 1998, the Baht exchange rate recovered to about 40 Baht to one U.S.
dollar and became stable at about 37 Baht to a U.S. dollar in the latter part of
1998 and 1999. Currently the same exchange rate of approximately 37 Baht
remains. As the Asian economy has started its recovery, Northbridge
Communities' management does not currently expect any major fluctuation of the
exchange rate. However, if Baht exchange rate becomes volatile again it would
affect through exchange gains and losses the results of operations.
With respect to Northbridge Communities' Cambodian operations, foreigners
are required to transact business in Cambodia using U.S. dollars. Therefore,
Northbridge Communities' operations in Cambodia are transacted in U.S. dollars,
the functional currency, and recorded in Baht on Northbridge Communities' books
to comply with Thai laws. For U.S. reporting purposes, Northbridge Communities'
foreign exchange exposure to U.S. dollars is believed to be minimal.
Minority interest
The income of minority interests decreased by $12,220,or 11%, in 1999 to
$101,642 from $113,862 in 1998. This is the result of unfavorable 1999
operations of Northbridge Communities' subsidiaries.
Cash Flow
As of December 31, 1999, Northbridge Communities had $100,966 of cash and
cash equivalents. Outstanding amounts due to a related company was $8,919,128.
On February 4, 2000, Northbridge Communities entered into an agreement with Asia
Properties Inc. Under the agreement, Asia Properties Inc. to acquire all of the
outstanding capital shares of Northbridge Communities. Asia Properties
Investments plans to issue to the shareholders of Northbridge Communities 4.6
million of Asia Properties Investments capital shares valued at U.S. $4.40 per
share. According to the acquisition agreement, amounting to U.S. $5.28 million
of the raising fund will be used to repay the loan from a related company.
Net cash used in operating activities was $2,809,946 for the fiscal year
1999, net cash used in operating activities primarily consisted of the net
operating losses as well as decrease in accounts payable and rental income in
advance. Net cash provided by operating activities was $1,353,165 for the fiscal
year 1998 and $3,992,001 for the fiscal year 1997. Net cash provided in
operating activities for 1998 and 1997 primarily consisted of the repayment from
a holding company and the increase in rental income in advance and accounts
payable.
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Net cash provided by investing activities for the fiscal year 1999 was
$1,959,805 which included the proceeds from sales of securities. Net cash used
in investing activities for the fiscal year 1998 and 1997 consists of additions
to property and equipment. Net cash used in investing activities was $3,752,592
in 1998 and $8,715,680 in 1997.
Net cash provided by financing activities was $910,567 for 1999, $2,345,497
for 1998 and $4,748,861 for 1997. Net cash provided by financing activities was
affected by the borrowings from related company.
Despite the continuing operational losses, it is Northbridge Communities'
belief that the operation is sustainable with potential profits in the future as
the economy is covering in Southeast Asia. The continuing operation depends on
the willingness of additional capital contribution committed by its existing
shareholders, and whether new investments can be brought in from the investing
community.
Restrictions to Foreign Ownership of Land in Thailand and Cambodia
According to the laws of Thailand and Cambodia, foreigners may not normally
own land except in special circumstances. However, the share ownership structure
and shareholders' agreements of Northbridge Communities allow foreign
shareholders to beneficially own and control a local company, which is
registered in Thailand and / or Cambodia and can own land in Thailand and
Cambodia. This practice is supported by opinions of Northbridge Communities'
legal advisors/attorneys. Therefore, Northbridge Communities beneficially owns
and controls its land investment in Thailand and Cambodia.
Inflation
Due to the nature of the real estate development business, inflation can be
critical for Northbridge Communities' operations. As the economy in Southeast
Asia started to recover from the 1997 Asian financial crisis, inflation has not
had a material impact on Northbridge Communities' business in recent years.
Management believes that inflation will not have a material impact in the near
future.
Segmented Geographic Sales Income
Income is generated from few customers, and income from General Motors
(Thailand) Ltd. is over 10% of Northbridge Communities' total income. The dollar
value of income from these customers is expected to remain level or increase
steadily over the next several years since the Asian economy is expected to grow
steadily in the future.
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Income of Northbridge Communities mainly represents rental income from 10
delivered houses to General Motors (Thailand) and student income from the
international schools operations.
<TABLE>
<CAPTION>
1999 1998 1997
-----------------------------------------------------------------------------------------------------------------------------
Property
Property Property investment
Investment School in investment School in in Thailand School in
in Thailand Cambodia Total in Thailand Cambodia Total Cambodia
--------------- ------------- ----------- ------------ ------------- ------------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Rental income $ 428,379 $ - $ 428,379 $ 381,860 $ - $ 381,860 $ - $ -
School income - 453,218 453,218 - $ 258,452 258,452 - 61,103
------------- ----------- ------------ ------------- ------------- ------------ ---------- ----------
428,379 453,218 881,597 381,860 258,452 640,312 - 61,103
Interest
income from
external 51,580 814 52,394 58,330 352 58,682 78,397 62
parties
Interest
expenses to
external 763,037 - 763,037 737,333 - 737,333 618,130 -
parties
Gain on sales
of securities 2,118,243 - 2,118,248 - - - - -
Depreciation 99,729 465,643 565,372 85,707 410,869 496,576 10,943 122,268
------------- ----------- ------------ ------------- ------------- ------------ ---------- ----------
Profit/(loss) (404,363) (945,263)* (1,349,626) (1,306,189) (1,143,993) (2,450,182) (852,051) (463,904)
------------- ----------- ------------ ------------- ------------- ------------ ---------- ----------
Total
--------------- ------------
<S> <C>
Rental income $ -
School income 61,103
------------
61,106
Interest
income from
external 78,459
parties
Interest
expenses to
external 618,130
parties
Gain on sales
of securities -
Depreciation 133,211
------------
Profit/(loss) (1,315,955)
------------
</TABLE>
* The loss excluded the write off the advance to Vietnam joint venture of U.S.
$1,552,670 during the fiscal year 1999.
b) Assets Segment Information as of December 31 are as follows:
Assets Location Thailand Cambodia Hong Kong Total
------------------- ----------- ----------- ---------- -----------
- 1999 $5,060,524 $12,940,240 $547 $18,001,311
- 1998 $6,438,616 $13,355,031 $1,333 $19,794,980
- 1997 $4,747,590 $12,603,141 $1,333 $17,352,064
Contingent Liabilities
As of December 31, 1999, Northbridge Communities has been sued by Unique
Building Concepts Co, Ltd., which is a 10% affiliate, for breach of contract due
to nonpayment of construction fees of U.S. $594,600 within the time frame stated
in the contract. The total unpaid fee claimed by United Building Concepts totals
U.S. $628,170. Northbridge Communities has in turn sued Unique Building
Concepts to recover damages of approximately $590,000 due to nonperformance by
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<PAGE>
Unique Building Concepts of the contract. Although the ultimate outcome has not
been determined, Northbridge Communities' management, under advice from its
legal advisor, believes that the outcome of the claim by Unique Building
Concepts will be in favor of Northbridge Communities, due to the effect of the
applicable statute of limitations. Therefore, no provision has been made except
the interest cost, which has been accrued in accordance with the contract.
Northbridge Communities' investment account balance on the balance sheet
has been pledged as collateral to guarantee loans of a related company of U.S. $
1,934,689 as of December 31 1999. If the guaranteed loan is not paid on time,
Northbridge Communities' investments may have to be transferred to the related
company.
Year 2000 Issue
Northbridge Communities has developed plans to replace or modify its
computers to address the Year 2000 issue. Northbridge Communities has also
started in-house modifications of its computer systems to address the Year 2000
issue.
Since most of the computers purchased recently are Year 2000 compliant, the
possible exposure may not be material. Northbridge Communities will continue to
assess newly purchased machinery and computer-related hardware and software to
ensure such items are Year 2000 compliant.
Operating Risks
Northbridge Communities' main operations are conducted in Thailand,
Cambodia and other Southeast Asian countries. Accordingly, the business,
financial condition and results of operations may be influenced by the
political, economic and legal environment in Southeast Asia. Northbridge
Communities' operations may be subjected to special considerations and risks not
typically associated with companies in the U.S. The risks include the following:
- Political Considerations
Northbridge Communities' business may be adversely affected by
political, economic uncertainties and social unrest in Thailand or
Cambodia. A change in policies by the Thailand and Cambodia
governments, changes in laws, regulations, or the interpretation
thereof, confiscatory taxation, restrictions on currency conversion,
or an expropriation of private enterprises could adversely affect
Northbridge Communities' interest. Although the Thai and Cambodian
governments have recently been pursuing economic reform policies,
Northbridge Communities cannot assure you that the Thai and Cambodian
governments will continue to pursue these policies or that these
policies may not be significantly altered, especially in the event of
a change in leadership, social or political disruption or unforeseen
circumstances affecting Thai and Cambodian political, economic and
social life.
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- Operation Considerations
Northbridge Communities' operations are depended on an addition risk
of obtaining the proper funding to pay its operations expenses as
Northbridge Communities has not been making money from its operations
as of today. The management has confidence that the proper capital
funding will be completed in the near future to continue its
operations.
- Economic Considerations
The economies of Thailand and Cambodia differ significantly from the
economy of the U.S. in such respects as structure, level of
development, gross national product, growth rate, capital
reinvestment, resource allocation and self-sufficiency, rate of
inflation and balance of payments position, among others. The Asian
financial crisis, which started in Thailand in the second half of
1997, had caused a severe economic recession in Asia for more than two
years. While economic conditions are currently improving, Northbridge
Communities cannot assure you that Southeast Asian economic growth
will continue. Many factors such as potential military interventions
and/or human rights violations, which are not prevalent in the U.S.,
could have a significant adverse effect on the economic conditions in
Southeast Asia. Further, much of the Asian economy is export driven.
Potential international economic slowdowns may also affect the
recovering economies of Thailand and Cambodia.
- Government Control of Currency Conversion and Exchange Rate Risks
Northbridge Communities receives its revenues in Thailand in Baht,
which is not freely convertible into U.S. dollars. However,
Northbridge Communities constantly requires U.S. dollars to fund a
portion of its operations. In Cambodia, foreigners can only conduct
business in U.S. dollars. Northbridge Communities requires U.S.
dollars to pay its American executives and its U.S. recruited teachers
for operational needs. The Thai government imposes control over its
foreign currency reserves in part through direct regulation of the
conversion of Baht into foreign currency and through restriction on
foreign imports. Exchange rate fluctuations may adversely affect
Northbridge Communities' operations in real estate business, its
financial performance and ability to meet its U.S. dollars
obligations.
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Reliance on Key Personnel
Despite the fact that most of the key personnel and employees have been
with Northbridge Communities for over one year, the operation of Northbridge
Communities is dependent on the services of its key ranking officers and
employees. The possible loss of their services or the inability to attract
qualified personnel will have a material adverse effect on Northbridge
Communities. Northbridge Communities believes that it will be able to retain or
attract qualified professional personnel in the future to maintain its
operations.
Impact of Recently Issued Accounting Standards
Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities, was issued in June 1998 and is
scheduled to become effective for all fiscal quarters for all fiscal years
beginning after June 15, 2000. This standard established accounting and
reporting standards for derivative financial instruments and for hedging
activities. Northbridge Communities does not currently engage in any activities
that would be covered by this standard.
Going concern
Despite the continuing operational losses, Northbridge Communities believes
that its operations are sustainable with potential profits in the future. As the
economy is recovering in Southeast Asia, Northbridge Communities expects the
value of real estate to appreciate steadily. It should be noted that the
continuing operations depend on additional capital contributions by its existing
shareholders, new investments from the investing community, and the speed of the
economic recovery as well as continuing political stability of the Southeast
Asian countries. On February 4, 2000, Northbridge Communities entered into a
Share Purchase and Sale Agreement with Asia Properties, Inc. Under the
agreement, Northbridge Communities is to merge with Asia Properties upon
completion of its reincorporation from a Nevada corporation to a British Virgin
Islands company to consolidate the resources in order to grow aggressively.
As a Share Purchase and Sales Agreement has been signed to combine
Northbridge Communities and Asia Properties, the management believes that the
fund raising will be completed in the near future. At the present time, two
potential investors have expressed interest in possibly investing $5 million and
$15 million in the combined company after the Asia Properties Investments
registration statement for the issuance of capital shares in the reincorporation
of Asia Properties as a British Virgin Islands company is declared effective.
The management believes that the further capital requirement can be met through
the completion of the fund raising mentioned above. In addition, since some of
the current shareholders are investment institutions such as Asian Frontier
Holdings Limited, these shareholders may be willing to contribute additional
capital to continue Northbridge Communities' operations.
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Real Estate Price Fluctuation
Northbridge Communities purchases and develops real estate property and
constructs schools to attract expatriates to lease its property. Real estate
prices fluctuate from time to time. Real estate prices have been low for the
past two years, but prices may rise resulting in increased costs of project
development.
Northbridge Communities' management has been working diligently to expand
its operations and to improve its results of operations. In the current year,
management has a) successfully increased the number of students enrolled in its
schools, thus improving its income, b) identified a window of opportunity and
traded a large sum of securities with warrants, thus realizing $ 2,118,243 in
capital gains. This tax-free capital gain made a positive contribution to
Northbridge Communities' bottom line in 1999. Consequently, Northbridge
Communities' net loss has been reduced by 73%, or $1,877,303, in the current
year. Despite of the current year improvement, the continuing operational losses
led to increased borrowings, which eroded shareholders' equity. In summary, the
1999 net loss of $686,740 put additional burden on Northbridge Communities'
future operations.
Credit Facility
In August 2000, Northbridge Communities executed a $1.7 million credit
facility with Cambodia Public Bank in Phnom Penh. Any draws against the
facility will bear interest at 3% above the bank's deposit rate and will be
subject to a three month promissory note but repayable on demand. Any
outstanding balances under the facility must be secured by deposits with the
bank in a matching amount. The purpose of the credit facility is to facilitate
the construction of the first phase of eighteen apartments which Northbridge
Communities expects to complete by the third quarter of 2001.
WHERE YOU CAN FIND MORE INFORMATION
Asia Properties Investments has filed a registration statement on Form F-4
to register with the SEC the Asia Properties Investments capital shares to be
issued in the reincorporation. This prospectus is part of that registration
statement. Some information in the registration statement has been omitted from
this prospectus in accordance with SEC rules.
Asia Properties Investments is not yet required to file annual, quarterly
and special reports, proxy statements and other information with the SEC. When
the SEC declares this registration statement effective, Asia Properties
Investments will become subject to the informational requirements of the
Securities Exchange Act of 1934 as they apply to a foreign private issuer.
Under those requirements we will be required to file reports and other
information with the SEC.
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<PAGE>
You may read and copy materials that Asia Properties Investments has filed
with the SEC, including the registration statement, at the SEC public reference
room in Washington D.C., New York, New York and Chicago, Illinois.
You can call the SEC at 1-800-732-0330 for further information about the
public reference room.
Electronic versions of documents filed with the SEC may be accessed through
the SEC's Internet site at http://www.sec.gov.
Asia Properties and Asia Properties Investments has supplied all
information contained in this document relating to Asia Properties and Asia
Properties Investments, and Northbridge Communities has supplied all information
in this document relating to Northbridge Communities.
Additional information about Asia Properties is also available at Asia
Properties' Internet site at http://www.asiaprop.com. Web site materials are not
a part of this prospectus.
You should only rely on the information contained in this prospectus. Asia
Properties and Asia Properties Investments have not authorized anyone to provide
you with information different from that contained in this prospectus. We are
offering to sell, and seeking offers to buy, shares of common stock only in
jurisdictions where offers and sales are permitted. The information contained
in this prospectus is accurate only as of the date of this prospectus,
regardless of the time of delivery of this prospectus or of any sale of common
stock.
REPORTS TO SECURITY HOLDERS
Asia Properties Investments intends to furnish its shareholders with annual
reports containing consolidated financial statements audited and reported upon
by its independent certified public accountants, after the end of each fiscal
year. Asia Properties Investments may distribute quarterly reports containing
unaudited interim financial information. Asia Properties Investments also may
furnish shareholders with such other periodic reports as it may determine to be
appropriate or as may be required by law.
LEGAL MATTERS
The British Virgin Islands law firm of O'Neal Webster O'Neal Myers Fletcher
& Gordon has passed upon the validity of the capital shares offered by this
prospectus and has rendered an opinion on the British Virgin Islands tax
consequences of the reincorporation summarized in the section entitled "The
Reincorporation -- Tax Consequences of the Reincorporation" on page 36.
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Ballard Spahr Andrews & Ingersoll, LLP has rendered an opinion on the U.S.
federal income tax consequences of the reincorporation summarized in the section
entitled "The Reincorporation -- Tax Consequences of the Reincorporation" on
page 36.
EXPERTS
The financial statements of Asia Properties for the period from April 6,
1998 (date of inception) to December 31, 1999 and the financial statements of
Northbridge Communities for the period from January 1, 1997 to December 31, 1999
included in this prospectus have been audited by Dickson V. Lee, Certified
Public Accountants, LLC, and have been included in this prospectus in reliance
on the reports of that firm given upon the authority of them as experts in
accounting and auditing.
SEC POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
As in most U.S. jurisdictions, the board of directors of a British Virgin
Islands company is charged with the management and affairs of that company and,
subject to any limitations to the contrary in the Asia Properties Investments
memorandum of association, Asia Properties Investments board of directors is
entrusted with the power to manage the business and affairs of Asia Properties
Investments. In most U.S. jurisdictions, directors of a company owe a fiduciary
duty to that company and its shareholders, including a duty of care, under which
directors must properly appraise themselves of all reasonably available
information, and a duty of loyalty, under which they must protect the interests
of that company and refrain from conduct that injures that company or its
shareholders or that deprives that company or its shareholders of any profit or
advantage. Many U.S. jurisdictions have enacted various statutory provisions,
which permit the monetary liability of directors to be eliminated or limited.
Under British Virgin Islands law, liability of a director to Asia Properties
Investments is generally limited to cases of willful malfeasance in the
performance of his duties or to cases where the director has not acted honestly
and in good faith and with a view to the best interests of Asia Properties
Investments.
Under the Asia Properties Investments memorandum of association, Asia
Properties Investments is authorized to indemnify any person who is made or
threatened to be made a party to a legal or administrative proceeding by virtue
of being a director, officer or liquidator of Asia Properties Investments,
provided such person acted honestly and in good faith and with a view to the
best interests of Asia Properties Investments and, in the case of a criminal
proceeding, had no reasonable cause to believe that his conduct was unlawful.
The memorandum of association also permits Asia Properties Investments to
indemnify any director, officer or liquidator of Asia Properties Investments who
is successful in any proceeding against expenses and judgments and fines and
amounts paid in settlement and reasonably incurred in connection with the
proceeding, where such person met the standard of conduct described in the
preceding sentence. There are also provisions in the memorandum of association
that insure or indemnify, to the full extent allowed by the laws of the
Territory of the British Virgin Islands law, directors, officers, employees,
agents or persons serving in similar capacities in other enterprises at the
request of Asia Properties Investments.
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Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling Asia Properties
Investments, Asia Properties Investments has been informed that, in the opinion
of the SEC, such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
ENFORCEABILITY OF CIVIL LIABILITIES AGAINST FOREIGN PERSONS
Asia Properties Investments is a British Virgin Islands company. Asia
Properties Investments has appointed Daniel S. McKinney as an agent upon whom
process may be served in any action brought against it under the securities laws
of the U.S. Mr. McKinney is an executive officer and director of Asia
Properties Investments, and his address is 114 Magnolia Street, Suite 400-115,
Bellingham, Washington 98225. However, it may be difficult for you to enforce
outside the U.S. judgments against Asia Properties Investments obtained in the
U.S. in any such actions, including actions predicated upon the civil liability
provisions of the U.S. federal securities laws. In addition, most of our
executive officers and directors reside outside the U.S. and substantially all
of the assets of those persons and of Asia Properties Investments are or may be
located outside of the U.S. As a result, it may be difficult for you to effect
service of process within the U.S. upon such persons. There is substantial
doubt as to the enforceability against Asia Properties Investments or its assets
of judgments of U.S. courts.
No treaty exists between the British Virgin Islands and the U.S. providing
for the reciprocal enforcement of foreign judgments. However, the courts of the
British Virgin Islands are generally prepared to accept a foreign judgment as
evidence of a debt due. An action may then be commenced in the British Virgin
Islands for recovery of this debt. A British Virgin Islands court will only
accept a foreign judgment as evidence of a debt due if:
- the judgment is for a liquidated amount in a civil matter,
- the judgment is final and conclusive and has not been stayed or
satisfied in full,
- the judgment is not directly or indirectly for the payment of foreign
taxes, penalties, fines or changes of a like nature,
- the judgment was not obtained by actual or constructive fraud or
duress,
- the foreign court has taken jurisdiction on grounds that are
recognized by the common law rules as to conflict of laws in the
British Virgin Islands,
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- the proceedings in which the judgment was obtained were not contrary
to natural justice (i.e., the concept of fair adjudication),
- the proceedings in which the judgment was obtained, the judgment
itself and the enforcement of the judgment are not contrary to the
public policy of the British Virgin Islands,
- the person against whom the judgment is given is subject to the
jurisdiction of the British Virgin Islands court, and
- the judgment is not on a claim for contribution in respect of damages
awarded by a judgment, which does not satisfy the foregoing.
Enforcement of a foreign judgment in the British Virgin Islands may also be
limited or affected by applicable bankruptcy, insolvency, liquidation,
arrangement, moratorium or similar laws relating to or affecting creditors'
rights generally and will be subject to a statutory limitation of time within
which proceedings may be brought.
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<TABLE>
<CAPTION>
INDEX TO FINANCIAL STATEMENTS
Page
----
ASIA PROPERTIES, INC.
<S> <C>
Annual financial statements
Independent Auditor Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Balance Sheet for the years ended December 31, 1999 and 1998 . . . . . . . . . . . . . F-3
Consolidated Statements of Operations for the years ended December 31, 1999 and the
period from April 6, 1998 (date of inception) through December 31, 1998 and 1999 . . . . . . . F-4
Consolidated Statements of Changes in Stockholders' Equity for the period from April 6, 1998
(date of inception) through December 31, 1998 and the year ended December 31, 1999 . . . . . . F-5
Consolidated Statements of Cash Flows for the year ended December 31, 1999 and the period from
April 6, 1998 (date of inception) through December 31, 1998 and 1999 . . . . . . . . . . . . . F-6
Notes to Consolidated Financial Statements - December 31, 1998 and 1999 . . . . . . . . . . . . . . F-7
Interim period financial statements
Accountants' Review Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-14
Unaudited Consolidated Balance Sheets for the first quarters ended March 31, 2000 and 1999. . . . . F-15
Unaudited Consolidated Statements of Operations for the quarter ended March 31, 2000 and 1999 . . . F-16
Unaudited Consolidated Statements of Changes in Stockholders' Equity for the first quarter ended
March 31, 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-17
Unaudited Consolidated Statements of Cash Flows for the first quarter ended March 31, 2000 and 1999 F-18
Notes to the consolidated interim financial statements - March 31, 2000 . . . . . . . . . . . . . . F-19
NORTHBRIDGE COMMUNITIES LIMITED
Annual financial statements
Independent Audit Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-26
Consolidated balance sheet for the years ended December 31, 1999, 1998 and 1997 . . . . . . . . . . F-27
Consolidated statements of operations for the years ended December 31, 1999, 1998 and 1997. . . . . F-28
Consolidated statements of changes in stockholders' equity for the years ended
December 31, 1997, 1998 and 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-29
Consolidated statements of cash flows for the year ended December 31, 1999, 1998 and 1997 . . . . . F-30
Notes to the financial statements - December 31, 1997, 1998 and 1999. . . . . . . . . . . . . . . . F-32
Interim period financial statements
Accountants' Review Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-43
Unaudited Consolidated Balance Sheets for the first quarters ended
March 31, 2000, 1999 and 1998. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-44
Unaudited Consolidated Statements of Operations for the quarters ended
March 31, 2000, 1999 and 1998. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-45
Unaudited Consolidated Statements of Changes in Stockholders' Equity for the first quarter ended
March 31, 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-46
Unaudited Consolidated Statements of Cash Flows for the first quarters ended
March 31, 1999 and 1998. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-47
Notes to the financial statements - March 31, 1998, 1999 and 2000 . . . . . . . . . . . . . . . . . F-49
PRO FORMA FINANCIAL STATEMENTS
Pro Forma Balance Sheet for the year ended December 31, 1999. . . . . . . . . . . . . . . . . . . . F-59
Pro Forma Statement of Operations for the year ended December 31, 1999. . . . . . . . . . . . . . . F-61
Notes to Pro Forma Condensed Financial Statements - December 31, 1999 . . . . . . . . . . . . . . . F-62
Pro Forma Balance Sheet for the first quarter ended March 31, 2000. . . . . . . . . . . . . . . . . F-63
Pro Forma Statement of Operations for the first quarter ended March 31, 2000. . . . . . . . . . . . F-65
Notes to Pro Forma Condensed Financial Statements - March 31, 2000. . . . . . . . . . . . . . . . . F-66
</TABLE>
F-1
<PAGE>
DICKSON V. LEE
CERTIFIED PUBLIC ACCOUNTANT, L.L.C.
Member of the SEC Practice Section
--------------------------------------------------------------------------------
Main Address : 110 East 59th Street, 6th Floor, New York, New York 10022
------------- Telephone: (212) 909-0397 Fax: (212) 909-0322
China Address : Suite 2503, United Plaza, Shenzhen, China
-------------- Telephone: (755) 271-0062 Fax: (755) 271-0389
--------------------------------------------------------------------------------
INDEPENDENT AUDITOR REPORT
To The Board of Directors of
Asia Properties, Inc.
(a development stage company)
We have audited the accompanying consolidated balance sheets of Asia Properties,
Inc. (a development stage company) as of December 31, 1998 and 1999, and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for the period from April 6, 1998 (inception date) to December
31, 1998, and 12 months ended December 31, 1999. These consolidated financial
statements are the responsibility of the Company management. Our responsibility
is to express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with U.S. generally accepted auditing
standards. 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 audits provide 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 Asia Properties,
Inc. as of December 31, 1998 and 1999 and the results of its operations, changes
in stockholders' equity and its cash flows for the period from April 6, 1998
(inception date) to December 31, 1998 and 12 months ended December 31, 1999 in
conformity with U.S. generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 16 to the
financial statements, the Company has suffered recurring losses from operations
that raise substantial doubt about its ability to continue as a going concern.
Management plans in regard to these matters are also described in Note 16. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ DICKSON V. LEE, CERTIFIED PUBLIC ACCOUNTANT, LLC
Dickson V. Lee, Certified Public Accountant, LLC
New York, New York
April 22, 2000
F-2
<PAGE>
<TABLE>
<CAPTION>
Asia Properties, Inc.
(a development stage company)
Consolidated Balance Sheet
--------------------------
For The Years Ended December 31
1999 1998*
---------- ----------
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 33,979 $ 423,912
Inventories less allowance - -
Deposits, other advances 7,509 5,778
---------- ----------
Total Current Assets 41,488 429,690
Fixed Assets
Machine & others 20,238 16,813
Less: accumulated depreciation (2,584) (154)
---------- ----------
Fixed Assets (net) 17,654 16,659
Other Assets
Investment in BREF 27,000 27,000
Other deferred assets 12,507 -
---------- ----------
Total Assets $ 98,649 $ 473,349
========== ==========
Liabilities & Stockholders' Equity
Current Liabilities
Accounts payable $ 70,006 $ 19,382
Other payables 1,083 -
---------- ----------
Total Current Liabilities 71,089 19,382
Total Liabilities 71,089 19,382
Stockholders' Equity
Common stock, par $0.001 5,922 5,851
(50,000,000 authorized, 5,921,434 outstanding)
Paid in capital 870,225 635,749
Accumulated deficit (848,587) (187,633)
---------- ----------
Total Stockholders' Equity 27,560 453,967
---------- ----------
Total Liabilities And Stockholders' Equity $ 98,649 $ 473,349
========== ==========
<FN>
* The 1998 balance represents approximately 8 months activities, from the
inception on April 6, to December 31, 1998.
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
F-3
<PAGE>
<TABLE>
<CAPTION>
ASIA PROPERTIES, INC.
(a development stage company)
Consolidated Statements of Operations
-------------------------------------
For The Years Ended December 31
Accumulative
amount from
1999 1998* inception
----------- ----------- --------------
<S> <C> <C> <C>
Sales $ - $ - $ -
Cost of Sales - - -
----------- ----------- --------------
Gross Profit - - -
----------- ----------- --------------
Selling expenses - - -
General & administration expenses (see Note 10) 666,550 187,722 854,272
----------- ----------- --------------
Financial expenses 487 126 613
Other Income/(expense) 6,083 215 6,298
----------- ----------- --------------
Loss before income tax (660,954) (187,633) (848,587)
Tax (see Note 21) - - -
----------- ----------- --------------
Net Deficit $ (660,954) $ (187,633) $ (848,587)
=========== =========== ==============
Weighted average number of shares
- basic and diluted 5,886,017 2,925,300 5,886,017
----------- ----------- --------------
Net loss per share
-Basic ($0.11) ($0.06) ($0.14)
-Diluted ($0.11) ($0.06) ($0.14)
<FN>
* The 1998 balance represents approximately 8 months activities, from the inception on
April 6, to December 31, 1998.
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
F-4
<PAGE>
<TABLE>
<CAPTION>
Asia Properties, Inc.
(a development stage company)
Consolidated Statements of Changes in Stockholders' Equity
----------------------------------------------------------
For the Years Ended December 31
Common Common Additional Paid Accumulated Stockholders'
Stock Shares Stock ($) in Capital Deficit Equity
-------------- ---------- ----------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Balance as of
April 6, 1998 $ -- $ -- $ -- $ -- $ --
Shares issued 7,250,600 7,251 694,349 -- 701,600
Share repurchased (1,400,000) (1,400) (58,600) -- (60,000)
Net loss -- -- -- (187,633) (187,633)
-------------- ---------- ----------------- ------------- ---------------
Balance as of
December 31, 1998* 5,850,600 5,851 635,749 (187,633) 453,967
Shares issued 70,834 71 234,476 -- 234,547
Net Loss -- -- -- (660,954) (660,954)
-------------- ---------- ----------------- ------------- ---------------
Balance as of
December 31, 1999 5,921,434 $ 5,922 $ 870,225 $ (848,587) $ 27,560
============== ========== ================= ============= ===============
<FN>
* The 1998 balance represents approximately 8 months activities, from the inception on April 6, to
December 31, 1998.
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
ASIA PROPERTIES, INC.
(a development stage company)
Consolidated Statements of Cash Flows
-------------------------------------
For The Years Ended December 31
Accumulative
amount from
1999 1998* Inception
----------- ----------- --------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Loss ($660,954) ($187,633) ($848,587)
Adjustments to reconcile net income to cash provided
by operating activities:
(Increase)/Decrease in deposits, prepayments
and other receivables (1,731) (5,778) (7,509)
(Increase)/Decrease in deferred assets (12,507) - (12,507)
Increase/(Decrease) in accounts payable 50,624 19,382 70,006
Increase/(Decrease) in other payable and charges 1,083 - 1,083
Depreciation expenses 2,430 154 2,584
----------- ----------- --------------
Net cash provided by operating activities (621,055) (173,875) (794,930)
Cash Flows from Investing Activities:
Purchase of property, plant and machinery (3,425) (16,813) (20,238)
Proceeds from sales of plan and machinery - - -
-----------
Increase in investment - (27,000) (27,000)
------------ ----------- --------------
Net cash flows from investing activities (3,425) (43,813) (47,238)
Cash Flows from Financing Activities:
Increase in paid-in capital 234,547 641,600 876,147
----------- ----------- --------------
Net cash flows from financing activities 234,547 641,600 876,147
Net (Decrease)/Increase in cash and cash equivalents (389,933) 423,912 33,979
Cash and cash equivalents at beginning of the period
(January 1) 423,912 - -
----------- ----------- --------------
Cash and cash equivalents at end of the period
(December 31) $ 33,979 $ 423,912 $ 33,979
=========== =========== ==============
<FN>
* The 1998 balance represents approximately 8 months activities, from the inception on April 6,
to December 31, 1998.
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
F-6
<PAGE>
1) General
Asia Properties, Inc. (the "Company") was incorporated in Nevada on April
6, 1998. The Company, with a place of business located at 12707 High Bluff
Drive, San Diego, California 92130, was formed to invest in Asian real estate,
primarily through its ownership of the Bangkok Real Estate Fund (See Note 3). A
representative office was also established in Bangkok Thailand on November 17,
1998, to carry out research of the Asian real estate market. The Company has a
100% owned subsidiary - Asia Properties, International (Thailand) Ltd., located
at 86/14 Sukhumvit 31, Bangkok 10110, Thailand, which was registered in Thailand
on August 2, 1999, to conduct the Company's operations in Thailand.
On January 22, 1999, trading of the Company's common stock commenced in the
U.S. over-the-counter market and the stock was quoted in the pink sheets of the
National Quotation Bureau (Symbol "ASPZ") with inactive trading.
The Company devotes most of its activities toward establishing a new
business, in which principal operations have not commenced or have not generated
an income. In accordance with Statement of Financial Accounting Standards
(SFAS) No.7, Accounting and Reporting by Development Stage Enterprises, the
Company is classified as a development stage company.
2) Summary of Significant Accounting Policies
A summary of the Company's significant accounting policies applied in the
preparation of the accompanying financial statements follows.
a) The Calendar Year Ending December, 31
The Company's calendar year ends on December 31 of the year. This
fiscal year policy has been adopted consistently in the past years.
b) Basis of Consolidation
Subsidiaries which the company has no significant influence but has
ownership over 20% but below 50% is included in the Company's
financial statement using the cost method. Subsidiaries which the
Company has ownership over 50% are consolidated with the Company's
financial statements as per APB opinion No. 18.
The consolidated financial statements include the accounts of the
Company, its Thailand subsidiary and representative office (See Note
1, General). All material inter-company balances and transactions, if
any, have been eliminated in consolation.
c) Use of Estimates
The preparation of financial statements in conformity with American
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the balance sheet and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
d) Depreciation
Fixed assets are depreciated on a straight-line basis over estimated
useful lives, ranging from three to seven years.
F-7
<PAGE>
e) Income Taxes
Income taxes are provided for the tax effects of transactions reported
in the financial statements and consist of taxes currently due plus
deferred taxes related to differences between the basis of fixed
assets for financial and income tax reporting. Deferred taxes also are
recognized for any operating losses that are available to offset
future taxable income and any tax credits that are available to offset
future federal and state income taxes.
Deferred tax assets and liabilities represent the future tax return
consequences of those differences, which will either be taxable or
deductible when the assets and liabilities are recovered or settled.
f) Cash and Cash Equivalents
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.
g) Foreign Currency Translation
The Company prepares its financial statements using United States
dollars as the reporting currency. However, its overseas operations,
including operations of the Thailand subsidiary and the Company's
Thailand representative office, are conducted in Thailand currency -
Baht (the functional currency). Transactions in Baht are translated
into United States dollars (the reporting currency) for consolidation.
In accordance with SFAS No. 52, Foreign Currency Translations, the
translation of financial statement into United States dollars is
performed for balance sheet accounts using the closing exchange rate
in effect at the balance sheet dates, and for revenue and expense
accounts using an average exchange rate during each reporting period.
The gain or (loss) resulting from translation are included in the
stockholder's equity separately as cumulative translation adjustments.
Gains and losses resulting from transaction conducted in a currency
other than the functional currency are recorded in current operations.
Currently, the exchange rate of Baht to United States dollars is
stable and the Company's management does not expect any major
fluctuation in the currency rate which would affect the comprehensive
income result of exchange gains and losses (see Note 13). There is no
comprehensive income arising from foreign currency exchange gains and
losses in the Company's statement of operations.
h) Foreign Corrupt Practices Act
The Company is subject to the U.S. Foreign Corrupt Practices Act of
1977, which generally prohibits U.S. companies from engaging in
bribery or making other prohibited payments to foreign officials for
the purpose of obtaining or retaining business. Foreign companies,
including some that may compete with the Company, are not subject to
these prohibitions. During the audit, no violation of the Foreign
Corrupt Practices Act by the Company was noted.
3) BREF Investments
On July 17, 1998, the Company took assignment of the right to establish the
Bangkok Real Estate Fund (BREF) in exchange for 3,000,000 shares of its common
stock valued at $0.001 per share and $3,000 from 3 parties who were the founders
for the Company. In addition, the Company paid $27,000 to BREF for operational
expenses. Total monetary value of the BREF is not material about $30,000 (i.e.
F-8
<PAGE>
$3,000 plus $27,000 paid to cover expenses in the development and registration
of BREF). However, business value created through the initial approval of BREF
may exceed the $30,000 cost invested. The registration of the fund was subject
to a minimum investment of 500 million Baht (approximately US$ 13.5 million) by
the Company and 9 other minority unit holders. This is required since BREF must
have at least 10 unit holders under the rules established by the Securities and
Exchange Commission of Thailand (Thai SEC).
The formation of BREF was approved by the Thai SEC on July 16, 1998,
subject to the funding as described above. BREF was to be established as a
private placement closed-end fund subject to the regulations and requirements
established by the Thai SEC in exchange for 3,000,000 shares of its common stock
valued at $0.01 per share and $30,000.
On July 17, 1999, the Company's right to establish BREF expired due to its
requirement to become funded within one year of its formation. In anticipation
of this, the Company applied for and received an approval to establish a new
fund, Bangkok RE Fund (BREF2), with rights and requirements similar to those of
BREF. The formation of BREF2 was approved on July 15, 1999 by the Thai SEC.
The registration of BREF2 is also subject to an investment of 500 million Baht
(approximately US$ 13.5 million), which must be completed by July 15, 2000.
4) Stockholders' Equity
The following shares are issued based on the fair value method:
On June 12, 1998, the Company issued 3,200,000 common shares at par value $
0.001 each for cash of $3,200, to the three founders of the Company for service
rendered.
On June 12, 1998, the Company issued 20,000 common shares at per value $
0.001 each for cash of $200, to related parties for services rendered.
On June 14, 1998, the Company issued 700,000 common shares at $ 0.01 per
share for cash of $7,000, to a new shareholder of the company.
On July 17, 1998, the Company issued 3,000,000 common shares $ 0.01 each
(equivalent to $30,000) and $3,000 from the founders for the Company to related
parties in exchange for the assignment of the right to establish BREF (see Note
3).
In September 1998, through a Private Placement Offering Memorandum dated
June 17, 1998, the Company issued 326,950 common shares at $ 0.001 par value for
at a price, before commission and expenses, of $2.00 per share for $653,900
cash.
During October and November 1998, the Company issued an additional 3,650
common shares at par value $ 0.001 each pursuant to the Private Placement
Offering Memorandum dated June 17, 1998, at a price $2.00 per share for $7,300
cash.
On November 16, 1998, the Company repurchased 1,400,000 shares of its
common stock at approximately $0.04 per share for $60,000 and restored those
shares to the status of authorized and unissued shares. The purchase was made
from a founder who elected to pursue other business interests.
On March 12, 1999, the Company issued 30,000 common shares at par value $
0.001 each, at a price $3.2 per share for $96,000 to a consultant as a payment
for services.
On May 6, 1999, the Company issued 500 common shares at per value $ 0.001
each, at a price $3.2 per share for $1,600 an employee as a performance award.
F-9
<PAGE>
On June 22, 1999, the Company issued 6,500 common shares at per value $
0.001 each, at a price $3.4 per share for $22,100 to a consultant as a payment
for services.
On July 5, 1999, the Company issued 33,334 common shares at per value $
0.001 each, at a price $3.4 per share for $113,147 to an employee as a
performance award.
On July 5, 1999, the Company issued 500 common shares at per value $ 0.001
each, at a price $3.4 per share for $1,700 to an employee as a performance
award.
5) Stock Options
Using the fair value method and using the average market price as a
reference. On June 22, 1999, the Company granted options to purchase 5,000
shares of its common stock, at a price of $5.00 per share, to each of 3
shareholders as an award. These options expire as follows: 10,000 shares
expired on December 31, 1999, and 5,000 shares expire on June 21, 2000. The
Board of Directors plans to continue to grant stock option awards in the future
to reward its management, directors and employees who make exceptional
contributions to the Company.
The Company applies APB Opinion No. 25, Accounting for Stock Issued to
Employees, and related Interpretations in accounting for its stock options.
There has been no compensation cost charged against income for the options for 8
months of 1998 and 12 months of 1999. Had compensation cost for the Company's
stock options been determined based on their fair value at the grant dates
consistent with the method of SFAS No. 123, Accounting for Stock-Based
Compensation, the Company's consolidated net loss would not have differed
materially from the amount reported.
6) Income Taxes
As of December 31, 1999, the Company had a deferred tax asset for the
deductible temporary differences relating to net operating loss carry forwards.
Because management was unable to determine if, more likely than not, the Company
will realize the deferred tax asset related to the net operating loss carry
forwards, a 100% valuation allowance was provided for these deferred tax assets
as of December 31, 1999.
December 31, 1999
----------------------------------------------
Deferred Tax Asset $ 274,000
Less: Valuation Allowance (274,000)
-----------
Net $ -
-----------
----------------------------------------------
At December 31, 1999, the Company had federal and state net operating loss
(NOL) carry forwards of approximately $660,954. These NOL's benefits will
expire in 2003.
7) Year 2000 Issue
The Company has implemented a year 2000 (Y2K) program aimed at ensuring
that its computer system and software will function properly beyond 1999. As
all of its computers were purchased in 1998 and 1999, the equipment is
considered to be Year 2000 compliant. Due to the nature of the Company's
business, it does not have any other machinery or equipment subject to the Year
2000 issue. The possible Y2K impact may not be significant to the Company.
Because the Company will continue to upgrade its computer systems and
software, it has not allocated additional resources or attributed additional
costs to Year 2000 compliance. The Company will continue to assess and test
newly purchased machinery and computer-related hardware and software to ensure
such items comply with Year 2000.
F-10
<PAGE>
8) Commitment and Contingencies
Except the Company may continue its operational loss in the near future
unless substantial income is generated (See Note 16). No other material
commitments and contingencies were noted as of December 31, 1999.
9) Inflation
Significant inflation may have a significant impact on the real estate
business. Significant inflation has not occurred in Thailand in recent years. It
is management's belief that significant inflation will not occur in the near
future (See Note 13).
10) Related Party Transactions
The related party transactions as noted below, are included in the general
and administration expenses on the Statement of Operations.
The Company has some office facilities, which are shared by its subsidiary.
The financial effects of the shared facilities are not material. All other
related party transactions are reviewed and disclosed when material, in
accordance with SFAS No. 57, Related Party Disclosures.
Coldway Limited received $ 20,000 in 1998 and $ 40,000 in 1999 from the
Company for consultancy services to help establishing the Company's
registration, accounting system and recruitment of personnel. Mr. D. McKinney,
President of the Company, is also a director of Coldway Ltd.
Milliard Limited received $ 20,000 in 1998 and $ 40,000 in 1999 from the
Company, for consultancy services to implement the operations of Thai subsidiary
in Bangkok. Mr. N. St Johnston, Chief Executive Officer of the Company is also a
director of Milliard Ltd, and a beneficial owner.
The Camden Financial Group received $ 1,455 in 1998 from the Company for
consultancy services on establishment of the company's strategy to expand and to
source of fundings. Mr. G. Killoran, who was a director of the Company in 1998,
was also a director of The Camden Financial Group.
Mr. J. C. Lanning, who was a director of the Company, received $ 17,700
($6,600 in 1998 and $11,100 in 1999) for his consultancy services of Company's
accounting operations from the Company for the period from October 23, 1998
through to May 25, 1999.
Mr. S. J. Landy, who was a director of the Company, received $ 60,000
($54,000 in 1998 and $6,000 in 1999) for his consultancy services to implement
the marketing plans of the Company for the period from April 1998 to January
1999.
11) Operating Risks
The Company's planned operations are to be conducted in Thailand and
Southeast Asia. Accordingly, the business, financial condition and results of
operations may be influenced by the political, economic and legal environment in
Thailand, and Southeast Asia. The Company's operations are subject to special
considerations and risks not typically associated with companies in North
America.
F-11
<PAGE>
12) Retirement Plan
The Company's employees in Thailand and America are all hired on
contractual basis, with no retirement provisions. Therefore, the Company has no
obligations for pension liabilities. In addition, the Company has not adopted
post-retirement or post-employment benefit plans.
13) Real Estate Prices Fluctuation
The Company intends to acquire and develop real estate projects in Thailand
and Southeast Asia. Real estate values are inflation sensitive, and fluctuate
from time to time, depending on the different life cycles of the economies of
Southeast Asia. It is management's belief that the real estate values in
Southeast Asia are currently low. Increasing values of real estate will impact
the company's operations.
14) Reliance on Key Personnel
Most key personnel have been with the Company for over one year, and the
operation of the Company, in a development stage, is dependent on the services
of key management. The possible loss of their services or the inability to
attract qualified personnel could have a material adverse effect on the Company.
15) Impact of Recently Issued Accounting Standards
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities,
was issued in June 1998 and is scheduled to become effective for all fiscal
quarters for all fiscal years beginning after June 15, 2000. SFAS No. 133
established accounting and reporting standards for derivative financial
instruments and for hedging activities. The Company does not currently engage in
any activities that would be covered by SFAS No. 133.
16) Going Concern
The Company has been able to raise capital from the investment community.
The Company, in a development stage, has not been able to generate any operating
income or profit. The company's ability to continue its business operations is
dependent on the continuing cash inflow from new investors, and/or capital
commitment from its existing shareholders. As the company has traded its shares
on the U.S. over-the-counter market (see Note 1). Management has held
discussions with potential stock brokers and investors to raise additional funds
and identify potential companies in the real estate industry as merger
candidates. A Share Purchase and Sale Agreement has been signed with
Northbridge Communities Limited (NCL), a Thai Company on February 4, 2000 to
increase its resources (see Note 17). The consolidated financial statements do
not include any adjustments that might result from the outcome of this going
concern uncertainty.
17) Subsequent Events
The Company signed a Share Purchase and Sale Agreement on February 4, 2000,
to acquire Northbridge Communities Limited ("NCL"), a Thailand company engages
mainly in real estate development business. NCL own certain real estate
properties in Thailand and Cambodia. Under the agreement, the Company is to
purchase all NCL assets and liabilities with exceptions of a Vietnam operations,
and a subsidiary company; Keltic Ltd, via a share exchange. So that NCL is to
become a 100% subsidiary of the Company. The Company is to issue to the
shareholders of NCL 4.6 million common shares valued at $4.40 per share in order
to purchase NCL.
The agreement requires that the closing of the share exchange must occur
before August 2, 2000. The agreement includes the following principal terms: a)
API will restructure the Board of Directors ("the Board") upon the closing of
the transaction, so that the Board will consist of D. McKinney, N. St. Johnston,
D. Diehl, D. Roberts and two appointees of NCL. b) API existing shareholders
must use the best efforts to raise $15 million in cash by September 11, 2000. c)
3.5 million of common shares held by the existing shareholders be transferred
into an escrow account after the purchase. (i.e. D. McKinney - 800,000 shares;
N. St. Johnston - 900,000 shares; Crestview Associates Ltd - 700,000 shares; Lim
G. Im - 600,000 shares; and Milliard Limited - 500,000 shares. d) In the event
the above mentioned parties are able to raise $15 million in cash by September
F-12
<PAGE>
11, 2000, the 3.5 million common shares will be returned to the owners. e) If
$15 million is not raided by September 11, 2000, 1.75 million common shares in
the escrow account will be transferred to the shareholders of NCL and Mr.
McKinney will resign from the Board. f) From September 12, 2000 to February 4,
2001, the shareholders of the 3.5 million shares will be entitled to claw back
their proportionate interest in 1.75 million shares, if capital can be raised.
The remaining shares will be transferred to the shareholders of NCL. g) If the
shareholders failed to list API on the American Stock Exchange before November
4, 2000, Mr. McKinney will resign from the Board.
In March 2000, the Company reacquired 30,000 shares of its common stock
issued on March 12, 1999, as settlement for cancellation of a service agreement
by a non-related party.
In February 2000, the Company closed its office in San Diego and
established a new office in Bellingham, Washington.
F-13
<PAGE>
DICKSON V. LEE
CERTIFIED PUBLIC ACCOUNTANTS, L.L.C.
--------------------------------------------------------------------------------
Main Address : 110 Wall Street, Suite 15C, New York, NY 10005 PMB 100
------------- Telephone: (212) 701-8587 Fax: (212) 701-8543
China Address : Suite 2503, United Plaza, Shenzhen, China
-------------- Telephone: (755) 271-0062 Fax: (755) 271-0389
--------------------------------------------------------------------------------
Accountants' Review Opinion
---------------------------
Asia Properties, Inc.
(a development stage company)
Stockholders and Board of Directors
We have made a review of the consolidated balance sheets of Asia Properties,
Inc. as of March 31, 2000 and 1999, which is the end of the first quarter of the
2000 and 1999 fiscal years, and the related consolidated statements of
operations, consolidated statement of changes in stockholders' equity, and
consolidated statement of cash flows for the three-month periods then ended, in
accordance with standards established by the American Institute of Certified
Public Accountants. These consolidated interim financial statements are the
responsibility of the Company management.
A review of interim financial information consists principally of obtaining an
understanding of the system for the preparation of interim financial
information, applying analytical procedures to financial data, and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an examination in accordance with U.S.
generally accepted auditing standards, the objective of which is the expression
of an opinion regarding the financial statements taken as a whole. Accordingly,
we do not express such an opinion.
On the basis of our review, we are not aware of any material modifications that
should be made to the accompanying financial statements for them to be in
conformity with U.S. generally accepted accounting principles.
/s/ DICKSON V. LEE, CERTIFIED PUBLIC ACCOUNTANTS, L.L.C.
Dickson V. Lee, Certified Public Accountants, L.L.C.
New York, New York
July 7, 2000
F-14
<PAGE>
<TABLE>
<CAPTION>
Unaudited
Asia Properties, Inc.
(a development stage company)
Unaudited Consolidated Balance Sheets
-------------------------------------
For The First Quarter Ended March 31
2000 1999
---------- ----------
Assets US$ US$
<S> <C> <C>
Current assets
Cash and cash equivalents 40,448 301,824
Deposit and other advances 8,722 7,710
---------- ----------
Total current assets 49,170 309,534
Fixed Assets
Machine & others 20,238 16,511
Less: accumulated depreciation (3,130) (950)
---------- ----------
Other Assets 17,108 15,561
Investment in BREF 27,000 27,000
---------- ----------
Total assets $ 93,278 $ 352,095
========== ==========
Liabilities & stockholders' equity
Current liabilities
Accounts payable 120,807 -
Other payable 857 20,189
---------- ----------
Total current liabilities 121,664 20,189
Total liabilities 121,664 20,189
Stockholders' equity
Common stock, par value US $0.001 5,921 5,881
Authorized shares - 50,000,000, Issued and outstanding
shares - 5,921,434
Paid in capital 870,225 731,719
Accumulated deficit (904,532) (405,694)
---------- ----------
Total stockholders' equity (28,386) 331,906
---------- ----------
Total liabilities and stockholders' equity $ 93,278 $ 352,095
========== ==========
</TABLE>
The accompanying notes form an integral part of these unaudited consolidated
financial statements.
F-15
<PAGE>
<TABLE>
<CAPTION>
Unaudited
Asia Properties, Inc.
(a development stage company)
Unaudited Consolidated Statements of Operations
-----------------------------------------------
For The First Quarter Ended March 31
Accumulative
amount from
2000 1999 inception *
---------- ---------- -------------
<S> <C> <C> <C>
US $ US $ US $
Income -- -- --
General & administration expenses 55,945 220,978 910,217
---------- ---------- -------------
Operating loss (55,945) (220,978) (910,217)
Financial income/(expense) - 1,631 (613)
Other income/(expenses) - 1,286 6,298
---------- ---------- -------------
Net income/(loss) (55,945) (218,061) (904,532)
========== ========== =============
Weighted average number of common shares
- basic and diluted 5,921,434 5,880,600 5,921,434
Net loss Per Share
-basic ($0.01) ($0.04) ($0.15)
-diluted ($0.01) ($0.04) ($0.15)
<FN>
* The accumulative amount represents the activities from the inception on April
6, 1998 to March 31, 2000
The accompanying notes form an integral part of these unaudited consolidated
financial statements
</TABLE>
F-16
<PAGE>
<TABLE>
<CAPTION>
Unaudited
Asia Properties, Inc.
(a development stage company)
Unaudited Consolidated Statements of Changes in Stockholders' Equity
--------------------------------------------------------------------
For The First Quarter Ended March 31
Common
Stock Common Paid-up Accumulated Stockholders'
----------- --------
(Shares) Stock Amount Capital Deficit Equity
----------- ------------- -------- ------------ --------------
US$ US$ US$ US$
<S> <C> <C> <C> <C> <C>
Balance as of April 6, 1998 - - - - -
Shares issued 7,250,600 7,251 694,349 - 701,600
Share repurchased (1,400,000) (1,400) (58,600) - (60,000)
Net loss for the period - - - (187,633) (187,633)
----------- ------------- -------- ------------ --------------
Balance as of December 31, 1998 5,850,600 5,851 635,749 (187,633) 453,967
Shares issued 70,834 70 234,476 - 234,546
Net loss for the year - - - (660,954) (660,954)
----------- ------------- -------- ------------ --------------
Balance as of December 31, 1999 5,921,434 5,921 870,225 (848,587) 27,559
Net loss for the period - - - (55,945) (55,945)
----------- ------------- -------- ------------ --------------
Balance as of March 31, 2000 5,921,434 5,921 870,225 (904,532) (28,386)
=========== ============= ======== ============ ==============
</TABLE>
The accompanying notes form an integral part of these unaudited consolidated
financial statements.
F-17
<PAGE>
<TABLE>
<CAPTION>
Unaudited
Asia Properties, Inc.
(a development stage company)
Unaudited Consolidated Statements of Cash Flows
-----------------------------------------------
For The First Quarter Ended March 31
Accumulative
amount from
2000 1999 inception
-------- --------- -------------
US $ US $ US $
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net loss (55,945) (218,061) (904,532)
Adjustments to reconcile net income to cash provided by operating
activities:
Depreciation expenses 545 1,098 3,129
Increase in deposits & other advance (1,213) (1,932) (8,722)
Decrease in other deferred assets 12,507 - -
Increase/(Decrease) in accounts payable 50,801 (19,382) 120,807
(Decrease)/Increase in other payable (226) 20,189 857
-------- --------- -------------
Net cash provided by operating activities 6,469 (218,088) (788,461)
Cash Flows from Investing Activities:
Purchase of property, plant and machinery - - (20,238)
Increase in investment - - (27,000)
-------- --------- -------------
Net cash flows from investing activities - - (47,238)
Cash Flows from Financing Activities:
Issued shares - 96,000 876,147
-------- --------- -------------
Net cash flows from financing activities - 96,000 876,147
-------- --------- -------------
Net increase/(decrease) in cash and cash equivalent 6,469 (122,088) 40,448
Cash and cash equivalents at beginning of the period (January 1) 33,979 423,912 --
-------- --------- -------------
Cash and cash equivalents at end of the period (March 31) 40,448 301,824 40,448
======== ========= =============
<FN>
* The accumulative amount represents the activities from the inception on April 6, 1998 to March 31,
2000.
The accompanying notes form an integral part of these unaudited consolidated financial statements.
</TABLE>
F-18
<PAGE>
Asia Properties, Inc. (a development stage company) Unaudited
Notes to the consolidated interim financial statements - March 31, 2000
1) General
-------
Asia Properties, Inc. (the "Company") was incorporated in Nevada on
April 6, 1998. The Company, with a place of business located office in
Bellingham, Washington State was formed to invest in Asian real
estate, primarily through its ownership of the Bangkok Real Estate
Fund (See Note 3). A representative office was also established in
Bangkok Thailand on November 17, 1998, to carry out research of the
Asian real estate market. The Company has a 100% owned subsidiary -
Asia Properties, International (Thailand) Ltd., located at 86/14
Sukhumvit 31, Bangkok 10110, Thailand, which was registered in
Thailand on August 2, 1999, to conduct the Company's operations in
Thailand.
On January 22, 1999, trading of the Company's common stocks commenced
in the U. S. Over-the-counter market and the stock was quoted in the
pink sheets of the National Quotation Bureau (Symbol "ASPZ") with
inactive trading.
The Company devotes most of its activities toward establishing a new
business, in which principal operations have not commenced or have not
generated an income. In accordance with Statement of Financial
Accounting Standards (SFAB) No.7, Accounting and Reporting by
Development Stage Enterprises, the company is classified as a
development stage company.
The Company signed a Share Purchase and Sales Agreement on February 4,
2000, to acquire NCL. Under the agreement, the Company is to acquire
NCL with the exception of NCL's Vietnam operations, and a subsidiary
company; Keltic Ltd, via a share swap, so that NCL is to become a 100%
subsidiary of the Company. The Company is to issue to the shareholders
of NCL 4.6 million common shares valued at $4.40 per share. The
agreement provides that the closing of the purchase and sale of those
common shares must occur before August 2, 2000. The principal real
estate properties in which NCL holds an interest include gated
community developments near Bangkok in Thailand and Phnom Penh in
Cambodia. The agreement includes the following principal terms: We
must restructure our board of directors upon the closing of the
transaction so that our directors will be Daniel S. McKinney, Nicholas
St. Johnston, David Diehl, David Roberts and two appointees of
Northbridge Communities Limited. We must use our best efforts to raise
U.S. $15 million in cash by September 11, 2000. $3.5 million of our
capital shares to be held by the following persons after the
reincorporation in the amounts indicated below have been transferred
into an escrow account: $ Daniel S. McKinney - 800,000 shares;
Nicholas St. Johnston - 900,000 shares; Crestview Associates Limited -
700,000 shares; Lim Gaik Im - 600,000 shares; and Milliard Limited -
500,000 shares. In the event the Company is able to raise U.S. $15
million in cash by September 11, 2000, the 3.5 million capital shares
in the escrow account will be surrendered back to Mr. McKinney, Mr.
St. Johnston, Ms. Gaik Im, Crestview Associates Limited and Milliard
Limited. In the event the Company is unable to raise U.S. $15 million
by September 11, 2000, 1.75 million capital shares in the escrow
account will be transferred to the former shareholders of Northbridge
Communities Limited and Mr. McKinney will be required to resign from
our Board of Directors. During a period from September 12, 2000 until
February 4, 2001 the shareholders who delivered the 3.5 million shares
into the escrow account will be entitled to clawback their
proportionate interest of 1.75 million of those shares if we raise
additional capital. Those shares not clawbacked will be transferred to
the former shareholders of Northbridge Communities Limited. The number
of shares that may be clawbacked will be equal to the product of: the
amount of capital raised divided by U.S. $15 million multiplied by
1.75 million. If we fail to list our capital shares on the American
Stock Exchange before November 4, 2000, Mr. McKinney will be required
to resign from our Board of Directors. The Company management believes
that the merger of the two companies is essential for API's future
growth. Therefore Company is working at full speed to raise fund, to
list Company in the American Stock Exchange and conclude the merger of
the two entities.
Management is confident that the financial statements include all
adjustments necessary in order to make them not misleading.
F-19
<PAGE>
Asia Properties, Inc. (a development stage company) Unaudited
Notes to the consolidated interim financial statements - March 31, 2000
2) Going Concern
--------------
The Company has been able to raise capital from the investment
community. However, the Company, in a development stage, has not been
able to generate any operating income or profit. The Company has an
accumulative loss of $904,532 from its inception on April 6, 1998. As
a result of the continuing losses, the Company's stockholder's equity
balance is in a negative amount of $28,386. The company's ability to
continue its business operations is dependent on the continuing cash
inflow from new investors, and/or capital commitment from its existing
shareholders. As the company has traded its shares on the U. S.
over-the-counter market (see Note 1) management has held discussions
with potential stock-brokers and investors to raise additional funds
and identify potential companies in the real estate industry as merger
candidates. A Share Purchase and Sale Agreement has been signed with
Northbridge Communities Limited (NCL), a Thai Company (see Note 1). As
of March 31, 2000, the final conclusion of the Agreement has not be
reached. The interim financial statements as of March 31, 2000 do not
include any adjustments that might result from the outcome of this
uncertainty.
3) Summary of Significant Accounting Policies
----------------------------------------------
A summary of the Company's significant accounting policies applied in
the preparation of the accompanying financial statements follows.
a) The Calendar Year Ending December, 31
The Company's calendar year ends on December 31 of the year. This
fiscal year policy has been adopted consistently in the past years.
b) Basis of Consolidation
Subsidiaries which the company has no significant influence but has
ownership over 20% but below 50% is included in the Company's
financial statement using the cost method. Subsidiaries which the
Company has ownership over 50% are consolidated with the Company's
financial statements as per APB opinion No.18.
The consolidated financial statements include the accounts of the
Company, its Thailand subsidiary and representative office (See Note
1, General). All material inter-company balances and transactions, if
any, have been eliminated in consolidation.
c) Use of Estimates
The preparation of financial statements in conformity with American
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the balance sheet and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
d) Depreciation
Fixed assets are depreciated on a straight line basis over estimated
useful lives, ranging from three to seven years.
e) Income Taxes
Income taxes are provided for the tax effects of transactions reported
in the financial statements and consist of taxes currently due plus
deferred taxes related to differences between the basis of fixed
assets for financial and income tax reporting. Deferred taxes also are
recognized for any operating losses that are available to offset
future taxable income and any tax credits that are available to offset
future federal and state income taxes.
F-20
<PAGE>
Asia Properties, Inc. (a development stage company) Unaudited
Notes to the consolidated interim financial statements - March 31, 2000
Deferred tax assets and liabilities represent the future tax return
consequences of those differences, which will either be taxable or
deductible when the assets and liabilities are recovered or settled.
f) Cash and Cash Equivalents
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.
g) Foreign Currency Translation
The Company prepares its financial statements using United States
dollars as the reporting currency. However, its overseas operations,
including operations of the Thailand subsidiary and the Company's
Thailand representative office, are conducted in Thailand currency -
Baht (the functional currency). Transactions in Baht are translated
into United States dollars (the reporting currency) for consolidation.
In accordance with SFAS No. 52, Foreign Currency Translations, the
translation of financial statement into United States dollars is
performed for balance sheet accounts using the closing exchange rate
in effect at the balance sheet dates, and for revenue and expense
accounts using an average exchange rate during each reporting period.
The gain or (loss) resulting from translation are included in the
stockholders' equity separately as cumulative translation adjustments.
Gains and losses resulting from transaction conducted in a currency
other than the functional currency are recorded in current operations.
Currently, the exchange rate of Baht to United States dollars is
stable and the Company's management does not expect any major
fluctuation in the currency rate which would affect the comprehensive
income result of exchange gains and losses (see Note 14). There is no
comprehensive income arising from foreign currency exchange gains and
losses in the Company's statement of operations.
h) Foreign Corrupt Practices Act
The Company is subject to the U.S. Foreign Corrupt Practices Act of
1977, which generally prohibits U.S. companies from engaging in
bribery or making other prohibited payments to foreign officials for
the purpose of obtaining or retaining business. Foreign companies,
including some that may compete with the Company, are not subject to
these prohibitions. During the audit, no violation of the Foreign
Corrupt Practices Act by the Company was noted.
4) BREF Investments
-----------------
On July 17, 1998, the Company took assignment of the right to
establish the Bangkok Real Estate Fund (BREF from 3 parties who were
the founders for the Company. In addition, the Company paid $27,000 to
BREF for operational expenses. Total monetary value of the BREF is not
material about $30,000 (i.e. $3,000 plus $27,000 paid to cover
expenses in the development and registration of BREF) However, the
Company management believes that business value created though the
initial approval of BREF may exceed the $30,000 cost invested. The
registration of the fund was subject to a minimum investment of 500
million Baht (approximately US$ 13.5 million) by the Company and 9
other minority unit holders. This is required since BREF must have at
least 10 unit holders under the rules established by the Securities
and Exchange Commission of Thailand (Thai SEC).
The formation of BREF was approved by the Thai SEC on July 16, 1998,
subject to the funding as described above. BREF was to be established
as a private placement closed-end fund subject to the regulations and
requirements established by the Thai SEC.) in exchange for 3,000,000
shares of its common stock valued at $0.01 per share and $30,000
F-21
<PAGE>
Asia Properties, Inc. (a development stage company) Unaudited
Notes to the consolidated interim financial statements - March 31, 2000
On July 17, 1999, the Company's right to establish BREF expired due to its
requirement to become funded within one year of its formation. In anticipation
of this, the Company applied for and received an approval to establish a new
fund, Bangkok RE Fund (BREF2), with rights and requirements similar to those of
BREF. The formation of BREF2 was approved on July 15, 1999 by the Thai SEC. The
registration of BREF2 is also subject to an investment of 500 million Baht
(approximately US$ 13.5 million), which must be completed by July 15, 2000.
5) Stockholders' Equity
---------------------
The following shares are issued based on the fair value method:
On June 12, 1998, the Company issued 3,200,000 common shares at par
value $0.001 each for cash of $3,200, to the three founders of the
Company for service rendered
On June 12, 1998, the Company issued 20,000 common shares at per value
$0.001 each for cash of $200, to related parties for services
rendered.
On June 14, 1998, the Company issued 700,000 common shares at $ 0.01
per share for cash of $7,000, to a new shareholder of the company.
On July 17, 1998, the Company issued 3,000,000 common shares at par
value $ 0.01 each (equivalent to $30,000) and $3,000 from the founders
for the Company to related parties in exchange for the assignment of
the right to establish BREF (see Note 4).
In September 1998, through a Private Placement Offering Memorandum
dated June 17, 1998, the Company issued 326,950 common shares at $
0.001 par value for at a price, before commission and expenses, of
$2.00 per share for $653,900 cash.
During October and November 1998, the Company issued an additional
3,650 common shares at par value $ 0.001 each pursuant to the Private
Placement Offering Memorandum dated June 17, 1998, at a price $2.00
per share for $7,300 cash.
On November 16, 1998, the Company repurchased 1,400,000 shares of its
common stock at approximately $0.04 per share for $60,000 and restored
those shares to the status of authorized and unissued shares. The
purchase price was made with a founder who elected to pursue other
business interests.
On March 12, 1999, the Company issued 30,000 common shares at par
value $0.001 each, at a price $3.2 per share for $96,000 to a
consultant as a payment for services.
On May 6, 1999, the Company issued 500 common shares at per value $
0.001 each, at a price $3.2 per share for $1,600 to an employee as a
performance award.
On June 22, 1999, the Company issued 6,500 common shares at per value
$ 0.001 each, at a price $3.4 per share for $22,100 to a consultant as
a payment for services.
On July 5, 1999, the Company issued 33,334 common shares at per value
$ 0.001 each, at a price $3.4 per share for $113,147 to an employee as
a performance award.
On July 5, 1999, the Company issued 500 common shares at per value $
0.001 each, at a price $3.4 per share for $1,700 to an employee as a
performance award.
F-22
<PAGE>
Asia Properties, Inc. (a development stage company) Unaudited
Notes to the consolidated interim financial statements - March 31, 2000
In March 2000, the Company reacquired 30,000 shares of its common
stock issued on March 12, 1999, as settlement for cancellation of a
service agreement by a non-related party. (This transaction has been
excluded from this interim financial statements.)
6) Stock Options
--------------
Using the fair value method, and using the average market price as a
reference. On June 22, 1999, the Company granted options to purchase
5,000 shares of its common stock, at a price of $5.00 per share, to
each of 3 shareholders as an award. These options expire as follows:
10,000 shares expired on December 31, 1999, and 5,000 shares expire on
June 21, 2000. The Board of Directors plans to continue to grant stock
option awards in the future to reward its management, directors and
employees who make exceptional contributions to the Company
The Company applies APB Opinion No. 25, Accounting for Stock Issued to
Employees, and related Interpretations in accounting for its stock
options. There has been no compensation cost charged against income
for the options for 8 months of 1998, 12 months of 1999 and 3 months
of 2000. Had compensation cost for the Company's stock options been
determined based on their fair value at the grant dates consistent
with the method of SFAS No. 123, Accounting for Stock-Based
Compensation, the Company's consolidated net loss would not have
differed materially from the amount reported.
7) Income Taxes
-------------
As of March 31, 2000, the Company had a deferred tax asset for the
deductible temporary differences relating to net operating loss carry
forwards. Because management was unable to determine if, more likely
than not, the Company will realize the deferred tax asset related to
the net operating loss carry forwards, a 100% valuation allowance was
provided for these deferred tax assets as of March 31, 2000.
March 31, 2000
-------------------------------------------------
Deferred Tax Asset $ 291,000
Less: Valuation Allowance (291,000)
-------------------------------------------------
Net $ -
-------------------------------------------------
At March 31, 2000, the Company had federal and state net operating
loss (NOL) carryforwards of approximately $716,899. These NOL's
benefits will expire in 2003.
8) Year 2000 Issue
-----------------
The Company has implemented a year 2000 (Y2K) program aimed at
ensuring that its computer system and software will function properly
beyond 1999. As all of its computers were purchased in 1998 and 1999,
the equipment is considered to be Year 2000 compliant. Due to the
nature of the Company's business, it does not have any other machinery
or equipment subject to the Year 2000 issue. The possible Y2K impact
may not be significant to the Company.
Because the Company will continue to upgrade its computer systems and
software, it has not allocated additional resources or attributed
additional costs to Year 2000 compliance. The Company will continue to
assess and test newly purchased machinery and computer-related
hardware and software to ensure such items comply with Year 2000.
F-23
<PAGE>
Asia Properties, Inc. (a development stage company) Unaudited
Notes to the consolidated interim financial statements - March 31, 2000
9) Commitment and Contingencies
------------------------------
Except the Company may continue its operational loss in the near
future unless substantial income is generated (See Note 1). No other
material commitments and contingencies were noted as of March 31,
2000.
10) Inflation
---------
Significant inflation may have a significant impact on the real estate
business. Significant inflation has not occurred in Thailand in recent
years. It is management's belief that significant inflation will not
occur in the near future (See Note 14).
11) Related Party Transactions
----------------------------
The Company has some office facilities which are shared by its
subsidiaries. The financial effects of the shared facilities are not
material. All other related party transactions are reviewed and
disclosed when material, in accordance with SFAS No. 57, Related Party
Disclosures.
12) Operating Risks
----------------
The Company's planned operations are to be conducted in Thailand and
southeast Asia. Accordingly, the business, financial condition and
results of operations may be influenced by the political, economic and
legal environment in Thailand, and Southeast Asia. The Company's
operations are subject to special considerations and risks not
typically associated with companies in North America. In addition, the
possible deterioration of any or all of the strategic relationships
between the Company and Northbridge Communities Limited may have an
adverse effect on the operations of the Company.
13) Retirement Plan
----------------
The Company's employees in Thailand and America are all hired on
contractual basis, with no retirement provisions. Therefore, the
Company has no obligations for pension liabilities. In addition, the
Company has not adopted post-retirement or post-employment benefit
plans.
14) Real Estate Prices Fluctuation
---------------------------------
The Company intends to acquire and develop real estate projects in
Thailand and Southeast Asia. Real estate values are inflation
sensitive, and fluctuate from time to time, depending on the different
life cycles of the economies of Southeast Asia. It is management's
belief that the real estate values in Southeast Asia are currently
low. Increasing values of real estate will impact the company's
operations.
15) Reliance on Key Personnel
----------------------------
Most key personnel have been with the Company for over one year, and
the operation of the Company, in a development stage, is dependent on
the services of key management. The possible loss of their services or
the inability to attract qualified personnel could have a material
adverse effect on the Company.
F-24
<PAGE>
Asia Properties, Inc. (a development stage company) Unaudited
Notes to the consolidated interim financial statements - March 31, 2000
16) Impact of Recently Issued Accounting Standards
---------------------------------------------------
SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, was issued in June 1998 and is scheduled to become
effective for all fiscal quarters for all fiscal years beginning after
June 15, 2000. SFAS No. 133 established accounting and reporting
standards for derivative financial instruments and for hedging
activities. The Company does not currently engage in any activities
that would be covered by SFAS No. 133.
F-25
<PAGE>
DICKSON V. LEE
CERTIFIED PUBLIC ACCOUNTANT, L.L.C.
Member of the SEC Practice Section
--------------------------------------------------------------------------------
Main Address : 110 East 59th Street, 6th Floor, New York, New York 10022
------------- Telephone: (212) 909-0397 Fax: (212) 909-0322
China Address : Suite 2503, United Plaza, Shenzhen, China
-------------- Telephone: (755) 271-0062 Fax: (755) 271-0389
--------------------------------------------------------------------------------
Independent Auditor Report
To The Board of Directors of
Northbridge Communities Limited
(a Thailand company)
We have audited the accompanying consolidated balance sheets of Northbridge
Communities Limited as of December 31, 1999, 1998 and 1997, and the related
consolidated statements of operations changes in stockholders' equity and cash
flows for the year then ended. These consolidated financial statements are the
responsibility of the Company management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with U.S. generally accepted auditing
standards. These 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 examination, 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 audits provide 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 Northbridge
Communities Limited as of December 31, 1999, 1998 and 1997 and the results of
its operations, changes in shareholders' equity and cash flows for the year then
ended in conformity with U.S. generally accepted accounting principles.
/S/ DICKSON V. LEE, CERTIFIED PUBLIC ACCOUNTANT, LLC
Dickson V. Lee, Certified Public Accountant, LLC
New York, New York
April 24, 2000
F-26
<PAGE>
<TABLE>
<CAPTION>
NORTHBRIDGE COMMUNITIES LIMITED
(INCORPORATED IN THAILAND)
CONSOLIDATED BALANCE SHEET
--------------------------
FOR THE YEARS ENDED DECEMBER 31
1999 1998 1997
----------- ----------- -----------
Assets US$ US$ US$
<S> <C> <C> <C>
Current assets
Cash and cash equivalents 100,966 40,540 94,470
Advance payment and other receivable 10,622 6,254 398,100
Deposits and prepayment 63,992 42,895 95,191
Inventories less allowance 3,226 2,968 2,335
Due from a holding company 7,530 708,501 708,501
Due from associated companies and related companies 132,077 338,141 61,104
----------- ----------- -----------
Total current assets 318,413 1,139,299 1,359,701
#133 Advances to a related company (Note 3) - 1,537,655 1,220,177
Loans to associate company (Note 4) 632,802 461,067 730,264
Fixed assets (Note 6)
Land and buildings, net 15,127,252 15,576,671 12,764,280
Equipment, furniture and fixture, net 450,899 617,955 402,328
----------- ----------- -----------
15,578,151 16,194,626 13,166,608
Construction in progress (Note 7) 1,280,353 1,280,353 1,171,167
Advance payment for land 126,392 126,392 331,081
Investments (Note 5) 65,200 593,243 593,243
----------- ----------- -----------
Total assets 18,001,311 21,332,635 18,572,241
=========== =========== ===========
Liabilities & stockholders' equity
Current liabilities
Accounts payable (Note 8) 1,448,496 2,112,275 112,286
Current portion of obligation under lease purchase agreements - 2,915 2,915
Rental income received in advance (Note 9) 1,355,836 1,823,895 1,415,210
Accrued interest payable 835,860 956,217 385,265
Other payable 55,091 40,849 41,534
Due to related companies 405,401 475,793 161,979
----------- ----------- -----------
Total current liabilities 4,100,684 5,411,944 2,119,189
Obligation under lease purchase agreements - 972 3,887
Loans from related companies (Note 10) 8,919,128 7,934,282 5,899,684
----------- ----------- -----------
Total liabilities 13,019,812 13,347,198 8,022,760
Minority interests (93,114) 8,528 122,390
Stockholders' equity
Common stock, par value U.S. $2.7 Authorized shares -
4,000,000, Issued and outstanding shares - 4,000,000 (Note 11) 10,810,811 10,810,811 10,810,811
Accumulated deficit (7,900,445) (5,046,643) (2,621,061)
Translation adjustment 2,164,247 2,212,741 2,237,341
----------- ----------- -----------
Total stockholders' equity 5,074,613 7,976,909 10,427,091
----------- ----------- -----------
Total liabilities and stockholders' equity 18,001,311 21,332,635 18,572,241
=========== =========== ===========
</TABLE>
The accompanying notes form an integral part of these consolidated financial
statements.
F-27
<PAGE>
<TABLE>
<CAPTION>
NORTHBRIDGE COMMUNITIES LIMITED
(INCORPORATED IN THAILAND)
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
FOR THE YEARS ENDED DECEMBER 31
1999 1998 1997
----------- ----------- -----------
US$ US$ US$
<S> <C> <C> <C>
Income (Note 13) 881,597 640,312 61,103
General & administration expenses 2,934,234 2,513,276 704,248
----------- ----------- -----------
Operating loss (2,052,637 (1,872,964) (643,145)
Other income and expenses
Interest income 52,394 58,682 78,459
Interest expenses (763,037) (737,333) (618,130)
Gains on sales of securities 2,118,243 - -
Write off the advance to joint venture (1,552,670) - -
Provision for diminution in value of investment (764,530) - -
----------- ----------- -----------
Net income/loss (2,962,237) (2,551,615) (1,182,816)
Other Comprehensive Income
Gains/(loss) from foreign currency transaction
(Note 2g) (41,701) (12,429) (150,738)
----------- ----------- -----------
Comprehensive loss before minority interests (3,003,938) (2,564,044) (1,333,554)
Minority interests 101,642 113,862 17,599
----------- ----------- -----------
Net comprehensive loss after minority interests (2,902,296) (2,450,182) (1,315,955)
=========== =========== ===========
Weighted average number of common shares - basic and diluted 4,000,000 4,000,000 4,000,000
Net Loss Per Share (Note 2h)
- basic ($0.73) ($0.61) ($0.33)
- diluted ($0.73) ($0.61) ($0.33)
</TABLE>
The accompanying notes form an integral part of these consolidated financial
statements.
F-28
<PAGE>
<TABLE>
<CAPTION>
NORTHBRIDGE COMMUNITIES LIMITED
(INCORPORATED IN THAILAND)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
----------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31
Common Cumulative
Common Stock Accumulated Translation Stockholders'
Stock Shares Amount Deficit Adjustment Equity
------------ ---------- ------------ ------------ --------------
US$ US$ US$ US$
<S> <C> <C> <C> <C> <C>
Balance as of December 31, 1996 4,000,000 10,810,811 (1,499,975) 2,432,210 11,743,046
Net loss for the year - - (1,182,816) - (1,182,816)
Translation adjustment - - - (150,738) (150,738)
Minority interest - - 61,730 (44,131) 17,599
------------ ---------- ------------ ------------ --------------
Balance as of December 31, 1997 4,000,000 10,810,811 (2,621,061) 2,237,341 10,427,091
Net loss for the year - - (2,551,615) - (2,551,615)
Translation adjustment - - - (12,429) (12,429)
Minority interest - - 126,033 (12,171) 113,862
------------ ---------- ------------ ------------ --------------
Balance as of December 31, 1998 4,000,000 10,810,811 (5,046,643) 2,212,741 7,976,909
Net loss for the year (2,962,237) - (2,962,237)
Translation adjustment - - - (41,701) (41,701)
Minority interest - - 108,435 (6,793) 101,642
------------ ---------- ------------ ------------ --------------
Balance as of December 31, 1999 4,000,000 10,810,811 (7,900,445) 2,164,247 5,074,613
============ ========== ============ ============ ==============
</TABLE>
The accompanying notes form an integral part of these consolidated financial
statements.
F-29
<PAGE>
<TABLE>
<CAPTION>
NORTHBRIDGE COMMUNITIES LIMITED
(INCORPORATED IN THAILAND)
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FOR THE YEAR ENDED DECEMBER 31
1999 1998 1997
----------- ----------- -----------
US$ US$ US$
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net loss (2,902,296) (2,450,182) (1,315,955)
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation expenses 565,372 496,576 133,211
Gain on disposal of assets (7,632) (1,817) -
#139 Gain on sales of securities (2,118,243) - -
Written off advance to joint venture 1,552,670 - -
Provision for diminution in value of investment (note 5) 764,530 - -
Minority interests (101,642) (113,862) (17,599)
(Increase)/Decrease in advance payment and other receivable (4,368) 391,846 (382,891)
(Increase)/Decrease in deposits and prepayment (21,097) 52,296 (64,455)
Increase in inventories (net) (258) (633) (2,335)
Decrease in due from a holding company 700,971 - 3,991,569
(Decrease)/Increase in accounts payable (663,779) 1,999,989 (159,247)
(Decrease)/Increase in rental income received in advance (468,059) 408,685 1,415,210
(Decrease)/Increase in other payable and charges (106,115) 570,267 394,493
----------- ----------- -----------
Net cash provided by operating activities
(2,809,946) 1,353,165 3,992,001
Cash Flows from Investing Activities:
Purchase of property & equipment (212,486) (3,640,882) (8,188,087)
#139 Purchase of securities (405,405) - -
#139 Proceeds from sales of securities 2,523,648 - -
Proceeds from sales of plant and machinery 271,221 118,105 -
Increase in construction in progress - (109,186) (1,171,167)
Decrease/(Increase) in advance payment for land - 204,689 (331,081)
(Increase)/Decrease in due from associated companies and related companies 206,064 (277,037) (50,568)
(Increase)/Decrease in advance to a related company (15,015) (317,478) (754,139)
(Increase)/Decrease in loan to associated company (171,735) 269,197 2,105,037
#139 Increase in investment in International School Eastern Seaboard
Limited (note 5) (236,487) - (325,675)
----------- ----------- -----------
Net cash flows from investing activities
(1,959,805) (3,752,592) (8,715,680)
Cash Flows from Financing Activities:
Decrease/(Increase) in due to related companies (70,392) 313,814 92,879
Increase in loan from related company 984,846 2,034,598 5,396,239
Repayment of obligation under lease purchase agreements (3,887) (2,915) (64,581)
Repayment of convertible loan - - (675,676)
----------- ----------- -----------
F-30
<PAGE>
Net cash flows from financing activities
910,567 2,345,497 4,748,861
Net (decrease)/increase in cash and cash equivalent 60,426 (53,930) 25,182
Cash and cash equivalents at beginning of the year 40,540 94,470 69,288
----------- ----------- -----------
Cash and cash equivalents at end of the year 100,966 40,540 94,470
=========== =========== ===========
</TABLE>
The accompanying notes form an integral part of these consolidated financial
statements.
F-31
<PAGE>
Northbridge Communities Limited (a Thailand Company)
Notes to financial statements - December 31, 1997, 1998, and 1999
1) General
-------
Northbridge Communities Limited (the Company) was incorporated in
Thailand on September 16, 1994. The Company's current place of
business is located at TISCO Tower, 7th floor, 48 North Sathorn Road,
Bangkok 10500, Thailand.
As Southeast Asia has started its economic development with increasing
levels of foreign investment, the Company's business is to develop
(English speaking) school-based residential real estate properties in
Southeast Asian cities.
The Company has constructed 14 single houses (10 houses are completed
and 4 are approximately 90% completed), on 12 lots of land located
inside Burapha Golf Club (the Golf Club Estate) in Thailand, and
leases 10 of the houses to General Motors (Thailand) Ltd. (the GM
House Project) for its expatriate families, for leases expiring in the
first half of 2003.
The Company has a 45% investment interest in Palanamai Limited
(Thailand), which owns 7 single homes and 16 town houses on 1.6
hectares (approximately 3.95 acres) of land inside the Golf Club
Estate in Thailand (See Note 5e).
It has a 51% beneficial ownership of 58 hectares (equivalent to
approximately 143 acres) of land located in Phnom Penh, Cambodia. Some
of the lands were used to build Northbridge International School of
Cambodia (NISC), an international school.
The Company has developed and now operates two English speaking
international schools. The International School of Eastern Seaboard
Ltd. (ISE) (from pre-kindergarten to Grade 12), is located at the
eastern seaboard of Thailand (between Bangkok and Pattaya), and is 25%
owned by the Company. ISE is accredited by the Western Association of
Schools and Colleges (WASC), based in California. The other school;
NISC (from pre-kindergarten to Grade 10), located in Phnom Penh of
Cambodia, is controlled by the Company via its 90% owned subsidiary -
Northbridge KC Development Co., Ltd. a Cambodia company. NISC is a
"Full Candidate for Accreditation" by WASC. See a further discussion
of ISE at Note 5(a).
The GM House Project, Palanamai and ISE are all located inside the
Golf Club Estate.
2) Summary of Significant Accounting Policies and Practices
--------------------------------------------------------------
The company is a Thailand company. Its purpose is to develop
school-based residential communities in Southeast Asia. Its
significant accounting policies and practices are as follows:
a) Calendar Year Ending December 31
The Company's fiscal year ends on June 30 of the following year, in
line with the school operations in Thailand. However, for its US
reporting purposes the Company has elected to have the books converted
to December 31 as the twelve-month year end date. The conversion has
been consistently applied to both 1997, 1998 and 1999.
b) Basis of Consolidation
The consolidated financial statements include all accounts of the
Company and its subsidiaries (see Note 1, General). All material
inter-company balances and transactions, if any, have been eliminated
on consolidation.(See Note 2j)
F-32
<PAGE>
Northbridge Communities Limited (a Thailand Company)
Notes to financial statements - December 31, 1997, 1998, and 1999
c) #124 Revenue Recognition
There are two types of revenue transactions:
1) Rental income which is recognized over the period covered by the
lease agreement on a straight line basis. The Company leases its real
estate property (houses) located at the Burapha Golf Club in Thailand
to General Motors (Thailand) Ltd. on a long term basis. The leases
expires in 2003.
2) School income which is recognized when services are rendered.
School income mainly represents the tuition fee income earned from
Northbridge International School Cambodia ("NISC")which is controlled
by the Company via its 90% owned subsidiary, Northbridge KC
Development Co., Ltd.
d) Loans versus advances
The Company's policies stipulate that an advance is money lent with no
interest, and a loan bears interest charges.
e) Investments
#127 Investments where the Company owns less than 50% of the voting
common shares but is unable to exert significant influence over the
financial and operating policy of the invested entity. These
investments are included in the consolidated financial statement under
the cost method. They are not reported, using the equity method. #130
When an impairment which is "Other than temporary" declines, the loss
in value of investments is recognized in the Company's financial
statements. Hence, such investments are stated at cost less permanent
decline in value, and all losses are recognized during the period
where decline incurred based on a conservative basis. (see Note 5c)
#128 The 45% investment interest in Palanamai Limited is stated at
cost less a provision for diminution in value which other than
temporary in the financial statement. (see Note 5c) Per the
management, Palanamai Limited is presently controlled by there (3)
other groups of shareholders; APK Associates Limited, Mr Darrell
Sheldon and Kahabodee Development Limited, who jointly own 54.9% of
the shares. Since the Company management believes that it has no
significant influence over Palanamai, the cost method is used.
The cost of Palanamai Limited is recorded as follows:
Historical cost $267,568
Less: Provision for permanent diminution ($241,560)
----------
Cost recorded in Investment account $26,008
==========
#129 The Company has a 51% beneficial ownership of 58 hectares of land
in Cambodia. The ownership is via its 51% owned subsidiary- Khaou
Chuly Land Company Limited, which owns 100% of the 58 hectares of the
Land. The cost of this land is included in the fixed assets in the
consolidated balance sheets. (See Note 6a)
#126 The Company purchased 1,500,000 preferred shares and 1,500,000
warrants of TISCO Financial Public Company Limited, a public listed
and traded company in the Stock Exchange of Thailand from Asian
Frontier Holdings Limited at the price of Thai Baht 1,500,000 on May
12, 1999. On June 25, 1999, the Company sold all of these securities
to Asian Frontier Holdings Limited. The components of gains on sales
of securities:-
F-33
<PAGE>
Northbridge Communities Limited (a Thailand Company)
Notes to financial statements - December 31, 1997, 1998, and 1999
Selling price (as per the closing price as of June 24, 1999 on the Stock
--------------------------------------------------------------------------------
Exchange of Thailand) of the securities:
---------------------------------------------
<TABLE>
<CAPTION>
No. of preferred Unit price of the sales of Total price
Description share/ warrants shares/warrants (Baht) (Baht)
---------------- ---------------- --------------------------- ------------
<S> <C> <C> <C>
Preferred shares 1,500,000 36 54,000,000
Warrants 1,500,000 26.25 39,375,000
------------
Total: 93,375,000
============
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Selling price of the securities Baht 93,375,000
Cost of the securities (Baht 15,000,000)
-----------------
Gains on sales of securities Baht 78,375,000 (or equivalent to US$2,118,243)
=================
</TABLE>
As the Company is not in a business of investment of stock, preferred
shares and warrants. The management believes that purchase and sales
of securities are with risk. Therefore, the Company will not engage in
speculate of securities in the near future.
#139 The decrease in investment account is mainly due to the provision
for diminution in value of investment amounting to US$764,530 provided
for this year. (see Note 5)
f) Fixed Assets
Fixed assets are stated at cost less accumulated depreciation.
Depreciation is provided for on all fixed assets using the
straight-line basis over the estimated useful lives as follows:-
Building 20 years
Furniture and fixtures 5 years
Office equipment and others 5 years
g) Foreign Currency Transactions
The Company records its books in Thailand currency (Baht) (the
functional currency) and translate Baht into U.S. dollars (the
reporting currency) for U.S. reporting and consolidation purposes. In
accordance with SFAS No. 52, Foreign Currency Translations, the
translation of financial statement into United States dollars is
performed for balance sheet accounts using the closing exchange rate
in effect at the balance sheet dates, and for revenue and expense
accounts using an average exchange rate during each reporting period.
The gain or (loss) resulting from translation are included in the
stockholders' equity separately as cumulative translation adjustments.
Gains and losses resulting from transaction conducted in a currency
other than the functional currency are recorded in current Aggregate
gains (losses) from foreign currency transactions included in the
results of operations for the years ended December 31, 1997, 1998 and
1999 were approximately ($162,000), $76,000 and $32,000.
The Baht devaluated from its high of 25 Baht to a U.S. dollar to a low
of 55 Baht to a U.S. dollar in first quarter of 1998 and fluctuated as
the Asian financial crisis started in Thailand at the end of 1997. In
1998, the Baht exchange rate recovered to about 40 Baht to a U.S.
dollar and became stable at about 37 Baht to a U.S. dollar in the
latter part of 1998 and 1999. Currently, the same exchange rate of
approximately 37 Baht to a U.S. dollar remains. As the Asian financial
crisis has started its recovery, the Company's management does not
expect any major fluctuation of the exchange rate. However, if Baht
exchange rate becomes volatile again, it would affect the operation's
and income result of exchange gains and losses (see Note 14).
F-34
<PAGE>
Northbridge Communities Limited (a Thailand Company)
Notes to financial statements - December 31, 1997, 1998, and 1999
For the Company's Cambodian operations, foreigners are required to
transact business using U.S. dollars in Cambodia. The Company's
operations in Cambodia are transacted in U.S. dollars (the functional
currency for foreigners) and recorded in Baht on the Company's books
to comply with Thailand laws. For the U.S. reporting purposes, the
Company's foreign exchange translations computations are not material.
h) Earnings (Loss) Per Share
Earnings (loss) per share is computed by dividing the net profit
(loss) before extraordinary items, and the net profit (loss) for the
period by the weighted average number of paid-up shares in issue
during the year. Earnings (loss) per share includes both the basic and
diluted computation.
i) Subsidiaries
Subsidiaries are enterprises in which the company owns more than 50%
of voting common shares, directly or indirectly. The Company's
investment in the subsidiaries in which the Company owns over 50% of
voting common shares and with significant control over the operations
are consolidated, in compliance with Accounting Research Bulletin
(ARB) #51, as amended by SFAS No. 94.
j) Related Party Transactions
The Company has some facilities which are shared by its affiliated
companies. The financial effects of the shared facilities are not
material. All other related party transactions are reviewed and
disclosed when material, in accordance with SFAS No.57. (See Notes 3,
8 & 10)
k) Restrictions on Foreign Ownership of Land in Thailand and Cambodia
According to the laws of Thailand and Cambodia, foreigners may not
normally own land, except in special circumstances. However, the
shareholding structure and shareholders' agreements of the Company
allow the foreign shareholders to beneficially own and control a
company which can own land in Thailand and Cambodia. This practice is
supported by opinions of the "in-country" legal advisors / attorneys,
who are legal professionals educated either in the U.S., UK, Australia
and hold legal titles such as J.D. (in the U.S.), LLM, LLB (in the
Commonwealth System) and have resided in Asia for many years.
Therefore, the Company beneficially owns and controls its land
investment in Thailand and Cambodia.
l) Inflation
Due to the nature of real estate development business, inflation can
be critical for the Company's operations. As the economy in Southeast
Asia has started to recover from the 1997 Asian financial crisis,
inflation has not had a material impact on the Company's business in
recent years. It is management's belief that inflation will not have a
material impact in the near future.
m) Cash and Cash Equivalents
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.
3) Advances to Related Companies
--------------------------------
The company has made advances to a Vietnamese Joint Venture Company to
fund a potential project in Northern Vietnam. The management has
decided to write off the advance to the joint venture (Vietnam
project) as the Broad has approved the write-off in December 1999, It
is a business decision. The advances therefore, are not included in
the financial statements.
F-35
<PAGE>
Northbridge Communities Limited (a Thailand Company)
Notes to financial statements - December 31, 1997, 1998, and 1999
4) Loans to an associate company
---------------------------------
Two loans have been made to an associate company, Palanamai Limited,
of which the Company owns 45% of the total interest. (See Note No.5b.)
One loan was made in the Thai currency in the amount of 9,427,660 Baht
(equivalent to approximately US$ 254,802). The other loan was made in
US dollars in the amount of $378,000. These two loans have a the total
current balance of U.S.$ 632,802. Both loans bear a fixed interest
rate at 8% per annum. #135 Loans to an associated company were
unsecured and without pre- determined repayment terms. The loans are
due on demand.
5) Investments
-----------
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
% of % of % of
Holding US$ Holding US$ Holding US$
------- --------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
International School (a)
Eastern Seaboard Limited 25 540,540 25 304,053 25 304,053
Palanami Limited (b) 45 267,568 45 267,568 45 267,568
Unique Building Concepts
Limited 10 21,622 10 21,622 10 21,622
Provision for diminishing in
value (764,530) - -
Investments, net 65,200 593,243 593,243
--------- ------- -------
</TABLE>
a) International School Eastern Seaboard Limited, a Thailand company
International School Eastern Seaboard (ISE) started its school
operation in August 1994. Currently, ISE has a student enrollment of
approximately 325 from 25 countries with a majority of 30 teachers
recruited from the US. Most students are dependents of parents who
employed by multi-national companies such as GM, Ford and Mazda,
located in the Eastern Seaboard Region of Thailand. In order to meet
the demand for expatriate housing, the Company has invested in
Palanamai Limited to provide leasing homes for the expatriate
families.
b) Palanamai Limited, a Thailand company.
The Company has had a 45% investment in Palanami Limited ("Palanamai")
since 1994. Palanamai has developed housing in the Eastern Seaboard
Region of Thailand in order to provide leasing homes for the
expatriate families. The existing structures include 7 single family
dwellings and 16 townhouse. The current average occupancy rate is
approximately 75% - 80%. Despite of its continuing operating losses,
the Company's management believes that in line with the Asian economic
recovery the property value of Palanamai has appreciated substantially
and Palanamai has the financial vitality to continue its operations.
c) Analysis of the Value of the Investment Account
Based on a share price
<TABLE>
<CAPTION>
1999 1998
Investment In Cost Fair Market Cost Fair Market
Value Value
---------- ----------- --------- ---------------
US$ US$ US$ US$
<S> <C> <C> <C> <C>
Palanamai Ltd 2.7/share 0.26/share 2.7/share 0.23/share
ISE 2.7/share 0.13/shyare 2.7/share 0.10/share
</TABLE>
F-36
<PAGE>
Northbridge Communities Limited (a Thailand Company)
Notes to financial statements - December 31, 1997, 1998, and 1999
#136 The fair market value of Palanamai Ltd and ISE were based on
value determined by the professional appraisers in Thailand . The
market value of these investee companies also are agreed by the
management of the Company. Palanamai Ltd and ISE, both of them have
recurring losses. As the property market has been in decline since
starting of the Asian financial crisis in 1997, the value of these
investments are decreased in value. On the conservative basis, the
management adopted a provision for diminution in value in order to
write-down the value of the Investment Account.
Based on the above analysis, management has decided to write down the
investment in the accounts to reflect the lower fair market value of $
0.23/share and $ 0.10/share of these two investments.
6) Property, plant and equipment
The account balances, recorded at historical costs, are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C> <C>
US$ US$ US$
Land (a) 6,571,313 6,547,184 5,009,488
Buildings (b) 9,502,823 9,502,823 7,836,788
Office equipment 354,364 311,240 207,245
Vehicles 59,000 59,000 81,159
Furniture and fixtures 266,709 385,760 162,883
---------- ---------- ----------
16,754,209 16,806,007 13,297,563
Vehicle under lease
purchases - 26,343 26,343
---------- ---------- ----------
16,754,209 16,823,350 13,323,906
Less: Accumulated
depreciation 1,176,058 637,724 157,298
Total property, plant and
equipment, net 15,578,151 16,194,626 13,166,608
========== ========== ==========
</TABLE>
(a) Details of Land is as follows:
<TABLE>
<CAPTION>
Description 1999 1998 1997
--------- --------- ---------
US$ US$ US$
<S> <C> <C> <C> <C>
Land used for GM Houses 1,561,825 1,537,696 -
Cambodia Estate including NISC 5,009,488 5,009,488 5,009,488
--------- --------- ---------
Total Land 6,571,313 6,547,184 5,009,488
</TABLE>
#137 There are 12 lots of land for the houses. Eleven houses are
leased to General Motors (Thailand) Ltd. These eleven houses are owned
by the Company and reported as fixed assets on the balance sheets. One
lot of land is still owned by an affiliate- Unique Building Concepts
Co., Ltd ("UBS"). This particular one lot of land is reported as
advance payment for land on the balance sheets since payment has been
made by the Company while the title is still not transferred from UBC
to the Company.
General Motors (Thailand) took the title of 11 lots of land and 10
houses as a collateral, and loaned the money and paid advance rental
to the Company. (See Note 9)
(b) Detailed descriptions of buildings are as follows:
The building cost includes the design and construction costs of the 10
houses leased to the GM expatriates, and construction costs of NISC.
The building is currently occupied by approximately 80 students, and
12 teachers employed mainly from the United States.
F-37
<PAGE>
Northbridge Communities Limited (a Thailand Company)
Notes to financial statements - December 31, 1997, 1998, and 1999
7) Construction In Progress.
--------------------------
The account balance relates to the 4 units of uncompleted houses of
the GM house project (see Note 1)
8) Accounts Payable- Current
---------------------------
Details of the balance of the account are as follows:
<TABLE>
<CAPTION>
Description 1999 1998 1997
--------- --------- -------
US$ US$ US$
<S> <C> <C> <C>
GM 4 undelivered houses 432,475 - -
Unique Building Concepts., Ltd. (See Note 14) 825,175 2,002,858 -
Loans from related parties 157,500 93,332 40,000
Miscellaneous 33,346 16,085 72,286
--------- --------- -------
Total 1,448,496 2,112,275 112,286
</TABLE>
9) Rental Income Received In Advance and Accounts Payable
-------------------------------------------------------------
This account represents rental income of 10 delivered houses received
in advance from the GM (Thai) Ltd. for the GM House Project. The
balance of $1,355,836 consists of $1,244,089 advanced rental and
$111,707 of security deposits for these houses. #138 The advance
rental income has been paid up by GM (Thai) Ltd to the first half of
the year 2003.
On July 30 1999 US$ 626,683 relating to rental income of 4 undelivered
houses was transferred to Accounts Payable as a result of the
Company's inability to deliver the 4 houses to the customer - GM
(Thai) Ltd. The Company has agreed to repay this advance with its
accrued interest. The outstanding amount will be repaid in
installments and delivered to the GM (Thai) Ltd., each in the amount
of US$ 39,167.70, with payments having started on August 1, 1999 and
continuing until November 1, 2000. (See Note 1.)
10) Loan from related company
----------------------------
1999 1998 1997
---- ---- ----
US$ US$ US$
Loans denominated in U.S. dollars: 8,919,128 7,934,282 5,899,684
The loans presented above are from Asian Frontier Holdings, who is a
shareholder of the Company. The loan bears variable interest at the
rate equivalent to the prevailing one month LIBOR rate (currently
approximately 7%) plus 1.25% for US dollars and is repayable on
demand.
11) Share capital
--------------
1999 1998 1997
---- ---- ----
US$ US$ US$
Registered and issued share capital
4,000,000 common shares
at Baht 100 (US$ 2.7) each 10,810,811 10,810,811 10,810,811
F-38
<PAGE>
Northbridge Communities Limited (a Thailand Company)
Notes to financial statements - December 31, 1997, 1998, and 1999
12) Related party transactions
----------------------------
A summary of related party transactions included in the statement of
operations is as follows:
1999 1998 1997
---- ---- ----
US$ US$ US$
Office rental paid to a related company 5,257 23,740 22,089
Interest expenses paid to related companies 658,436 423,560 200,497
(See Note 10)
Gain on sales of securities 2,118,243 - -
The Company bought on May 12, 1999 and sold on June 25, 1999 a sum of
1.5 million common stock and warrants of TISCO, a Thailand publicly
listed company and realized a profit of $2,118,243 (or 78,375,000
Baht). The purchase and sales transactions were conducted with a
related party, through the Thai Stock Exchange. The related party, who
is an investment banker, also manages two of the major shareholders in
the Company.#139 (See Note 2e)
13) Segmented Geographic Sales Income
------------------------------------
Income is generated from few customers and income from General Motors
(Thailand) Ltd. represents over 10% of the Company's total income. The
dollar value of income from these customers is expected to maintain or
increase steadily over the next several years due to the fact that the
Company expects the relationship with the client and the Asian economy
is to grow steadily in the future.
#140 a) Operating Geographic Segment Information are provided for the year
ended December 31 are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
Property Property Property
investment School in investment School in investment School in
in Thailand Cambodia Total in Thailand Cambodia Total in Thailand Cambodia
------------- ----------- ------------ ------------- ------------ ------------ ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Rental income $ 428,379 $ - $ 428,379 $ 381,860 $ - $ 381,860 $ - $ -
School income - 453,218 453,218 - $ 258,452 258,452 - 61,103
428,379 453,218 881,597 381,860 258,452 640,312 - 61,103
------------- ----------- ------------ ------------- ------------ ------------ ------------- ----------
Interest
income from
external
parties 51,580 814 52,394 58,330 352 58,682 78,397 62
Interest
expenses to
external
parties 763,037 - 763,037 737,333 - 737,333 618,130 -
Gain on sales
of securities 2,118,243 - 2,118,248 - - - - -
Depreciation 99,729 465,643 565,372 85,707 410,869 496,576 10,943 122,268
------------- ----------- ------------ ------------- ------------ ------------ ------------- ----------
Profit/(loss) (404,363) (945,263)* (1,349,626) (1,306,189) (1,143,993) (2,450,182) (852,051) (463,904)
------------- ----------- ------------ ------------- ------------ ------------ ------------- ----------
Total
------------
<S> <C>
Rental income $ -
School income 61,103
61,107
------------
Interest
income from
external
parties 78,459
Interest
expenses to
external
parties 618,130
Gain on sales
of securities -
Depreciation 133,211
------------
Profit/(loss) (1,315,955)
------------
<FN>
* Excluded the write-off of advance to Vietnam JV of U.S. $1,552,670.
</TABLE>
F-39
<PAGE>
Northbridge Communities Limited (a Thailand Company)
Notes to financial statements - December 31, 1997, 1998, and 1999
b) Assets Segment Information as of December 31 are as follows:
<TABLE>
<CAPTION>
Assets Location Thailand Cambodia Hong Kong Total
---------------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
- 1999 $5,060,524 $12,940,240 $ 547 $18,001,311
- 1998 $6,438,616 $13,355,031 $ 1,333 $19,794,980
- 1997 $4,747,590 $12,603,141 $ 1,333 $17,352,064
</TABLE>
14) Contingent Liabilities
-----------------------
a) As of December 31, 1999, the Company had been sued by Unique Building
Concepts Co., Ltd., which is a 10% affiliate, ("UBC") for breach of
contract due to non-payment of construction fees of US$594,600 (or
22,000,000 Baht) within the timeframe stated in the contract. The
total unpaid fees claimed by UBC is amounting to US$628,170 (or
23,242,335 Baht). Although the ultimate outcome has not been
determined, the Company's management, under advice from its legal
advisor, believes that the outcome will be in favor of the Company,
due to the effect of the applicable Statute of Limitations. Therefore,
no provision has been made except for the interest cost, which has
been accrued in accordance with the contract.
The damage claimed and accrued interest are recorded as Account
payable in the balance sheets. According to the Construction
Agreement, interest is calculated at the rate of 18% per annum on non-
payment amount of construction fees. The disclosure accrual of payable
to UBC is as follows:
<TABLE>
<CAPTION>
<S> <C>
Damages claimed Baht 0
Unpaid fees Baht 23,242,335
Interest accrued Baht 7,289,155
----------------
Total payable to UBC Baht 30,531,490 (or equivalent to US$825,175, See Note 8)
================
</TABLE>
b) The investment account on the balance sheet has been pledged as
collateral to guarantee loans of a related company US$ 1,934,689, as
of December 31 1999. If the guaranteed loan is not paid on time, the
Company's investments may have to be transferred to the related
company.
15) Year 2000 Issue
-----------------
The company has developed plans to replace or modify its computers to
deal with the Year 2000 (Y2K) issue. The Company has started in-house
modifications of its computer systems to address the Year 2000 issue.
Since most of the computers purchased since 1998 are Y2K compliant,
the possible exposure may not be material. The Company will continue
to assess newly purchased machinery and computer-related hardware and
software to ensure such items are Y2K compliant.
16) Operating Risks
---------------
The Company's main operations are conducted in Thailand, Cambodia and
other Southeast Asian countries. Accordingly, the business, financial
conditions and results of operations may be influenced by the
political, economic and legal environment in Southeast Asia. The
Company's operations may be subjected to special considerations and
risks not typically associated with companies operating in the U.S.
17) Foreign Corrupt Practices Act
--------------------------------
The Company is a Thailand registered business entity and is not
subject to the U.S. Foreign Corrupt Practices Act of 1977, which
generally prohibits U.S. companies from engaging in bribery or other
prohibited payments to foreign officials for the purpose of obtaining
or retaining business. During the audit, no violation of the Foreign
Corrupt Practices Act by the Company was noted.
F-40
<PAGE>
Northbridge Communities Limited (a Thailand Company)
Notes to financial statements - December 31, 1997, 1998, and 1999
18) Going concern
--------------
Despite the continuing operational losses, it is the Company's belief
that the operation is sustainable with potential profits in the future
as the economy is recovering in Southeast Asia. It should be noted
that the shareholders including Asian Frontier Holdings and Siam
Investment Fund remain confidant of the future of the operations of
the Company. The continuing operation depends on the willingness of
additional capital contribution committed by its existing
shareholders, whether new investments can be brought in from the
investing community, and the speed of economic recovery as well as
continuing political stability of the Southeast Asian countries.
19) Retirement Plan
----------------
The Company's employees in Southeast Asia are all hired on a
contractual basis. The Company has properly provided the retirement
benefits to those employees who are entitled.
20) Shortage of Labor
-------------------
The Company has not experienced any labor shortage or labor disputes
in the past. It is expected that labor resources are abundant in
Southeast Asia, and are sufficient to fulfill Company's real estate
property development and operating needs.
21) Real Estate Price Fluctuation
--------------------------------
The Company purchases and develops real estate property and constructs
schools to attract expatriates to lease its property. The real estate
price fluctuates from time to time. The real estate price has been low
for the past two years, but prices may rise resulting in increased
cost of project development.
22) Reliance on Key Personnel
----------------------------
Despite the fact that most of the key personnel and employees have
been with the Company for over one year, the operation of the Company
is dependent on the services of its top ranking officers and
employees. The possible loss of their services or the inability to
attract qualified personnel may or could have a material adverse
effect on the Company.
23) Accounting for Stock Options
-------------------------------
In October 1995, the FASB issued Statement of Financial Accounting
Standards No. 123 "Accounting for Stock Based Compensation" (FASB
No.123), which established the "fair value" method of accounting for
stock based compensation arrangements given to employees. The Company
has not adopted a stock option plan. The Board of Directors may adopt
stock option plans in the future to reward its management, directors
and employees expected to make exceptional contributions to the
Company.
24) Impact of Recently Issued Accounting Standards
---------------------------------------------------
Statement of Financial Accounting Standards No.133 - Accounting for
Derivative Instruments and Hedging Activities (FASB No.133) was
recently issued. FASB No.133 established accounting and reporting
standards for derivative financial instruments and for hedging
activities. The Company does not currently engage in any activities
that would be covered by FASB No.133.
F-41
<PAGE>
Northbridge Communities Limited (a Thailand Company)
Notes to financial statements - December 31, 1997, 1998, and 1999
25) Subsequent Events
------------------
The Company signed a Share Purchase and Sales Agreement on February 4,
2000, with Asia Properties, Inc. (API) to acquire the Company. Under
the agreement, API is to acquire the Company with the exception of the
Company's Vietnam operations, and a subsidiary company; Keltic Ltd,
via a share swap, so that The Company is to become a 100% subsidiary
of API. API is to issue to the shareholders of the Company 4.6 million
common shares valued at $4.40 per share. The agreement provides that
the closing of the purchase and sale of those common shares must occur
before August 2, 2000. The principal real estate properties in which
the Company holds an interest include gated community developments
near Bangkok in Thailand and Phnom Penh in Cambodia. The agreement
includes the following principal terms: API must restructure their
board of directors upon the closing of the transaction so that their
directors will be Daniel S. McKinney, Nicholas St. Johnston, David
Diehl, David Roberts and two appointees of the Company. API must use
our best efforts to raise U.S. $15 million in cash by September 11,
2000. $3.5 million of our capital shares to be held by the following
persons after the reincorporation in the amounts indicated below have
been transferred into an escrow account: $ Daniel S. McKinney -
800,000 shares; Nicholas St. Johnston - 900,000 shares; Crestview
Associates Limited - 700,000 shares; Lim Gaik Im - 600,000 shares; and
Milliard Limited - 500,000 shares. In the event API is able to raise
U.S. $15 million in cash by September 11, 2000, the 3.5 million
capital shares in the escrow account will be surrendered back to Mr.
McKinney, Mr. St. Johnston, Ms. Gaik Im, Crestview Associates Limited
and Milliard Limited. In the event API is unable to raise U.S. $15
million by September 11, 2000, 1.75 million capital shares in the
escrow account will be transferred to the former shareholders of the
Company and Mr. McKinney will be required to resign from our Board of
Directors. During a period from September 12, 2000 until February 4,
2001 the shareholders who delivered the 3.5 million shares into the
escrow account will be entitled to clawback their proportionate
interest of 1.75 million of those shares if we raise additional
capital. Those shares not clawbacked will be transferred to the former
shareholders of the Company. The number of shares that may be
clawbacked will be equal to the product of: the amount of capital
raised divided by U.S. $15 million multiplied by 1.75 million. If API
fails to list their capital shares on the American Stock Exchange
before November 4, 2000, Mr. McKinney will be required to resign from
our Board of Directors.
F-42
<PAGE>
DICKSON V. LEE
CERTIFIED PUBLIC ACCOUNTANTS, L.L.C.
--------------------------------------------------------------------------------
Main Address : 110 Wall Street, Suite 15C, New York, NY 10005 PMB 100
------------- Telephone: (212) 701-8587 Fax: (212) 701-8543
China Address : Suite 2503, United Plaza, Shenzhen, China
-------------- Telephone : (755) 271-0062 Fax: (755) 271-0389
--------------------------------------------------------------------------------
Accountants' Review Opinion
Northbridge Communities Limited
(incorporated in Thailand)
Stockholders and Board of Directors
We have made a review of the consolidated balance sheets of Northbridge
Communities Limited as of March 31, 2000, 1999 and 1998, which is the end of the
first quarter of the 2000, 1999 and 1998 fiscal years, and the related
consolidated statements of operations, consolidated statement of changes in
stockholders' equity, and consolidated statement of cash flows for the
three-month periods then ended, in accordance with standards established by the
American Institute of Certified Public Accountants. These consolidated interim
financial statements are the responsibility of the Company management.
A review of interim financial information consists principally of obtaining an
understanding of the system for the preparation of interim financial
information, applying analytical procedures to financial data, and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an examination in accordance with U.S.
generally accepted auditing standards, the objective of which is the expression
of an opinion regarding the financial statements taken as a whole. Accordingly,
we do not express such an opinion.
On the basis of our review, we are not aware of any material modifications that
should be made to the accompanying financial statements for them to be in
conformity with U.S. generally accepted accounting principles.
/S/ DICKSON V. LEE, CERTIFIED PUBLIC ACCOUNTANTS, L.L.C.
Dickson V. Lee, Certified Public Accountants, L.L.C.
New York, New York
July 7, 2000
F-43
<PAGE>
<TABLE>
<CAPTION>
Unaudited
NORTHBRIDGE COMMUNITIES LIMITED
(INCORPORATED IN THAILAND)
UNAUDITED CONSOLIDATED BALANCE SHEETS
-------------------------------------
FOR THE FIRST QUARTER ENDED MARCH 31
2000 1999 1998
----------- ----------- -----------
Assets US$ US$ US$
<S> <C> <C> <C>
Current assets
Cash and cash equivalents 105,642 40,933 57,062
Advance payment and other receivable 30,854 5,582 774,367
Deposits and prepayment 27,319 45,398 367,493
Inventories less allowance 3,087 2,968 2,119
Due from a holding company 7,710 709,289 710,412
Due from associated companies and related companies (Note 3) 147,514 332,836 70,343
----------- ----------- -----------
Total current assets 322,126 1,137,006 1,981,796
Advances to a related company (Note 4) - 2,134,376 1,321,605
Loans to an associate company (Note 5) 636,378 95,103 642,405
Property, plant and equipment (Note 7)
Land and buildings, net 15,135,180 15,690,560 12,698,973
Equipment, furniture and fixture, net 304,580 478,939 510,880
----------- ----------- -----------
15,439,760 16,169,499 13,209,853
Construction in progress (Note 8) 1,280,353 1,280,353 1,741,489
Advance payment for land 126,392 126,392 126,392
Investments (Note 6) 65,200 593,243 593,243
----------- ----------- -----------
Total assets 17,870,209 21,535,972 19,616,783
=========== =========== ===========
Liabilities & stockholders' equity
Current liabilities
Accounts payable (Note 9) 1,308,852 2,113,490 397,230
Current portion of obligation under lease purchase agreements - 2,914 2,915
Rental income received in advance (Note 10) 1,256,472 1,710,896 2,067,798
Accrued interest payable 982,578 1,117,643 563,779
Other payable 91,444 37,872 12,559
Due to related companies 408,331 478,326 67,485
----------- ----------- -----------
Total current liabilities 4,047,677 5,461,141 3,111,766
Obligation under lease purchase agreements - 243 3,158
Loans from related company (Note 11) 9,196,576 8,273,362 5,265,139
----------- ----------- -----------
Total liabilities 13,244,253 13,734,746 8,380,063
Minority interests (114,610) 16,051 87,285
Stockholders' equity
Common stock, par value U.S. $2.7 Authorized shares -
4,000,000, Issued and outstanding shares - 4,000,000 (Note 12) 10,810,811 10,810,811 10,810,811
Accumulated deficit (8,214,405) (5,507,320) (1,923,366)
Translation adjustment 2,144,160 2,481,684 2,261,990
----------- ----------- -----------
Total stockholders' equity 4,740,566 7,785,175 11,149,435
----------- ----------- -----------
Total liabilities and stockholders' equity 17,870,209 21,535,972 19,616,783
=========== =========== ===========
</TABLE>
The accompanying notes form an integral part of these consolidated financial
statements.
F-44
<PAGE>
<TABLE>
<CAPTION>
Unaudited
NORTHBRIDGE COMMUNITIES LIMITED
(INCORPORATED IN THAILAND)
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------
FOR THE QUARTER ENDED MARCH 31
2000 1999 1998
---------- ---------- -----------
US$ US$ US$
---------- ---------- -----------
<S> <C> <C> <C>
Income (Note 14) 290,870 208,041 63,530
General & administration expenses 482,970 541,769 329,101
---------- ---------- -----------
Operating loss (192,100) (333,728) (265,571)
Other income and expenses
Interest income 40,814 38,053 1,221,302
Interest expenses (181,887) (198,728) (281,775)
---------- ---------- -----------
Net income/(loss)
(333,173) (494,403) 673,956
Other Comprehensive Income
Gains/(loss) from foreign currency translation
(Note 2g) (22,370) 310,192 13,283
---------- ---------- -----------
Comprehensive loss before minority interests (355,543) (184,211) 687,239
Minority interests 21,495 (7,523) 35,105
---------- ---------- -----------
Net comprehensive income/(loss) after minority interests (334,048) (191,734) 722,344
========== ========== ===========
Weighted average number of common shares -
Basic and diluted 4,000,000 4,000,000 4,000,000
Net loss Per Share (Note 2h)
- basic ($0.08) ($0.05) $ 0.18
- diluted ($0.08) ($0.05) $ 0.18
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-45
<PAGE>
<TABLE>
<CAPTION>
Unaudited
NORTHBRIDGE COMMUNITIES LIMITED
(INCORPORATED IN THAILAND)
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
--------------------------------------------------------------------
FOR THE FIRST QUARTER ENDED MARCH 31
Common Cumulative
Common Stock Stock Accumulated Translation Stockholders'
Shares Amount Deficit Adjustment Equity
------------ ---------- ------------ ------------ --------------
US$ US$ US$ US$
<S> <C> <C> <C> <C> <C>
Balance as of December 31, 1996 4,000,000 10,810,811 (1,499,975) 2,432,210 11,743,046
Net loss for the year - - (1,182,816) - (1,182,816)
Translation adjustment - - - (150,738) (150,738)
Minority interest - - 61,730 (44,131) 17,599
------------ ---------- ------------ ------------ --------------
Balance as of December 31, 1997 4,000,000 10,810,811 (2,621,061) 2,237,341 10,427,091
Net loss for the year - - (2,551,615) - (2,551,615)
Translation adjustment - - - (12,429) (12,429)
Minority interest - - 126,033 (12,171) 113,862
------------ ---------- ------------ ------------ --------------
Balance as of December 31, 1998 4,000,000 10,810,811 (5,046,643) 2,212,741 7,976,909
Net loss for the year (2,962,237) - (2,962,237)
Translation adjustment - - - (41,701) (41,701)
Minority interest - - 108,435 (6,793) 101,642
------------ ---------- ------------ ------------ --------------
Balance as of December 31, 1999 4,000,000 10,810,811 (7,900,445) 2,164,247 5,074,613
Net loss for the period - - (333,173) - (333,173)
Translation adjustment - - - (22,370) (22,370)
Minority interest - - 19,213 2,283 21,496
------------ ---------- ------------ ------------ --------------
Balance as of March 31, 2000 4,000,000 10,810,811 (8,214,405) 2,144,160 4,740,566
============ ========== ============ ============ ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-46
<PAGE>
<TABLE>
<CAPTION>
Unaudited
NORTHBRIDGE COMMUNITIES LIMITED
(INCORPORATED IN THAILAND)
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
FOR THE FIRST QUARTER ENDED MARCH 31
1999 1998 1997
--------- --------- ----------
US$ US$ US$
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net (loss)/income
(334,048) (191,734) 722,344
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation expenses 141,302 127,843 95,833
Loss/(Gain) on disposal of assets - 114 (96)
Minority interests (21,495) 7,523 (35,105)
(Increase)/Decrease in advance payment and other receivable (20,232) 672 (376,267)
Decrease/(Increase) in deposits and prepayment 36,673 (2,503) (272,302)
Increase in inventories (net) 139 - 216
Decrease in due from a holding company (180) (788) (1,911)
(Decrease)/Increase in accounts payable (139,644) 1,215 284,944
(Decrease)/Increase in rental income received in advance (99,364) (112,999) 652,588
Increase in other payable and charges 183,071 158,449 149,539
--------- --------- ----------
Net cash provided by operating activities (253,778) (12,208) 1,219,783
Cash Flows from Investing Activities:
Purchase of property & equipment (2,911) (102,830) (52,588)
Proceeds from sales of plan and machinery - - 118,295
Increase in construction in progress - - (570,322)
(Increase)/Decrease in due from associated companies and related companies (15,437) 5,305 (9,239)
Increase in advance to a related company - (596,721) (101,428)
(Increase)/Decrease in loan to associated company (3,576) 365,964 87,859
--------- --------- ----------
Net cash flows from investing activities (21,924) (328,282) (527,423)
Cash Flows from Financing Activities:
Increase/(Decrease) in due to related companies 2,930 2,533 (94,494)
Increase/(Decrease) in loan from related company 277,448 339,080 (634,545)
Repayment of obligation under lease purchase agreements - (730) (729)
--------- --------- ----------
Net cash flows from financing activities 280,378 340,883 (729,768)
F-47
<PAGE>
Net increase/(decrease) in cash and cash equivalents 4,676 393 (37,408)
Cash and cash equivalents at beginning of the period (January 1) 100,966 40,540 94,470
Cash and cash equivalents at end of the period (March 31) 105,642 40,933 57,062
========= ========= ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-48
<PAGE>
Northbridge Communities Limited (a Thailand Company)
Notes to the financial statements - March 31, 1998, 1999 and 2000 Unaudited
1) General
-------
Northbridge Communities Limited (the Company) was incorporated in
Thailand on September 16, 1994. The Company's current place of
business is located at TISCO Tower, 8th floor, 48 North Sathorn Road,
Bangkok 10500, Thailand.
As Southeast Asia has started its economic development with increasing
levels of foreign investment, the Company's business is to develop
(English speaking) school-based residential real estate properties in
Southeast Asian cities.
The Company has constructed 14 single houses (10 houses are completed
and 4 are approximately 90% completed), on 12 lots of land located
inside Burapha Golf Club (the Golf Club Estate) in Thailand, and
leases 10 of the houses to General Motors (Thailand) Ltd. (the GM
House Project) for its expatriate families, for leases expiring in the
first half of 2003.
The Company has a 45% investment interest in Palanamai Limited
(Thailand), which owns 7 single homes and 16 town houses on 1.6
hectares (approximately 3.95 acres) of land inside the Golf Club
Estate in Thailand (See Note 6b).
It has a 51% beneficial ownership of 58 hectares (equivalent to
approximately 143 acres) of land located in Phnom Penh, Cambodia. Some
of the lands were used to build Northbridge International School of
Cambodia (NISC), an international school.
The Company has developed and now operates two English speaking
international schools. The International School of Eastern Seaboard
Ltd. (ISE) (from pre-kindergarten to Grade 12), is located at the
eastern seaboard of Thailand (between Bangkok and Pattaya), and is 27%
owned by the Company. ISE is accredited by the Western Association of
Schools and Colleges (WASC), based in California. The other school;
NISC (from pre-kindergarten to Grade 10), located in Phnom Penh of
Cambodia, is controlled by the Company via its 90% owned subsidiary -
Northbridge KC Development Co., Ltd. a Cambodia company. NISC is a
"Full Candidate for Accreditation" by WASC. See a further discussion
of ISE at Note 6a.
The GM House Project, Palanamai and ISE are all located inside the
Golf Club Estate.
The Company signed a Share Purchase and Sales Agreement on February 4,
2000, with Asia Properties, Inc. (API) to acquire the Company. Under
the agreement, API is to acquire the Company with the exception of the
Company's Vietnam operations, and a subsidiary company; Keltic Ltd,
via a share swap, so that The Company is to become a 100% subsidiary
of API. API is to issue to the shareholders of the Company 4.6 million
common shares valued at $4.40 per share. The agreement provides that
the closing of the purchase and sale of those common shares must occur
before August 2, 2000. The principal real estate properties in which
the Company holds an interest include gated community developments
near Bangkok in Thailand and Phnom Penh in Cambodia. The agreement
includes the following principal terms: API must restructure their
board of directors upon the closing of the transaction so that their
directors will be Daniel S. McKinney, Nicholas St. Johnston, David
Diehl, David Roberts and two appointees of the Company. API must use
our best efforts to raise U.S. $15 million in cash by September 11,
2000. $3.5 million of our capital shares to be held by the following
persons after the reincorporation in the amounts indicated below have
been transferred into an escrow account: $ Daniel S. McKinney -
800,000 shares; Nicholas St. Johnston - 900,000 shares; Crestview
Associates Limited - 700,000 shares; Lim Gaik Im - 600,000 shares; and
Milliard Limited - 500,000 shares. In the event API is able to raise
U.S. $15 million in cash by September 11, 2000, the 3.5 million
capital shares in the escrow account will be surrendered back to Mr.
McKinney, Mr. St. Johnston, Ms. Gaik Im, Crestview Associates Limited
and Milliard Limited. In the event API is unable to raise U.S. $15
million by September 11, 2000, 1.75 million capital shares in the
escrow account will be transferred to the former shareholders of the
Company and Mr. McKinney will be required to resign from our Board of
F-49
<PAGE>
Northbridge Communities Limited (a Thailand Company)
Notes to the financial statements - March 31, 1998, 1999 and 2000 Unaudited
Directors. During a period from September 12, 2000 until February 4,
2001 the shareholders who delivered the 3.5 million shares into the
escrow account will be entitled to clawback their proportionate
interest of 1.75 million of those shares if we raise additional
capital. Those shares not clawbacked will be transferred to the former
shareholders of the Company. The number of shares that may be
clawbacked will be equal to the product of: the amount of capital
raised divided by U.S. $15 million multiplied by 1.75 million. If API
fails to list their capital shares on the American Stock Exchange
before November 4, 2000, Mr. McKinney will be required to resign from
our Board of Directors. The management believe that the merger of the
two companies is good for its future growth and development of the
school- based real estate projects.
Management is confident that the financial statements include all
adjustments necessary in order to make them not misleading.
2) Summary of Significant Accounting Policies and Practices
--------------------------------------------------------------
The company is a Thailand company. Its purpose is to develop
school-based residential communities in Southeast Asia. Its
significant accounting policies and practices are as follows:
a) Calendar Year Ending December 31
The Company's fiscal year ends on June 30 of the following year,
in line with the school operations in Thailand. However, for its
US reporting purposes the Company has elected to have the books
converted to December 31 as the twelve-month year end date.
b) Basis of Consolidation
The consolidated financial statements include all accounts of the
Company and its subsidiaries (see Note 1, General). All material
inter-company balances and transactions, if any, have been
eliminated on consolidation.(See Note 2j)
c) Revenue Recognition
There are two types of revenue transactions:
1) Rental income which is recognized over the period covered by
the lease agreement on a straight line basis. The Company leases
its real estate property (houses) located at the Burapha Golf
Club in Thailand to General Motors (Thailand) Ltd. on a long term
basis. The leases expires in 2003.
2) School income which is recognized when services are rendered.
School income mainly represents the tuition fee income earned
from Northbridge International School Cambodia ("NISC")which is
controlled by the Company via its 90% owned subsidiary,
Northbridge KC Development Co., Ltd.
d) Loans versus Advances
The Company's policies stipulate that an advance is money lent
with no interest, and a loan bears interest charges.
F-50
<PAGE>
Northbridge Communities Limited (a Thailand Company)
Notes to the financial statements - March 31, 1998, 1999 and 2000 Unaudited
e) Investments
Investments where the Company owns less than 50% of the voting
common shares but is unable to exert significant influence over
the financial and operating policy of the invested entity. These
investments are included in the consolidated financial statement
under the cost method. They are not reported, using the equity
method. When an impairment which is "Other than temporary"
declines, the loss in value of investments is recognized in the
Company's financial statements. Hence, such investments are
stated at cost less permanent decline in value, and all losses
are recognized during the period where decline incurred based on
a conservative basis. (see Note 6c)
The 45% investment interest in Palanamai Limited is stated at
cost less a provision for diminution in value which other than
temporary in the financial statement. (see Note 6c) Per the
management, Palanamai Limited is presently controlled by three
(3) other groups of shareholders; APK Associates Limited, Mr
Darrell Sheldon and Kahabodee Development Limited, who jointly
own 54.9% of the shares. Since the Company management believes
that it has no significant influence over Palanamai, the cost
method is used.
The cost of Palanamai Limited is recorded as follows:
Historical cost $267,568
Less: Provision for permanent diminution ($241,560)
----------
Cost recorded in Investment account $26,008
==========
The Company has a 51% beneficial ownership of 58 hectares of land
in Cambodia. The ownership is via its 51% owned subsidiary- Khaou
Chuly Land Company Limited, which owns 100% of the 58 hectares of
the Land. The cost of this land is included in the fixed assets
in the consolidated balance sheets. (See Note 7a)
The decrease in investment account is mainly due to the provision
for diminution in value of investment amounting to US$764,530
provided as of December 31, 1999. (see Note 6)
f) Fixed Assets
Fixed assets are stated at cost less accumulated depreciation.
Depreciation is provided for on all fixed assets using the
straight-line basis over the estimated useful lives as follows:-
Building 20 years
Furniture and fixtures 5 years
Office equipment and others 5 years
g) Foreign Currency Transactions
The Company records its books in Thailand currency (Baht) (the
functional currency) and translate Baht into U.S. dollars (the
reporting currency) for U.S. reporting and consolidation
purposes. In accordance with SFAS No. 52, Foreign Currency
Translations, the translation of financial statement into United
States dollars is performed for balance sheet accounts using the
closing exchange rate in effect at the balance sheet dates, and
for revenue and expense accounts using an average exchange rate
during each reporting period. The gain or (loss) resulting from
translation are included in the stockholders' equity separately
as cumulative translation adjustments. Gains and losses resulting
from transaction conducted in a currency other than the
functional currency are recorded in current. Aggregate gains
(losses) from foreign currency transactions included in the
results of operations for the three months period ended March 31
1998, 1999 and 2000 were approximately $36,000, $15,000 and
($19,000) .
F-51
<PAGE>
Northbridge Communities Limited (a Thailand Company)
Notes to the financial statements - March 31, 1998, 1999 and 2000 Unaudited
For the Company's Cambodian operations, foreigners are required
to transact business using U.S. dollars in Cambodia. The
Company's operations in Cambodia are transacted in U.S. dollars
(the functional currency for foreigners) and recorded in Baht on
the Company's books to comply with Thailand laws. For the U.S.
reporting purposes, the Company's foreign exchange translations
computations are not material.
h) Earnings (Loss) Per Share
Earnings (loss) per share is computed by dividing the net profit
(loss) before extraordinary items, and the net profit (loss) for
the period by the weighted average number of paid-up shares in
issue during the year. Earnings (loss) per share includes both
the basic and diluted computation.
i) Subsidiaries
Subsidiaries are enterprises in which the company owns more than
50% of voting common shares, directly or indirectly. The
Company's investment in the subsidiaries in which the Company
owns over 50% of voting common shares and with significant
control over the operations are consolidated, in compliance with
Accounting Research Bulletin (ARB) #51, as amended by SFAS No.
94.
j) Related Party Transactions
The Company has some facilities which are shared by its
affiliated companies. The financial effects of the shared
facilities are not material. All other related party transactions
are reviewed and disclosed when material, in accordance with SFAS
No.57. (See Notes 3, 4, 9, 11 & 13)
k) Restrictions on Foreign Ownership of Land in Thailand and
Cambodia
According to the laws of Thailand and Cambodia, foreigners may
not normally own land, except in special circumstances. However,
the shareholding structure and shareholders' agreements of the
Company allow the foreign shareholders to beneficially own and
control a company which can own land in Thailand and Cambodia.
This practice is supported by opinions of the "in-country" legal
advisors / attorneys, who are legal professionals educated either
in the U.S., UK, Australia and hold legal titles such as J.D. (in
the U.S.), LLM, LLB (in the Commonwealth System) and have resided
in Asia for many years. Therefore, the Company beneficially owns
and controls its land investment in Thailand and Cambodia.
l) Inflation
Due to the nature of real estate development business, inflation
can be critical for the Company's operations. As the economy in
Southeast Asia has started to recover from the 1997 Asian
financial crisis, inflation has not had a material impact on the
Company's business in recent years. It is management's belief
that inflation will not have a material impact in the near
future.
m) Cash and Cash Equivalents
The Company considers all highly liquid investments with original
maturity of three months or less to be cash equivalents.
3) Due from Associated Companies and Related Companies
---------------------------------------------------------
The amounts due from associated companies and related companies were
unsecured, interest free and without pre- determined repayment terms.
F-52
<PAGE>
Northbridge Communities Limited (a Thailand Company)
Notes to the financial statements - March 31, 1998, 1999 and 2000 Unaudited
4) Advances to a Related Company
---------------------------------
The company has made advances to a Vietnamese Joint Venture Company to
fund a potential project in Northern Vietnam. The management has
decided to write off the advance to the joint venture (Vietnam
project) as the Broad has approved it in December 1999. It is a
business decision. Consequently, the account balance becomes zero as
of March 31, 2000.
5) Loans to an Associate Company
---------------------------------
Two loans have been made to an associate company, Palanamai Limited,
of which the Company owns 45% of the total interest. (See Note No.6b.)
One loan was made in the Thai currency in the amount of 9,756,520 Baht
(equivalent to approximately US$ 258,378). The other loan was made in
US dollars in the amount of $378,000. These two loans have a the total
current balance of U.S.$ 636,378. Both loans bear a fixed interest
rate at 8% per annum. Loans to an associated company were unsecured
and without pre- determined repayment terms. The loans are due on
demand.
6) Investments
-----------
As of March 31, the balance of the account are as follows:
<TABLE>
<CAPTION>
2000 1999 1998
--------------------------------------------------------
% of % of % of
Holding US Holding US$ Holding US$
------- -- ------- --- ------- ---
<S> <C> <C> <C> <C> <C> <C> <C>
International School Eastern (a) 25 540,540 25 304,053 25 304,053
Seaboard Limited
Palanami Limited (b) 45 267,568 45 267,568 45 267,568
Unique Building Concepts 10 21,622 10 21,622 10 21,622
Limited
Provision for diminishing in value (764,530) - -
-----------------------------------------------
Investments, net 65,200 593,243 593,243
========= ======= =======
</TABLE>
a) International School Eastern Seaboard Limited, a Thailand company
International School Eastern Seaboard (ISE) started its school
operation in August 1994. Currently, ISE has a student enrollment of
approximately 325 from 25 countries with a majority of 30 teachers
recruited from the US. Most students are dependents of parents who
employed by multi-national companies such as GM, Ford and Mazda,
located in the Eastern Seaboard Region of Thailand. In order to meet
the demand for expatriate housing, the Company has invested in
Palanamai Limited to provide leasing homes for the expatriate
families.
b) Palanamai Limited, a Thailand Company
The Company has had a 45% investment in Palanami Limited ("Palanamai")
since 1994. Palanamai has developed housing in the Eastern Seaboard
Region of Thailand in order to provide leasing homes for the
expatriate families. The existing structures include 7 single family
dwellings and 16 townhouse. The current average occupancy rate is
approximately 75% - 80%. Despite of its continuing operating losses,
the Company's management believes that in line with the Asian economic
recovery the property value of Palanamai has appreciated substantially
and Palanamai has the financial vitality to continue its operations.
F-53
<PAGE>
Northbridge Communities Limited (a Thailand Company)
Notes to the financial statements - March 31, 1998, 1999 and 2000 Unaudited
c) Analysis of the Value of the Investment Account
<TABLE>
<CAPTION>
2000 1999 .
---------------------- ------------------------
Cost Fair Market Cost Fair Market
Value Value .
---------------------- ------------------------
Investment In US$ US$ US$ US$
<S> <C> <C> <C> <C>
Palanamai Ltd 2.7/share 0.26/share 2.7/share 0.23/share
ISE 2.7/share 0.13/share 2.7/share 0.10/share
</TABLE>
The fair market value of Palanamai Ltd and ISE were based on value
determined by the professional appraisers in Thailand. The fair market
value of these investee companies also are agreed by the management of
the Company. Palanamai Ltd and ISE, both of them have recurring losses
and as the property market has been in decline since starting of the
Asian financial crisis in 1997, the value of these investments are
decreased. On the conservative basis, the management adopted a
provision for diminution in value in order to write-down the value of
the Investment Account.
Based on the above analysis, management has decided to write down the
costs of investment in the accounts to reflect the lower fair market
value of $ 0.23/share and $ 0.10/share of these two investments.
7) Property, Plant and Equipment
--------------------------------
The account balances as of March 31, recorded at historical costs, are
as follows:
<TABLE>
<CAPTION>
2000 1999 1998
-------------- ---------- ----------
US$ US$ US$
<S> <C> <C> <C>
Land (a) 6,571,313 6,547,184 5,009,488
Buildings (b) 9,502,823 9,502,823 7,836,788
Office equipment 357,232 388,941 256,141
Vehicles 59,000 59,000 81,159
Furniture and fixtures 266,752 410,775 253,065
-------------- ---------- ----------
16,757,120 16,908,723 13,436,641
Vehicle under lease purchases - 26,343 26,343
-------------- ---------- ----------
16,757,120 16,935,066 13,462,984
Less: Accumulated depreciation 1,317,360 765,567 253,131
-------------- ---------- ----------
Total property, plant and
equipment, net 15,439,760 16,169,499 13,209,853
============== ========== ==========
(a) Details of Land is as follows:
Description 2000 1999 1998
---- ---- ----
US$ US$ US$
Land used for GM Houses 1,561,825 1,537,696 -
Cambodia Estate including NISC 5,009,488 5,009,488 5,009,488
--------- --------- ---------
Total Land 6,571,313 6,547,184 5,009,488
</TABLE>
There are 12 lots of land for the houses. Eleven houses are leased to General
Motors (Thailand) Ltd. These eleven houses are owned by the Company and
reported as fixed assets on the balance sheets. One lot of land is still owned
by an affiliate- Unique Building Concepts Co., Ltd ("UBS"). This particular one
lot of land is reported as advance payment for land on the balance sheets since
payment has been made by the Company while the title is still not transferred
from UBC to the Company.
F-54
<PAGE>
Northbridge Communities Limited (a Thailand Company)
Notes to the financial statements - March 31, 1998, 1999 and 2000 Unaudited
General Motors (Thailand) took the title of 11 lots of land and
10 houses as a collateral, and loaned the money and paid advance
rental to the Company (See Note 10).
(b) Detailed descriptions of buildings are as follows:
The building cost includes the design and construction costs of
the 10 houses leased to the GM expatriates, and construction
costs of NISC. The building is currently occupied by
approximately 80 students, and 12 teachers employed mainly from
the United States.
8) Construction In Progress.
---------------------------
The account balance relates to the 4 units of uncompleted houses of
the GM house project (see Note 1)
9) Accounts Payable- Current
---------------------------
Details of the balance of the account as of March 31 are as follows:
<TABLE>
<CAPTION>
Description 2000 1999 1998
--------- --------- -------
US$ US$ US$
<S> <C> <C> <C>
GM 4 undelivered houses 314,527 - -
UBC 825,175 2,002,858 -
Loans from related parties 157,500 93,332 40,000
Miscellaneous 11,650 17,300 357,230
--------- --------- -------
Total 1,308,852 2,113,490 397,230
</TABLE>
10) Rental Income Received In Advance and Accounts Payable
-------------------------------------------------------------
This account represents rental income of 10 delivered houses received
in advance from the GM (Thai) Ltd. for the GM House Project. The
balance of $1,256,472 consists of $1,144,765 advanced rental and
$111,707 of security deposits for these houses. The advance rental
income has been paid up by GM (Thai) Ltd to the first half of the year
2003.
On July 30 1999 US$ 626,683 relating to rental income of 4 undelivered
houses was transferred to Accounts Payable as a result of the
Company's inability to deliver the 4 houses to the customer - GM
(Thai) Ltd. The Company has agreed to repay this advance with its
accrued interest. The outstanding amount will be repaid in
installments and delivered to the GM (Thai) Ltd., each in the amount
of US$ 39,167.70, with payments having started on August 1, 1999 and
continuing until November 1, 2000. (See Note 1.)
11) Loan from Related Company
----------------------------
<TABLE>
<CAPTION>
2000 1999 1998
--------- --------- ---------
US$ US$ US$
<S> <C> <C> <C>
Loans denominated in U.S. dollars: 9,196,576 8,273,362 5,265,139
</TABLE>
The loans presented above are from Asian Frontier Holdings and
Financa Investment Advisor Limited who are shareholders of the
Company. The loans are unsecured and bear variable interest at the
rate equivalent to the prevailing one month LIBOR rate (currently
approximately 7%) plus 1.25% for US dollars. The loans are repayable
on demand.
F-55
<PAGE>
Northbridge Communities Limited (a Thailand Company)
Notes to the financial statements - March 31, 1998, 1999 and 2000 Unaudited
12) Share Capital
--------------
<TABLE>
<CAPTION>
2000 1999 1998
---------- ---------- ----------
<S> <C> <C> <C>
US$ US$ US$
Registered and issued share capital
4,000,000 common shares
at Baht 100 (US$2.7) each 10,810,811 10,810,811 10,810,811
</TABLE>
<TABLE>
<CAPTION>
2000 1999 1998
------- ------- -------
US$ US$ US$
<S> <C> <C> <C>
Office rental paid to a related company 1,977 1,752 6,653
Interest expenses paid to related companies 154,451 181,376 281,775
</TABLE>
14) Segmented Geographic Sales Income
------------------------------------
Income is generated from few customers and income from GM (Thai) Ltd.
represents over 10% of the Company's total income. The dollar value of
income from these customers is expected to maintain or increase
steadily over the next several years due to the fact that the Company
expects the relationship with the client and the Asian economy is to
grow steadily in the future.
<TABLE>
<CAPTION>
2000 1999 1998
------- ------- ------
US$ US$ US$
<S> <C> <C> <C>
Rental income- Property investment in Thailand 99,364 112,999 -
School enrollment income- School in Cambodia 191,506 95,042 63,530
------- ------- -------
290,870 208,041 63,530
</TABLE>
15) Contingent Liabilities
-----------------------
a) As of March 31, 2000, the Company had been sued by Unique
Building Concepts Co., Ltd., which is a 10% affiliate, ("UBC")
for breach of contract due to non-payment of construction fees of
US$594,600 (or 22,000,000 Baht) within the timeframe stated in
the contract. The total unpaid fees claimed by UBC is amounting
to US$649,265 (or 24,542,221 Baht). Although the ultimate outcome
has not been determined, the Company's management, under advice
from its legal advisor, believes that the outcome will be in
favor of the Company, due to the effect of the applicable Statute
of Limitations. Therefore, no provision has been made except for
the interest cost, which has been accrued in accordance with the
contract.
The damage claimed and accrued interest are recorded as Account
payable in the balance sheets. According to the Construction
Agreement, interest is calculated at the rate of 18% per annum on
non- payment amount of construction fees
b) The investment account on the balance sheet has been pledged as
collateral to guarantee loans of a related company US$ 1,934,689,
as of March 31 2000. If the guaranteed loan is not paid on time,
the Company's investments may have to be transferred to the
related company.
F-56
<PAGE>
Northbridge Communities Limited (a Thailand Company)
Notes to the financial statements - March 31, 1998, 1999 and 2000 Unaudited
16) Year 2000 Issue
-----------------
The company has developed plans to replace or modify its computers to
deal with the Year 2000 (Y2K) issue. The Company has started in-house
modifications of its computer systems to address the Year 2000 issue.
Since most of the computers purchased since 1998 are Y2K compliant,
the possible exposure may not be material. The Company will continue
to assess newly purchased machinery and computer-related hardware and
software to ensure such items are Y2K compliant.
17) Operating Risks
----------------
The Company's main operations are conducted in Thailand, Cambodia and
other Southeast Asian countries. Accordingly, the business, financial
conditions and results of operations may be influenced by the
political, economic and legal environment in Southeast Asia. The
Company's operations may be subjected to special considerations and
risks not typically associated with companies operating in the U.S. In
addition, the possible deterioration of any or all of the strategic
relationships between the Company and Asia Properties, Inc. may have
an adverse effect on the operations of the Company.
18) Foreign Corrupt Practices Act
--------------------------------
The Company is a Thailand registered business entity and is not
subject to the U.S. Foreign Corrupt Practices Act of 1977, which
generally prohibits U.S. companies from engaging in bribery or other
prohibited payments to foreign officials for the purpose of obtaining
or retaining business. During the audit, no violation of the Foreign
Corrupt Practices Act by the Company was noted.
19) Going Concern
--------------
Despite the continuing operational losses, it is the Company's belief
that the operation is sustainable with potential profits in the future
as the economy is recovering in Southeast Asia. It should be noted
that the shareholders including Asian Frontier Holdings and Siam
Investment Fund remain confidant of the future of the operations of
the Company. However, the continuing operation depends on the
willingness of additional capital contribution committed by its
existing shareholders, whether new investments can be brought in from
the investing community, and the speed of economic recovery as well as
continuing political stability of the Southeast Asian countries.
20) Retirement Plan
----------------
The Company's employees in Southeast Asia are all hired on a
contractual basis. The Company has properly provided the retirement
benefits to those employees who are entitled.
21) Shortage of Labor
-------------------
The Company has not experienced any labor shortage or labor disputes
in the past. It is expected that labor resources are abundant in
Southeast Asia, and are sufficient to fulfill Company's real estate
property development and operating needs.
22) Real Estate Price Fluctuation
--------------------------------
The Company purchases and develops real estate property and constructs
schools attracting expatriates to lease its property. The real estate
price fluctuates from time to time. The real estate price has been low
for the past two years, but prices may rise resulting in increased
cost of project development.
F-57
<PAGE>
Northbridge Communities Limited (a Thailand Company)
Notes to the financial statements - March 31, 1998, 1999 and 2000 Unaudited
23) Reliance on Key Personnel
----------------------------
Despite the fact that most of the key personnel and employees have
been with the Company for over one year, the operation of the Company
is dependent on the services of its top ranking officers and
employees. The possible loss of their services or the inability to
attract qualified personnel may or could have a material adverse
effect on the Company.
24) Accounting for Stock Options
-------------------------------
In October 1995, the FASB issued Statement of Financial Accounting
Standards No. 123 "Accounting for Stock Based Compensation" (FASB
No.123), which established the "fair value" method of accounting for
stock based compensation arrangements given to employees. The Company
has not adopted a stock option plan. The Board of Directors may adopt
stock option plans in the future to reward its management, directors
and employees expected to make exceptional contributions to the
Company.
25) Impact of Recently Issued Accounting Standards
---------------------------------------------------
Statement of Financial Accounting Standards No.133 - Accounting for
Derivative Instruments and Hedging Activities (FASB No.133) was
recently issued. FASB No.133 established accounting and reporting
standards for derivative financial instruments and for hedging
activities. The Company does not currently engage in any activities
that would be covered by FASB No.133.
F-58
<PAGE>
Northbridge Communities Limited (a Thailand Company)
Notes to the financial statements - March 31, 1998, 1999 and 2000 Unaudited
<TABLE>
<CAPTION>
ASIA PROPERTIES, INC.
PRO FORMA BALANCE SHEET
-----------------------
FOR THE YEAR ENDED DECEMBER 31, 1999
1999
Assets NCL API Note Adjustment Total
---------- ------ ---- ----------- ----------
<S> <C> <C> <C> <C> <C>
US$ US$ US$ US$
Current assets
Cash and cash equivalents 100,966 33,979 134,945
Advance payment and other
receivable 10,622 - 10,622
Deposits and prepayment 63,992 7,509 4 (2,661) 68,840
Inventories less allowance 3,226 - 3,226
Due from a holding company 7,530 - 7,530
Due from associated companies and
related companies 132,077 - 132,077
Total current assets 318,413 41,488 357,240
---------- ------ ----------
Loans to associated company 632,802 - 632,802
Fixed assets
Land and buildings, net 15,127,252 - 15,127,252
Equipment, furniture and fixture,
net 450,899 17,654 468,553
15,578,151 17,654 15,595,805
---------- ------ ----------
Construction in progress 1,280,353 - 1,280,353
Advance payment for land 126,392 - 126,392
Investments 65,200 27,000 92,200
3 4,149,189
Goodwill - - 4 2,432 4,151,621
Other deferred assets - 12,507 12,507
Total assets 18,001,311 98,649 22,248,920
---------- ------
</TABLE>
Footnote:
Assumption #1 The Company is to acquire all outstanding common shares
of NCL in exchange for its common stock of 4.6 millions with an assigned value
of $4.40 per share.
a) Acquired all outstanding common shares of NCL of $10,810,811
b) The Company is to issue 4.6 millions common stock
c) The common shares are issued at assigned value of $4.40 per
share, hence the additional paid-in capital is amounting to
$20,235,400 (($4.4 - $0.001) x 4.6 millions)
Assumption #2 a) The related company agreed to convert $5.28 million of
its loan to NCL into 1.2 million common stock of the Company.
b) Therefore, goodwill for the acquisition (all outstanding
common shares of NCL) are computed:
API is to issue 4.6 million common shares at $4.4
$20,240,000
Less: Acquired all outstanding common shares of NCL
(10,810,811
Converted $5.28 million loan to NCL into 1.2
million common shares (5,280,000)
--------------------
Goodwill
$4,149,189
========
4 The API's purchase of NCL is to exclude the Keltic Ltd., a subsidiary of NCL
Excluded Keltic's assets $,2,661
Excluded Keltic's liabilities 229
-------------
Goodwill $2,432
=============
<TABLE>
<CAPTION>
ASIA PROPERTIES, INC.
PRO FORMA BALANCE SHEET
-----------------------
FOR THE YEAR ENDED DECEMBER 31, 1999
1999
Liabilities & stockholders' equity NCL API Note Adjustment Total
----------- --------- ---- ------------ -----------
US$ US$ US$ US$
<S> <C> <C> <C> <C> <C>
Current liabilities
Accounts payable 1,448,496 70,007 1,518,503
Current portion of obligation
under lease purchase
agreements - - -
Rental income received in
Advance 1,355,836 - 1,355,836
Accrued interest payable 835,860 - 835,860
Other payable 55,091 1,083 4 (229) 55,945
Due to related companies 405,401 - 405,401
Total current liabilities 4,100,684 71,090 4,171,545
----------- --------- -----------
Loans from related companies 8,919,128 - 2 (5,280,000) 3,639,128
Total liabilities 13,019,812 71,090 7,810,673
Minority interests (93,114) - (93,114)
Stockholders' equity
Common stock, API: par
$0.001
Authorized shares - 50,000,000;
issued and outstanding
10,521,434 at December 31, 1a (10,810,811) 10,521
1999 10,810,811 5,921 1b 4,600
Additional paid-in capital - 870,225 1c 20,235,400 21,105,625
Accumulated deficit (7,900,445) (848,587) (8,749,032)
Translation adjustment 2,164,247 - 2,164,247
Total stockholders' equity 5,074,613 27,559 14,531,361
----------- --------- -----------
Total liabilities and stockholders'
equity 18,001,311 98,649 22,248,920
----------- --------- -----------
</TABLE>
F-59
<PAGE>
Footnote:
Assumption #1 The Company is to acquire all outstanding common shares
of NCL in exchange for its common stock of 4.6 millions with an assigned value
of $4.40 per share.
a) Acquired all outstanding common shares of NCL of $10,810,811
b) The Company is to issue 4.6 millions common stock
c) The common shares are issued at assigned value of $4.40 per
share, hence the additional paid-in capital is amounting to
$20,235,400 (($4.4 - $0.001) x 4.6 millions)
Assumption #2 a) The related company agreed to convert $5.28 million of
its loan to NCL into 1.2 million common stock of the Company.
b) Therefore, goodwill for the acquisition (all outstanding
common shares of NCL) are computed:
API is to issue 4.6 million common shares at $4.4
$20,240,000
Less: Acquired all outstanding common shares of NCL
(10,810,811
Converted $5.28 million loan to NCL into 1.2
million common shares (5,280,000)
--------------------
Goodwill
$4,149,189
========
4 The API's purchase of NCL is to exclude the Keltic Ltd., a subsidiary of NCL
Excluded Keltic's assets $,2,661
Excluded Keltic's liabilities 229
-------------
Goodwill $2,432
=============
F-60
<PAGE>
<TABLE>
<CAPTION>
ASIA PROPERTIES, INC.
PRO FORMA STATEMENT OF OPERATIONS
---------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1999
NCL API Note Adjustment Total
US$ US$ US$ US$
<S> <C> <C> <C> <C> <C>
Income 881,597 0 881,597
General & administration expenses 2,934,234 666,550 2 (8,084) 3,592,700
----------- --------- -----------
Operating loss (2,052,637) (666,550) (2,711,103)
Other income and expenses
Interest income 52,394 0 52,394
Interest expenses (763,037) (487) (763,524)
Other expenses 0 6,083 6,083
Gains on sales of securities 2,118,243 0 2,118,243
Written off amount due to related company 0 0 1 (1,552,670) (1,552,670)
Provision for diminution in value of investment (764,530) - (764,530)
----------- --------- -----------
Net income/(loss) (1,409,567) (660,954) (3,615,107)
Other Comprehensive Income
Gains/(loss) from foreign currency transaction (41,701) 0 (41,701)
----------- --------- -----------
Comprehensive loss before minority interests (1,451,268) (660,954) (3,656,808)
Minority interests 101,642 0 101,642
----------- --------- -----------
Net comprehensive loss after minority interests (1,349,626) (660,954) (3,555,166)
=========== ========= ===========
<FN>
Note
1. Written off the advance to Vietnam project
2. Deduct the loss of Keltic Co
</TABLE>
F-61
<PAGE>
Asia Properties, Inc.
Notes to Pro Forma condensed Financial Statements - December 31, 1999
Note 1) General
-----------------
Asian Properties, Inc. (the "Company") was incorporated in Nevada on April
6, 1998. The Company, with place of business located at 12707 High Bluff Drive,
San Diego, California 92130, was formed to invest in Asian real estate.
On January 22, 1999, trading of the Company's common stock commenced in the
U.S. Over-The-Counter market and the stock was quoted in the pink sheets of the
National Quotation Bureau (Symbol "ASPZ"). The Company has 50,000,000
authorized common shares with par value of $0.001 per share. Of the total
issued shares, 1,400,000 common shares were held as treasury stock with the
value of $60,000. As of December 31, 1999, total issued and outstanding common
shares were 5,921,434.
The Company signed a Share Purchase and Sales Agreement on February 4,
2000 to purchase Northbridge Communities Ltd. ("NCL"), a company incorporated in
Thailand. Under the agreement, the Company is to acquire NCL with the exception
of NCL's Vietnam operations and a subsidiary company; Keltic Ltd., via its
common stock, so that NCL is to become a 100% subsidiary of the Company. (See
Note 2).
Note 2) Management's assumptions of Pro Forma Adjustments
----------------------------------------------------------------
Assumptions of the Company's management to develop the pro forma
adjustments to compute the pro forma financial statements are as follows:
a) The Company is to acquire #144 all outstanding common shares of NCL in
exchange for its common stock of 4.6 millions with an assigned value
of $4.40 per share. The additional 4.6 millions of API common shares
is to be issued from the authorized common shares of 50,000,000.
b) The related company agreed that $5.28 million of its loan to NCL will
be in exchange for 1.2 million common stock of the Company.
c) The API's purchase of NCL is to exclude the Keltic Ltd., a subsidiary
of NCL.
d) No cash is involved in the API purchase.
Note 3)
--------
The pro forma financial information in essence is a business combination of
historical financial statements of API and NCL for the year ended December 31,
1999. The two historical statements on which the pro forma financial statements
are based, have been audited by our auditing firm. The historical statements can
be obtained via the audit reports. In addition, our firm has an appropriate
level of knowledge of the accounting and financial reporting practices of each
significant constituent part of the combined entity. #145 The pro forma
financial information has not been audited by the accountants. Therefore, the
level of assurance provided on the pro forma information is limited only to show
what the significant effects on the historical information might have been had
the transaction occurred at an earlier date. However, the pro forma condensed
financial statements are not necessarily indicative of the results of operations
or related effects on financial position that would have been attained had the
above-mentioned transaction actually occurred earlier.
F-62
<PAGE>
<TABLE>
<CAPTION>
ASIA PROPERTIES, INC.
PRO FORMA BALANCE SHEET
-----------------------
FOR THE YEAR ENDED MARCH 31, 2000
2000
Assets NCL API Note Adjustment Total
---------- ------ ---- ----------- ----------
US$ US$ US$ US$
<S> <C> <C> <C> <C> <C>
Current assets
Cash and cash equivalents 105,642 40,448 146,090
Advance payment and other
receivable 30,854 - 30,854
Deposits and prepayment 27,319 8,722 3 (2,661) 33,380
Inventories less allowance 3,087 - 3,087
Due from a holding company 7,710 - 7,710
Due from associated companies
and related companies 147,514 - 147,514
Total current assets 322,126 49,170 368,635
---------- ------ ----------
Advance to a related company - - -
Loans to associated company 636,378 - 636,378
Fixed assets
Land and buildings, net 15,135,180 - 15,135,180
Equipment, furniture and fixture,
Net 304,580 17,108 321,688
15,439,760 17,108 15,456,888
---------- ------ ----------
Construction in progress 1,280,353 - 1,280,353
Advance payment for land 126,392 - 126,392
Investments 65,200 27,000 92,200
Goodwill - - 2b 4,149,189 4,151,621
2 2,432
Total assets 17,870,209 93,278 22,112,447
---------- ------ ----------
<FN>
Footnote:
Assumption #1 The Company is to acquire all outstanding common shares of NCL in exchange
for its common shares of 4.6 millions with an assigned value of
$4.40 per share.
a) Acquired all outstanding common shares of NCL
b) The Company is to issue 4.6 millions common stock of $10,810,811
c) The common shares are issued at assigned value of $4.40 per share,
hence the additional paid-in capital is amounting to $20,235,400
($4.4-$0.001) x 4.6 millions)
Assumption #2 a) The related company agreed to convert $5.28 million of its loan to NCL
into 1.2 million common stock of the Company.
b) Therefore, goodwill for the acquisition (all outstanding common shares of
NCL) are computed:
API is to issue 4.6 million common shares at $4.4 $20,240,000
Less: Acquired all outstanding common shares of NCL (10,810,811)
Converted $5.28 million loan to NCL into 1.2 million common shares (5,280,000)
------------
Goodwill reported to the pro forma financial statements $4,149,189,
============
Assumption #3 The API's purchase of NCL is to exclude the Keltic Ltd, a subsidiary of
NCL. Therefore, the goodwill is reconciled:
Exclusion of Keltic's assets $2,661
Exclusion of Keltic's liabilities 229
--------
Goodwill reported to the pro form financial statements $2,432
========
</TABLE>
<TABLE>
<CAPTION>
ASIA PROPERTIES, INC.
PRO FORMA BALANCE SHEET
-----------------------
FOR THE YEAR ENDED MARCH 31, 2000
2000
Liabilities & stockholders' equity NCL API Note Adjustment Total
----------- --------- ---- ------------ -----------
US$ US$ US$ US$
<S> <C> <C> <C> <C> <C>
Current liabilities
Accounts payable 1,308,852 120,807 1,429,659
Current portion of obligation
under lease purchase agreements - - -
Rental income received in
Advance 1,256,472 - 1,256,472
Accrued interest payable 982,578 - 982,578
Other payable 91,444 857 3 (229) 92,072
Due to related companies 408,331 - 408,331
Total current liabilities 4,047,677 121,664 4,169,112
----------- --------- -----------
Loans from related companies 9,196,576 - 2a (5,280,000) 3,916,576
Total liabilities 13,244,253 121,664 8,085,688
----------- --------- -----------
Minority interests (114,610) - (114,610)
Stockholders' equity
Common stock, API: par
0.001
Authorized shares - 50,000,000;
issued and outstanding
10,521,434 at December 31, 1999 10,810,811 5,921 1a (10,810,811) 10,521
1b 4,600 21,105,625
Additional paid-in capital - 870,225 1c 20,235,400 21,105,625
Accumulated deficit (8,214,405) (904,532) (9,118,937)
Translation adjustment 2,144,160 - 2,144,160
Total stockholders' equity 4,740,566 (28,386) 14,141,369
----------- --------- -----------
Total liabilities and stockholders'
equity 17,870,209 93,278 22,112,447
----------- --------- -----------
<FN>
Footnote:
Assumption #1 The Company is to acquire all outstanding common shares of NCL in exchange
for its common shares of 4.6 millions with an assigned value of
$4.40 per share.
a) Acquired all outstanding common shares of NCL
b) The Company is to issue 4.6 millions common stock of $10,810,811
c) The common shares are issued at assigned value of $4.40 per share,
hence the additional paid-in capital is amounting to $20,235,400
($4.4-$0.001) x 4.6 millions)
Assumption #2 a) The related company agreed to convert $5.28 million of its loan to NCL
into 1.2 million common stock of the Company.
b) Therefore, goodwill for the acquisition (all outstanding common shares of
NCL) are computed:
API is to issue 4.6 million common shares at $4.4 $20,240,000
Less: Acquired all outstanding common shares of NCL (10,810,811)
Converted $5.28 million loan to NCL into 1.2 million common shares (5,280,000)
------------
Goodwill reported to the pro forma financial statements $4,149,189,
============
Assumption #3 The API's purchase of NCL is to exclude the Keltic Ltd, a subsidiary of
NCL. Therefore, the goodwill is reconciled:
Exclusion of Keltic's assets $2,661
Exclusion of Keltic's liabilities 229
--------
Goodwill reported to the pro form financial statements $2,432
========
</TABLE>
F-63
<PAGE>
<TABLE>
<CAPTION>
ASIA PROPERTIES, INC.
PRO FORMA STATEMENT OF OPERATIONS
---------------------------------
FOR THE QUARTER MARCH 31, 2000
NCL API Total
US$
US$ US$
<S> <C> <C> <C>
Income 290,870 - 290,870
General & administration expenses 482,970 55,945 538,915
--------- -------- -----------
Operating loss (192,100) (55,945) (248,045)
Other income and expenses
Interest income 40,814 - 40,814
Interest expenses (181,887) - (181,887)
--------- -------- -----------
Net income/(loss) (333,173) (55,945) (389,118)
Other Comprehensive Income
Gains/(loss) from foreign currency transaction (22,370) - (22,370)
--------- -------- -----------
Comprehensive loss before minority interests (355,543) (55,945) (3,656,808)
Minority interests 21,945 0 21,945
--------- -------- -----------
Net comprehensive loss after minority interests (334,048) (55,945) (389,993)
========= ======== ===========
</TABLE>
F-64
<PAGE>
Asian Properties Inc.
Notes to Pro Forma Condensed financial Statements - March 31, 2000
Note 1) General
-----------------
Asian Properties, Inc. ("the Company") was incorporated in Nevada on April 6,
1998. The Company, with place of business of business located at 12707 High
Bluff Drive, San Diego, California 92130, was formed to invest in Asian real
estate.
On January 22, 1999, trading of the Company's common stock commenced in the U.S.
Over-The-Counter market and the stock was quoted in the pink sheets of the
National Quotation Bureau (Symbol "ASPZ"). The Company has 50,000,000 authorized
common shares with par value of $0.001 per share. Of the total issued shares,
1,400,000 common shares were held as treasury stock with the value of $60,000.
As of March 31, 2000, total issued and outstanding common shares were 5,921,434.
The Company signed a Share Purchase and Sales Agreement on February 4, 2000 to
purchase Northbridge Communities Ltd. ("NCL"), a company incorporated in
Thailand. Under the agreement, the Company is to acquire NCL with the exception
of NCL's Vietnam operations and a subsidiary company; Keltic Ltd, via its common
stock, so that NCL is to become a 100% subsidiary of the Company. (See Note 2)
Note 2) Management's assumptions of Pro Forma Adjustments.
----------------------------------------------------------------
Assumptions of the Company's management to develop the pro forma
adjustments to compute the pro forma financial statements are as
follows:
a) The Company is to acquire all outstanding common shares of NCL in exchange
for its common stock of 4.6 millions with an assigned value of $4.40 per
share. The additional 4.6 millions of API common shares is to be issued
from the authorized common shares of 50,000,000.
b) The related company agreed that $5.28 million of its loan to NCL will be in
exchange for 1.2 million common stock of the Company.
c) The API's purchase of NCL is to exclude the Keltic Ltd, a subsidiary of
NCL.
d) No cash is involved in the API purchase.
Note 3)
--------
The pro forma financial information in essence is a business combination of
historical unaudited financial statements of API and NCL for the year ended on
March 31, 2000. The two historical statements on which the pro forma financial
statements are based, have been reviewed by our auditing firm. The historical
statements can be obtained via the review reports. We have an appropriate level
of knowledge of the accounting and financial reporting practices of each
significant constituent part of the combined entity. It should be noted that the
pro forma financial information has not been audited by the accountants.
Therefore, the level of assurance provided on the pro forma information is
limited only to show what the significant effects on the historical information
might have been had the transaction occurred at an earlier date. However, the
pro forma condensed financial statements are not necessarily indicative of the
results of operations or related effects on financial position that would have
been attained had the above-mentioned transaction actually occurred earlier.
F-65
<PAGE>
ANNEX A
NEVADA GENERAL CORPORATION LAW
SECTIONS 92A.300 THROUGH 92A.500
RIGHTS OF DISSENTING OWNERS
92A.300 DEFINITIONS. As used in NRS 92A.300 to 92A.500, inclusive, unless the
context otherwise requires, the words and terms defined in NRS 92A.305 to
92A.335, inclusive, have the meanings ascribed to them in those sections.
92A.305 "BENEFICIAL STOCKHOLDER" DEFINED. "Beneficial stockholder" means a
person who is a beneficial owner of shares held in a voting trust or by a
nominee as the stockholder of record.
92A.310 "CORPORATE ACTION" DEFINED. "Corporate action" means the action of a
domestic corporation.
92A.315 "DISSENTER" DEFINED. "Dissenter" means a stockholder who is entitled to
dissent from a domestic corporation's action under NRS 92A.380 and who exercises
that right when and in the manner required by NRS 92A.400 to 92A.480, inclusive.
92A.320 "FAIR VALUE" DEFINED. "Fair value," with respect to a dissenter's
shares, means the value of the shares immediately before the effectuation of the
corporate action to which he objects, excluding any appreciation or depreciation
in anticipation of the corporate action unless exclusion would be inequitable.
92A.325 "STOCKHOLDER" DEFINED. "Stockholder" means a stockholder of record or a
beneficial stockholder of a domestic corporation.
92A.330 "STOCKHOLDER OF RECORD" DEFINED. "Stockholder of record" means the
person in whose name shares are registered in the records of a domestic
corporation or the beneficial owner of shares to the extent of the rights
granted by a nominee's certificate on file with the domestic corporation.
92A.335 "SUBJECT CORPORATION" DEFINED. "Subject corporation" means the domestic
corporation which is the issuer of the shares held by a dissenter before the
corporate action creating the dissenter's rights becomes effective or the
surviving or acquiring entity of that issuer after the corporate action becomes
effective.
92A.340 COMPUTATION OF INTEREST. Interest payable pursuant to NRS 92A.300 to
92A.500, inclusive, must be computed from the effective date of the action until
the date of payment, at the average rate currently paid by the entity on its
principal bank loans or, if it has no bank loans, at a rate that is fair and
equitable under all of the circumstances.
92A.350 RIGHTS OF DISSENTING PARTNER OF DOMESTIC LIMITED PARTNERSHIP. A
partnership agreement of a domestic limited partnership or, unless otherwise
provided in the partnership agreement, an agreement of merger or exchange, may
provide that contractual rights with respect to the partnership interest of a
dissenting general or limited partner of a domestic limited partnership are
available for any class or group of partnership interests in connection with any
merger or exchange in which the domestic limited partnership is a constituent
entity.
92A.360 RIGHTS OF DISSENTING MEMBER OF DOMESTIC LIMITED-LIABILITY COMPANY. The
articles of organization or operating agreement of a domestic limited-liability
company or, unless otherwise provided in the articles of organization or
operating agreement, an agreement of merger or exchange, may provide that
contractual rights with respect to the interest of a dissenting member are
available in connection with any merger or exchange in which the domestic
limited-liability company is a constituent entity.
A-1
<PAGE>
92A.370 RIGHTS OF DISSENTING MEMBER OF DOMESTIC NONPROFIT CORPORATION.
1. Except as otherwise provided in subsection 2, and unless otherwise
provided in the articles or bylaws, any member of any constituent domestic
nonprofit corporation who voted against the merger may, without prior
notice, but within 30 days after the effective date of the merger, resign
from membership and is thereby excused from all contractual obligations to
the constituent or surviving corporations which did not occur before his
resignation and is thereby entitled to those rights, if any, which would
have existed if there had been no merger and the membership had been
terminated or the member had been expelled.
2. Unless otherwise provided in its articles of incorporation or
bylaws, no member of a domestic nonprofit corporation, including, but not
limited to, a cooperative corporation, which supplies services described in
chapter 704 of NRS to its members only, and no person who is a member of a
domestic nonprofit corporation as a condition of or by reason of the
ownership of an interest in real property, may resign and dissent pursuant
to subsection 1.
92A.380 RIGHT OF STOCKHOLDER TO DISSENT FROM CERTAIN CORPORATE ACTIONS AND TO
OBTAIN PAYMENT FOR SHARES.
1. Except as otherwise provided in NRS 92A.370 and 92A.390, a
stockholder is entitled to dissent from, and obtain payment of the fair
value of his shares in the event of any of the following corporate actions:
(a) Consummation of a plan of merger to which the domestic
corporation is a party:
(1) If approval by the stockholders is required for the merger by
NRS 92A.120 to 92A.160, inclusive, or the articles of
incorporation and he is entitled to vote on the merger; or
(2) If the domestic corporation is a subsidiary and is merged
with its parent under NRS 92A.180.
(b) Consummation of a plan of exchange to which the domestic
corporation is a party as the corporation whose subject owner's
interests will be acquired, if he is entitled to vote on the plan.
(c) Any corporate action taken pursuant to a vote of the stockholders
to the event that the articles of incorporation, bylaws or a
resolution of the board of directors provides that voting or nonvoting
stockholders are entitled to dissent and obtain payment for their
shares.
2. A stockholder who is entitled to dissent and obtain payment under
NRS 92A.300 to 92A.500, inclusive, may not challenge the corporate action
creating his entitlement unless the action is unlawful or fraudulent with
respect to him or the domestic corporation.
92A.390 LIMITATIONS ON RIGHT OF DISSENT: STOCKHOLDERS OF CERTAIN CLASSES OR
SERIES; ACTION OF STOCKHOLDERS NOT REQUIRED FOR PLAN OF MERGER.
1. There is no right of dissent with respect to a plan of merger or
exchange in favor of stockholders of any class or series which, at the
record date fixed to determine the stockholders entitled to receive notice
of and to vote at the meeting at which the plan of merger or exchange is to
be acted on, were either listed on a national securities exchange, included
in the national market system by the National Association of Securities
Dealers, Inc., or held by at least 2,000 stockholders of record, unless:
(a) The articles of incorporation of the corporation issuing the
shares provide otherwise; or
A-2
<PAGE>
(b) The holders of the class or series are required under the plan of
merger or exchange to accept for the shares anything except:
(1) Cash, owner's interests or owner's interests and cash in lieu
of fractional owner's interests of:
(I) The surviving or acquiring entity; or
(II) Any other entity which, at the effective date of the
plan of merger or exchange, were either listed on a national
securities exchange, included in the national market system
by the National Association of Securities Dealers, Inc., or
held of record by a least 2,000 holders of owner's interests
of record; or
(2) A combination of cash and owner's interests of the kind
described in sub-subparagraphs (I) and (II) of subparagraph (1)
of paragraph (b).
2. There is no right of dissent for any holders of stock of the
surviving domestic corporation if the plan of merger does not require
action of the stockholders of the surviving domestic corporation under NRS
92A.130.
92A.400 LIMITATIONS ON RIGHT OF DISSENT: ASSERTION AS TO PORTIONS ONLY TO SHARES
REGISTERED TO STOCKHOLDER; ASSERTION BY BENEFICIAL STOCKHOLDER.
1. A stockholder of record may assert dissenter's rights as to fewer
than all of the shares registered in his name only if he dissents with
respect to all shares beneficially owned by any one person and notifies the
subject corporation in writing of the name and address of each person on
whose behalf he asserts dissenter's rights. The rights of a partial
dissenter under this subsection are determined as if the shares as to which
he dissents and his other shares were registered in the names of different
stockholders.
2. A beneficial stockholder may assert dissenter's rights as to shares
held on his behalf only if:
(a) He submits to the subject corporation the written consent of the
stockholder of record to the dissent not later than the time the
beneficial stockholder asserts dissenter's rights; and
(b) He does so with respect to all shares of which he is the
beneficial stockholder or over which he has power to direct the vote.
92A.410 NOTIFICATION OF STOCKHOLDERS REGARDING RIGHT OF DISSENT.
1. If a proposed corporate action creating dissenters' rights is submitted
to a vote at a stockholders' meeting, the notice of the meeting must state
that stockholders are or may be entitled to assert dissenters' rights under
NRS 92A.300 to 92A.500, inclusive, and be accompanied by a copy of those
sections.
2. If the corporate action creating dissenters' rights is taken by written
consent of the stockholders or without a vote of the stockholders, the
domestic corporation shall notify in writing all stockholders entitled to
assert dissenters' rights that the action was taken and send them the
dissenter's notice described in NRS 92A.430.
92A.420 PREREQUISITES TO DEMAND FOR PAYMENT FOR SHARES.
1. If a proposed corporate action creating dissenters' rights is submitted
to a vote at a stockholders' meeting, a stockholder who wishes to assert
dissenter's rights:
(a) Must deliver to the subject corporation, before the vote is taken,
written notice of his intent to demand payment for his shares if the
proposed action is effectuated; and
A-3
<PAGE>
(b) Must not vote his shares in favor of the proposed action.
2. A stockholder who does not satisfy the requirements of subsection 1 and
NRS 92A.400 is not entitled to payment for his shares under this chapter.
92A.430 DISSENTER'S NOTICE: DELIVERY TO STOCKHOLDERS ENTITLED TO ASSERT RIGHTS;
CONTENTS.
1. If a proposed corporate action creating dissenters' rights is authorized
at a stockholders' meeting, the subject corporation shall deliver a written
dissenter's notice to all stockholders who satisfied the requirements to
assert those rights.
2. The dissenter's notice must be sent no later than 10 days after the
effectuation of the corporate action, and must:
(a) State where the demand for payment must be sent and where and when
certificates, if any, for shares must be deposited;
(b) Inform the holders of shares not represented by certificates to
what extent the transfer of the shares will be restricted after the
demand for payment is received;
(c) Supply a form for demanding payment that includes the date of the
first announcement to the news media or to the stockholders of the
terms of the proposed action and requires that the person asserting
dissenter's rights certify whether or not he acquired beneficial
ownership of the shares before that date;
(d) Set a date by which the subject corporation must receive the
demand for payment, which may not be less than 30 nor more than 60
days after the date the notice is delivered; and
(e) Be accompanied by a copy of NRS 92A.300 to 92A.500, inclusive.
92A.440 DEMAND FOR PAYMENT AND DEPOSIT OF CERTIFICATES; RETENTION OF
RIGHTS OF STOCKHOLDER.
1. A stockholder to whom a dissenter's notice is sent must:
(a) Demand payment;
(b) Certify whether he acquired beneficial ownership of the shares
before the date required to be set forth in the dissenter's notice for
this certification; and
(c) Deposit his certificates, if any, in accordance with the terms of
the notice.
2. The stockholder who demands payment and deposits his certificates, if
any, before the proposed corporate action is taken retains all other rights
of a stockholder until those rights are canceled or modified by the taking
of the proposed corporate action.
3. The stockholder who does not demand payment or deposit his certificates
where required, each by the date set forth in the dissenter's notice, is
not entitled to payment for his shares under this chapter.
A-4
<PAGE>
92A.450 UNCERTIFICATED SHARES: AUTHORITY TO RESTRICT TRANSFER AFTER DEMAND FOR
PAYMENT; RETENTION OF RIGHTS OF STOCKHOLDER.
1. The subject corporation may restrict the transfer of shares not
represented by a certificate from the date the demand for their payment is
received.
2. The person for whom dissenter's rights are asserted as to shares not
represented by a certificate retains all other rights of a stockholder
until those rights are canceled or modified by the taking of the proposed
corporate action.
92A.460 PAYMENT FOR SHARES: GENERAL REQUIREMENTS.
1. Except as otherwise provided in NRS 92A.470, within 30 days after
receipt of a demand for payment, the subject corporation shall pay each
dissenter who complied with NRS 92A.440 the amount the subject corporation
estimates to be the fair value of his shares, plus accrued interest. The
obligation of the Subject Corporation under this subsection may be enforced
by the district court:
(a) Of the county where the corporation's registered office is
located; or
(b) At the election of any dissenter residing or having its registered
office in this state, of the county where the dissenter resides or has
its registered office. The court shall dispose of the complaint
promptly.
2. The payment must be accompanied by:
(a) The subject corporation's balance sheet as of the end of a fiscal
year ending not more than 16 months before the date of payment, a
statement of income for that year, a statement of changes in the
stockholders' equity for that year and the latest available interim
financial statements, if any;
(b) A statement of the subject corporation's estimate of the fair
value of the shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's rights to demand payment under NRS
92A.480; and
(e) A copy of NRS 92A.300 to 92A.500, inclusive.
92A.470 PAYMENT FOR SHARES: SHARES ACQUIRED ON OR AFTER DATE OF DISSENTER'S
NOTICE.
1. A subject corporation may elect to withhold payment from a dissenter
unless he was the beneficial owner of the shares before the date set forth
in the dissenter's notice as the date of the first announcement to the news
media or to the stockholders of the terms of the proposed action.
2. To the extent the subject corporation elects to withhold payment, after
taking the proposed action, it shall estimate the fair value of the shares,
plus accrued interest, and shall offer to pay this amount to each dissenter
who agrees to accept it in full satisfaction of his demand. The subject
corporation shall send with its offer a statement of its estimate of the
fair value of the shares, an explanation of how the interest was
calculated, and a statement of the dissenters' right to demand payment
pursuant to NRS 92A.480.
92A.480 DISSENTER'S ESTIMATE OF FAIR VALUE: NOTIFICATION OF SUBJECT CORPORATION;
DEMAND FOR PAYMENT OF ESTIMATE.
1. A dissenter may notify the subject corporation in writing of his own
estimate of the fair value of his shares and the amount of interest due,
and demand payment of his estimate, less any payment pursuant to NRS
92A.460, or reject the offer pursuant to NRS 92A.470 and demand payment of
the fair value of his shares and interest due, if he believes that the
amount paid pursuant to NRS 92A.460 or offered pursuant to NRS 92A.470 is
less than the fair value of his shares or that the interest due is
incorrectly calculated.
2. A dissenter waives his right to demand payment pursuant to this section
unless he notifies the Subject Corporation of his demand in writing within
30 days after the Subject Corporation made or offered payment for his
shares.
92A.490 LEGAL PROCEEDING TO DETERMINE FAIR VALUE: DUTIES OF SUBJECT CORPORATION;
POWERS OF COURT; RIGHTS OF DISSENTER.
1. If a demand for payment remains unsettled, the subject corporation shall
commence a proceeding within 60 days after receiving the demand and
petition the court to determine the fair value of the shares and accrued
interest. If the Subject Corporation does not commence the proceeding
within the 60-day period, it shall pay each dissenter whose demand remains
unsettled the amount demanded.
A-5
<PAGE>
2. A subject corporation shall commence the proceeding in the district
court of the county where its registered office is located. If the Subject
Corporation is a foreign entity without a resident agent in the state, it
shall commence the proceeding in the county where the registered office of
the domestic corporation merged with or whose shares were acquired by the
foreign entity was located.
3. The Subject Corporation shall make all dissenters, whether or not
residents of Nevada, whose demands remain unsettled, parties to the
proceeding as in an action against their shares. All parties must be served
with a copy of the petition. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
4. The jurisdiction of the court in which the proceeding is commenced under
subsection 2 is plenary and exclusive. The court may appoint one or more
persons as appraisers to receive evidence and recommend a decision on the
question of fair value. The appraisers have the powers described in the
order appointing them, or any amendment thereto. The dissenters are
entitled to the same discovery rights as parties in other civil
proceedings.
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<PAGE>
5. Each dissenter who is made a party to the proceeding is entitled to a
judgment:
(a) For the amount, if any, by which the court finds the fair value of
his shares, plus interest, exceeds the amount paid by the subject
corporation; or
(b) For the fair value, plus accrued interest, of his after-acquired
shares for which the Subject Corporation elected to withhold payment
pursuant to NRS 92A.470.
92A.500 LEGAL PROCEEDING TO DETERMINE FAIR VALUE: ASSESSMENT OF COSTS AND FEES.
1. The court in a proceeding to determine fair value shall determine all of
the costs of the proceeding, including the reasonable compensation and
expenses of any appraisers appointed by the court. The court shall assess
the costs against the subject corporation, except that the court may assess
costs against all or some of the dissenters, in amounts the court finds
equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously or not in good faith in demanding payment.
2. The court may also assess the fees and expenses of the counsel and
experts for the respective parties, in amounts the court finds equitable:
(a) Against the subject corporation and in favor of all dissenters if
the court finds the subject corporation did not substantially comply
with the requirements of NRS 92A.300 to 92A.500, inclusive; or
(b) Against either the subject corporation or a dissenter in favor of
any other party, if the court finds that the party against whom the
fees and expenses are assessed acted arbitrarily, vexatiously or not
in good faith with respect to the rights provided by NRS 92A.300 to
92A.500, inclusive.
3. If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the subject
corporation, the court may award to those counsel reasonable fees to be
paid out of the amounts awarded to the dissenters who were benefited.
4. In a proceeding commenced pursuant to NRS 92A.460, the court may assess
the costs against the subject corporation, except that the court may assess
costs against all or some of the dissenters who are parties to the
proceeding, in amounts the court finds equitable, to the extent the court
finds that such parties did not act in good faith in instituting the
proceeding.
5. This section does not preclude any party in a proceeding commenced
pursuant to NRS 92A.460 or 92A.490 from applying the provisions of N.R.C.P.
68 or NRS 17.115.
A-8
<PAGE>
ANNEX B
DEMAND NOTICE TO ASSERT DISSENTERS' RIGHTS
To: Asia Properties, Inc.
c/o Computershare Investor Services, Inc.
12039 West Alameda Parkway, Suite Z-2
Lakewood, Colorado 80228
and
Roger V. Davidson, Esq.
Ballard Spahr Andrews & Ingersoll, LLP
1225 17th Street, Suite 2300
Denver, Colorado 80202
Certified Mail
Return Receipt Requested
Notice is hereby given that the undersigned is the owner of
__________________ shares of common stock of Asia Properties, Inc., a Nevada
corporation, and is hereby making a written demand for payment of the fair value
of those shares of common stock in connection with the undersigned's dissent to
the merger of Asia Properties, Inc. into Asia Properties Investments, Inc., a
British Virgin Islands company formed for the purpose of the reincorporation of
Asia Properties, Inc. as a British Virgin Islands company.
This merger was first publicly announced on ________________, 2000. The
undersigned hereby certifies that the date on which the undersigned, or the
person on whose behalf the undersigned dissents, acquired beneficial ownership
of the stock is _________________, __________.
The undersigned hereby tenders and deposits all certificates for the common
stock for purposes of processing the same pursuant to the provisions of Sections
92A.300 through 92A.500 of the Nevada General Corporation Law. To the extent
that the common stock is not represented by certificates, the undersigned
understands and acknowledges that the transfer of the common stock will be
restricted from the date that this notice is received by Asia Properties, Inc.
Very truly yours,
_______________________________________
[Name of dissenting stockholder]
B-1
<PAGE>
PART II
INFORMATION NOT REQUIRED IN A PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As in most U.S. jurisdictions, the board of directors of a British Virgin
Islands company is charged with the management and affairs of the company and,
subject to any to the contrary in the Asia Properties Investments memorandum of
association, the Asia Properties Investments Board of Directors is entrusted
with the power to manage the Asia Properties Investments business and affairs.
In most U.S. jurisdictions, directors owe a fiduciary duty to the company and
its stockholders, including a duty of care, under which directors must properly
appraise themselves of all reasonably available information, and a duty of
loyalty, under which they must protect the interests of the company and refrain
from conduct that injures the company or its stockholders or that deprives the
company or its stockholders of any profit or advantage. Many U.S. jurisdictions
have enacted various statutory provisions which permit the monetary liability of
directors to be eliminated or limited. Under British Virgin Islands law,
liability of one of an Asia Properties Investments directors to Asia Properties
Investments is generally limited to cases of willful malfeasance in the
performance of his duties or to cases where the director has not acted honestly
and in good faith and with a view to Asia Properties Investments best interests.
Under the Asia Properties Investments memorandum of association, Asia
Properties Investments is authorized to indemnify any person who is made or
threatened to be made a party to a legal or administrative proceeding by virtue
of being a director, officer or liquidator of Asia Properties Investments,
provided such person acted honestly and in good faith and with a view to the
best interests of Asia Properties Investments and, in the case of a criminal
proceeding, had no reasonable cause to believe that his conduct was unlawful.
The Asia Properties Investments memorandum of association also permits Asia
Properties Investments to indemnify any director, officer or liquidator who is
successful in any proceeding against expenses and judgments and fines and
amounts paid in settlement and reasonably incurred in connection with the
proceeding, where such person met the above standard of conduct. There also are
provisions in the memorandum of association that insure or indemnify, to the
full extent allowed by the laws of the Territory of the British Virgin Islands,
directors, officers, employees, agents or persons serving in similar capacities
in other enterprises at the request of Asia Properties Investments.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The following exhibits are furnished as part of this registration statement:
No. Exhibit Description
--- --------------------
2.1 Agreement and Plan of Merger between Asia Properties, Inc. and Asia
Properties Investments, Inc. dated February 4, 2000.*
II-1
<PAGE>
2.2 Amendment to Agreement and Plan of Merger between Asia Properties, Inc. and
Asia Properties Investments, Inc. dated as of July 14, 2000.*
3.1 Memorandum of Association of Asia Properties Investments, Inc. as filed
with the Registrar of Companies in the British Virgin Islands on December
7, 1999.*
3.2 Articles of Association of Asia Properties Investments, Inc. as filed with
the Registrar of Companies in the British Virgin Islands on December 7,
1999.*
3.3 Certificate of Incorporation of Asia Properties, Inc., a Nevada
corporation.*
3.4 Bylaws of Asia Properties, Inc., a Nevada corporation.*
5.1 Opinion of O'Neal Webster O'Neal Myers Fletcher & Gordon regarding the
validity of the shares.*
8.1 Opinion of Ballard Spahr Andrews & Ingersoll, LLP regarding U.S. federal
income tax matters.*
8.2 Opinion of O'Neal Webster O'Neal Myers Fletcher & Gordon regarding British
Virgin Islands tax matters (included in Exhibit 5.1 hereto).
10.1 Agreement on Acquisition of Right to Establish Property Fund dated July 18,
1998 between Asia Properties, Inc., Daniel S. McKinney, Simon J. Landy and
Nicholas St. Johnston.*
10.2 Consultancy Contract dated August 25, 1998 between Asia Properties, Inc.
and Coldway, Ltd.*
10.3 Consultancy Contract dated August 25, 1998 between Asia Properties, Inc.
and Milliard Limited.*
10.4 Consulting Agreement dated October 8, 1998 between Asia Properties, Inc.
and Camden Financial Group, Inc.*
10.5 Consulting Agreement dated October 8, 1998 between Asia Properties, Inc.
and Jay C. Lanning.*
10.6 Agreement dated November 16, 1998 between Asia Properties, Inc. and Simon
Landy.
10.7 Memorandum of Understanding between Asia Properties, Inc. and Northbridge
Communities Limited dated June 11, 1999.*
II-2
<PAGE>
10.8 Share Purchase and Sale Agreement dated February 4, 2000 between Asia
Properties Investments, Inc., Asia Properties (Thailand) Limited,
Northbridge Communities Limited and the shareholders of Northbridge
Communities Limited.*
10.9 Amendment No. 1 dated July __, 2000 to Share Purchase and Sale Agreement
dated February 4, 2000 between Asia Properties Investments Inc., Asia
Properties (Thailand) Limited, Northbridge Communities Limited and the
shareholders of Northbridge Communities Limited.* 10.10 Loan Agreement
between Asia Properties, Inc. and Coldway Limited dated July 1, 2000*
10.11Loan Agreement between Asia Properties, Inc. and Milliard Limited dated
July 1, 2000.*
10.12Loan Agreement between Asia Properties, Inc. and Daniel S. McKinney dated
July 1, 2000.*
10.13Loan Agreement between Asia Properties, Inc. and Nicholas St. Johnston
dated July 1, 2000.*
10.14Contract of Employment and Statement of Particulars of Terms of Employment
of Daniel S. McKinney dated September 1, 1999.
10.15Contract of Employment and Statement of Particulars of Terms of Employment
of Nicholas St. Johnston dated September 1, 1999.
10.16Letter from Cambodian Public Bank Limited dated June 26, 2000 Regarding
$1.7 Million Credit Facility for Northbridge Communities Limited
23.1 Consent of British Virgin Islands counsel (included in Exhibit 5.1
hereto).*
23.2 Consent of Ballard Spahr Andrews & Ingersoll, LLP (included in Exhibit 8.1
hereto).*
23.3 Consent of Dickson V. Lee, Certified Public Accountants, LLC.*
24.1 Power of Attorney (included in signature page hereof).*
99.1 Translation of letter dated July 16, 1998 from the Office of the Securities
and Exchange Commission of Thailand.*
99.2 Translation of letter dated July 15, 1999 from the Office of the Securities
and Exchange Commission of Thailand.*
99.3 Acknowledgement of Agreement to convert debt to Asian Frontier Holdings,
Ltd. into 1,200,000 shares of Asia Properties Investments, dated August 14,
2000.*
____________
* Filed herewith.
II-3
<PAGE>
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form;
(2) That every prospectus (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of
section 10(a)(3) of the Securities Act of 1933 and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part
of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof; and
(3) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to any provision or
arrangement whereby the registrant may indemnify a director, officer or
controlling person or the registrant against liabilities arising under the
Securities Act, or otherwise, the registrant has been advised that in the
opinion of the SEC such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
(b) The undersigned registrant undertakes: (i) to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means; and (ii) to arrange or provide for a facility in the
U.S. for the purpose of responding to such requests. The undertaking in
subparagraph (i) above includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
II-4
<PAGE>
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Bangkok, Thailand, and
the City of Bellingham, Washington on September 14, 2000.
ASIA PROPERTIES INVESTMENTS, INC.
By: /s/ Daniel S. McKinney
------------------------------------------------
Daniel S. McKinney, President
By: /s/ NICHOLAS ST. JOHNSTON
------------------------------------------------
Nicholas St. Johnston, Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby authorizes, constitutes
and appoints Nicholas St. Johnson and Daniel S. McKinney, or either of them
individually, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his own name, place and stead,
in any and all capacities, to sign any and all amendments (including
post-effective amendments and other amendments thereto) to this registration
statement on Form F-4 and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do and
perform each and every act and thing as he could do in person, hereby ratifying
and confirming all that said attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
------------------------- --------------------------------- ------------------
/s/ Daniel S. McKinney President and Director September 14, 2000
-------------------------
Daniel S. McKinney
/s/ NICHOLAS ST. JOHNSTON Chief Executive Officer, Chief September 14, 2000
------------------------- Financial Officer, Principal
Nicholas St. Johnston Accounting and Financial Officer,
and Director
<PAGE>
Signature Title Date
------------------------- --------------------------------- ------------------
Director September __, 2000
-------------------------
David W. Diehl
/s/ David Roberts Director September 14, 2000
-------------------------
David Roberts
<PAGE>
