UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB/A
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(Mark one)
XX QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF
1934
For the transition period from ______________ to _____________
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Commission File Number: 33-10281
KING POWER INTERNATIONAL GROUP CO., LTD.
(Exact name of small business issuer as specified in its charter)
Nevada 75-2641513
(State of incorporation) (IRS Employer ID Number)
Bangkok International Airport Building, Vibhavadi Road, Bangkok 10210 Thailand
(Address of principal executive offices)
(662) 996-8004
(Issuer's telephone number)
Copies to:
Kevin B. Halter, Jr.
16910 Dallas Parkway, Suite 100
Dallas, TX 75248
(972) 248-1922
(972) 248-4797 (fax)
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Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES X NO
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: August 10, 1997: 20,000,000
Transitional Small Business Disclosure Format (check one): YES NO X
<PAGE>
KING POWER INTERNATIONAL GROUP CO., LTD.
Form 10-QSB for the Quarter ended June 30, 1997
Table of Contents
Page
Part I - Financial Information ----
Item 1 Financial Statements 3
Item 2 Management's Discussion and Analysis or Plan of Operation 14
Part II - Other Information
Item 1 Legal Proceedings 15
Item 2 Changes in Securities 15
Item 3 Defaults Upon Senior Securities 15
Item 4 Submission of Matters to a Vote of Security Holders 15
Item 5 Other Information 15
Item 6 Exhibits and Reports on Form 8-K 15
2
<PAGE>
KING POWER INTERNATIONAL GROUP CO., LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 1997 and December 31, 1996
ASSETS
------
<TABLE>
<S> <C> <C>
(Unaudited) (Audited)
June 30, December 31,
1997 1996
------------ ------------
CURRENT ASSETS
Cash and cash equivalents $ 5,102,045 $ 1,140,832
Accounts receivable
Trade 710,630 73,334
Refundable value added tax 1,753,933 922,619
Related parties 516,211 74,161
Other unrelated entities 238,413 --
Directors 4,731,517 1,876,164
Inventories and purchase deposits 24,042,894 7,086,427
Prepaid expenses and other 1,012,896 371,782
------------ ------------
Total current assets 38,108,539 11,545,319
------------ ------------
PROPERTY, PLANT AND EQUIPMENT
Leasehold improvements 3,439,833 1,609,928
Equipment and fixtures 1,527,974 851,627
Building and land 404,948 --
Vehicles 272,202 221,308
------------ ------------
5,644,957 2,682,863
Less accumulated depreciation (675,012) (419,039)
------------ ------------
Net property, plant and equipment 4,969,945 2,263,824
------------ ------------
OTHER ASSETS
Restricted deposit 11,607,573 9,547,451
Other 1,594,510 387,146
------------ ------------
Total other assets 13,202,083 9,934,597
------------ ------------
TOTAL ASSETS $ 56,280,567 $ 23,743,740
============ ============
</TABLE>
- Continued -
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
3
<PAGE>
KING POWER INTERNATIONAL GROUP CO., LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - CONTINUED
June 30, 1997 and December 31, 1996
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<S> <C> <C>
(Unaudited) (Audited)
June 30, December 31,
1997 1996
------------ ------------
CURRENT LIABILITIES
Cash overdraft $ 493,456 $ 937,804
Short-term note payable to bank 12,840,822 5,652,964
Current maturities of long-term debt 9,802 --
Current maturities of hire-purchase payable 37,323 63,488
Accounts payable - trade
Unrelated parties 27,020,721 9,766,916
Related parties 1,504,108 1,284,554
Advances from related parties -- 685,012
Other accrued liabilities
Concession fees 1,669,980 --
Other 1,925,041 1,017,113
------------ ------------
Total current liabilities 45,501,253 19,407,851
------------ ------------
LONG-TERM LIABILITIES
Long-term debt, net of current maturities 374,814 --
Hire-purchase payable 56,467 55,010
------------ ------------
Total liabilities 46,886,021 19,462,861
------------ ------------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST 603,362 350,096
------------ ------------
SHAREHOLDERS' EQUITY
Common stock - $0.001 par value. 100,000,000 shares
authorized. 20,000,000 and 19,075,316 shares issued
and outstanding, respectively 20,000 19,075
Additional paid-in capital 19,194,350 19,258,069
Accumulated deficit (9,469,679) (15,340,361)
------------ ------------
9,744,671 3,936,783
Treasury stock - at cost (33,334 shares) -- (6,000)
------------ ------------
Total shareholders' equity 9,744,671 3,930,783
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 56,280,567 $ 23,743,740
============ ============
</TABLE>
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
4
<PAGE>
KING POWER INTERNATIONAL GROUP CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Six and Three months ended June 30, 1997 and 1996
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C>
Six months Six months Three months Three months
ended ended ended ended
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
------------- ------------- ------------- -------------
REVENUES
Net merchandise sales $ 56,127,714 $ 17,576,750 $ 28,808,787 $ 8,284,026
Gain on foreign exchange 902,754 254,233 807,078 90,831
------------ ------------ ------------ ------------
Total revenues 57,030,468 17,830,983 29,615,865 8,374,857
------------ ------------ ------------ ------------
COST OF SALES
Product costs 23,829,812 6,631,133 12,198,831 3,054,116
Concession fees 20,173,375 11,320,052 10,372,566 4,979,905
------------ ------------ ------------ ------------
Total cost of sales 44,003,187 17,951,185 22,571,397 8,034,021
------------ ------------ ------------ ------------
GROSS PROFIT 13,027,281 (120,202) 7,044,468 340,836
------------ ------------ ------------ ------------
OPERATING EXPENSES
Selling expenses
Salaries and related costs 3,660,426 1,840,636 2,059,375 986,321
Other selling expenses 2,068,367 381,299 1,209,614 193,795
Depreciation 259,188 71,335 132,434 35,484
General and administrative expenses 1,811,861 199,946 1,152,420 107,269
Interest expense 436,962 3,824 373,392 3,670
Compensation expense on common
stock issued at less than "fair
value" for recapitalization and
consulting costs 76,641 -- 76,641 --
------------ ------------ ------------ ------------
Total operating expenses 8,313,445 2,497,040 5,003,876 1,170,501
------------ ------------ ------------ ------------
INCOME (LOSS)
FROM OPERATIONS $ 4,713,836 $ (2,617,242) $ 2,040,592 $ (985,703)
============ ============ ============ ============
</TABLE>
- Continued -
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
5
<PAGE>
KING POWER INTERNATIONAL GROUP CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED
Six and Three months ended June 30, 1997 and 1996
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C>
Six months Six months Three months Three months
ended ended ended ended
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
INCOME (LOSS)
FROM OPERATIONS $ 4,713,836 $ (2,617,242) $ 2,040,592 $ (985,703)
OTHER INCOME (EXPENSES)
Interest income 1,138,961 11,020 641,741 11,020
Other 167,573 -- 19,190 --
Effect of converting foreign
currency for financial
reporting purposes 106,301 114,630 (99,048) 202,150
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE
PROVISION FOR INCOME
TAXES AND MINORITY
INTEREST 6,126,671 (2,491,592) 2,602,475 (772,533)
PROVISION FOR
INCOME TAXES -- -- -- --
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE
MINORITY INTEREST 6,126,671 (2,491,592) 2,602,475 (772,533)
MINORITY INTEREST (255,989) 2,933 (141,893) 2,933
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ 5,870,682 $ (2,488,659) $ 2,460,582 $ (769,600)
============ ============ ============ ============
Earnings (loss) per share of
common stock outstanding $ 0.30 $ (0.13) $ 0.13 $ (0.04)
============ ============ ============ ============
Weighted-average number
of shares outstanding 19,366,515 19,075,016 19,654,514 19,075,016
============ ============ ============ ============
</TABLE>
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
6
<PAGE>
KING POWER INTERNATIONAL GROUP CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended June 30, 1997 and 1996
(Unaudited)
<TABLE>
<S> <C> <C>
Six months Six months
ended ended
June 30, 1997 June 30, 1996
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 5,870,682 $ (2,488,659)
Adjustments to reconcile net income to net cash
provided by operating activities
Minority interest 255,989 (2,933)
Depreciation and amortization 259,188 71,335
Effect of converting foreign
currency for financial reporting purposes (137,358) (48,325)
Compensation expense on common stock
issued at less than "fair value" for
recapitalization and consulting expenses 76,641 --
(Increase) decrease in
Accounts receivable - trade (637,296) --
Refundable value added taxes (831,314) (2,919)
Inventory (16,956,467) 30,947
Prepaid expenses and other assets (1,850,493) (419,443)
Restricted deposits (2,060,122) (2,811,625)
Increase (decrease) in
Trade accounts payable 17,473,359 1,049,163
Other accrued liabilities 2,577,908 1,670,545
------------ ------------
Net cash provided by operating activities 4,040,717 (2,951,914)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash advanced to related parties (442,050) (648,404)
Cash advanced to other unrelated entities (238,413) --
Cash advanced to directors (2,855,353) (7,243,933)
Cash invested in other companies -- (232,558)
Cash paid for property, plant and equipment (2,962,094) (246,201)
------------ ------------
Net cash used in investing activities (6,497,910) (8,371,096)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Reduction of cash overdraft (444,348) (362,393)
Net change in short term note payable 7,187,858 3,941,664
Principal advanced on long-term debt 384,616 --
Cash advances repaid to related parties (685,012) --
Cash received in initial capitalization of
J. M. T. Duty Free Company, Limited -- 7,889,193
Net change in hire-purchase agreement (24,708) 97,556
------------ ------------
Net cash provided by financing activities 6,418,406 11,566,020
------------ ------------
INCREASE IN CASH AND CASH EQUIVALENTS 3,961,213 243,010
Cash and cash equivalents at beginning of period 1,140,832 455,093
------------ ------------
Cash and cash equivalents at end of period $ 5,102,045 $ 698,103
============ ============
</TABLE>
- Continued -
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
7
<PAGE>
KING POWER INTERNATIONAL GROUP CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Six months ended June 30, 1997 and 1996
(Unaudited)
Six months Six months
ended ended
June 30, 1997 June 30, 1996
------------- -------------
SUPPLEMENTAL DISCLOSURES OF
INTEREST AND INCOME TAXES PAID
Interest paid during the period $ 436,962 $3,824
============== ======
Income taxes paid (refunded) $ -- $ --
============== ======
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
8
<PAGE>
KING POWER INTERNATIONAL GROUP CO., LTD.
Notes to Financial Statements
Note 1 - Basis of Presentation
King Power International Group Co., Ltd. (formerly Immune America, Inc.) (KPG)
is incorporated under the laws of the State of Nevada. From inception through
June 12, 1997, KPG had no significant assets, liabilities or business operations
and was in search of a suitable business acquisition or merger candidate. As
such, the Company was classified as a "development stage enterprise"
On June 12, 1997, KPG engaged in a step reverse merger transaction with the
shareholders of J. M. T. Group Company, Ltd. and J. M. T. Duty Free Company,
Ltd. (Thailand corporations) whereby an aggregate 18,800,000 shares of
restricted, unregistered common stock was exchanged for 100.0% of the issued and
outstanding shares of J. M. T. Group Company, Ltd. and 95.0% of the issued and
outstanding shares of J. M. T. Duty Free Company, Ltd.
The June 12, 1997 reverse merger was treated as a recapitalization of KPG.
Accordingly, the assets, liabilities and business operations of J. M. T. Group
Company, Ltd. And J. M. T. Duty Free Company, Ltd. are recognized at historical
cost. The combined historical financial statements of the KPG, J. M. T. Group
Company, Ltd. and J. M. T. Duty Free Company, Ltd. become the historical
financial statements of King Power International Group Co., Ltd.
Concurrent with the reverse merger, KPG changed its corporate name from Immune
America, Inc. to King Power International Group Co., Ltd.
J. M. T. Group Company, Ltd. (JMT Group) is a Thailand corporation engaged in
selling various souvenirs and consumer products in the international and
domestic terminals of the various airports located within Thailand to the
general public. JMT Group holds the exclusive operating license granted by the
Airports Authority of Thailand for all shops of this specific nature.
J. M. T. Duty Free Company, Ltd. (JMT Duty Free) is a Thailand corporation
engaged in selling duty free merchandise to the traveling public under the
supervision of Thailand customs in various shops located in the international
terminals of the various airports located within Thailand. JMT Duty Free holds a
non-exclusive license to operate duty free shops from the Airports Authority of
Thailand for shops of this specific nature.
JMT Group and JMT Duty Free operate in a home currency of the Thai Baht. All
figures in the accompanying financial statements have been converted to US
Dollars using the following conversion rates as provided to the Company by the
Bank of Thailand:
December 31, 1995 25.20 Baht per $1
June 30, 1996 25.37 Baht per $1
December 31, 1996 25.62 Baht per $1
June 30, 1997 25.80 Baht per $1
9
<PAGE>
KING POWER INTERNATIONAL GROUP CO., LTD.
Notes to Financial Statements - Continued
Note 1 - Basis of Presentation - Continued
JMT Group and JMT Duty Free use the US Dollar as their base product pricing
method, thereby allowing for periodic currency fluctuation through conversion at
the point of sale. All sales are made and collected in Thai Baht. Accordingly,
the Company is at risk for currency translation between the point of sale and
conversion of non-Thai Baht proceeds into local currency. Additionally, the
Company pays for local goods and services in local currency and is not subject
to currency conversion risk; however, all international purchases are also tied
to US Dollar valuation and the Company is at foreign currency conversion risk at
the time of payment. The gain or loss from foreign currency translations in the
normal operations of JMT Group and JMT Duty Free is presented as a component of
net revenues as, in management's opinion, this is an integral component of the
Company's operations.
In converting the Company's operating subsidiaries' financial statements from
local currency to US Dollars, changes caused by fluctuation in currency
translation rates are presented separately as a component of Other income
(expense) for financial statement purposes.
These financial statements reflect the books and records of King Power
International Group Co., Ltd., J. M. T. Group Company, Ltd., and J. M. T. Duty
Free Company, Ltd. for the periods ended June 30, 1997 and 1996, respectively,
as if the businesses had been combined as of the beginning of the first period
presented.. All significant intercompany transactions have been eliminated in
combination. The consolidated entities are collectively referred to as Company.
During interim periods, the Company follows the accounting policies set forth in
the individual audited financial statements of J. M. T. Group Company, Ltd. and
J. M. T. Duty Free Company, Ltd. in the Current Report Pursuant to Section 13 or
15(d) of The Securities Exchange Act of 1934 on Form 8-K/A filed with the
Securities and Exchange Commission. The December 31, 1996 balance sheet data was
combined using the audited financial statements of the respective entities. The
June 30, 1997 financial information was extracted from the combined unaudited
financial statements from the respective entities, but does not include all
disclosures required by generally accepted accounting principles. Users of
financial information provided for interim periods should refer to the annual
financial information and footnotes contained in the Current Report Pursuant to
Section 13 or 15(d) of The Securities Exchange Act of 1934 on Form 8-K/A when
reviewing the interim financial results presented herein.
In the opinion of management, the accompanying interim financial statements,
prepared in accordance with the instructions for Form 10-QSB, are unaudited and
contain all material adjustments, consisting only of normal recurring
adjustments necessary to present fairly the financial condition, results of
operations and cash flows of the Company for the respective interim periods
presented. The current period results of operations are not necessarily
indicative of results which ultimately will be reported for the full fiscal year
ending December 31, 1997.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
10
<PAGE>
KING POWER INTERNATIONAL GROUP CO., LTD.
Notes to Financial Statements - Continued
Note 1 - Basis of Presentation - Continued
The Company has a concentration of revenue sources related to 1) passenger and
visitor populations within the domestic and international terminals of the
various airports located within Thailand and 2) the respective licenses to
operate the Company's various stores within these airports as granted by the
Airports Authority of Thailand. An interruption of either of these components
could have a significant financial impact on the operations of the Company.
Management does not anticipate any interruption of either of these items in the
foreseeable future.
Note 2 - Summary of Significant Accounting Policies
1. Cash and cash equivalents
-------------------------
The Company considers all cash on hand and in banks, including accounts in
book overdraft positions, certificates of deposit and other highly-liquid
investments with maturities of three months or less, when purchased, to be
cash and cash equivalents.
Cash overdraft positions may occur from time to time due to the timing of
making bank deposits and releasing checks, in accordance with the Company's
cash management policies.
Foreign currency transactions are recorded at the average rate of exchange in
effect at the transaction date. Monetary assets and liabilities denominated
in foreign currencies are translated at the exchange rate in effect on the
financial statement date. Exchange differences are recognized in the
accompanying consolidated statements of operations.
2. Accounts and advances receivable
--------------------------------
In the normal course of business, payment for goods sold in the Company's
stores are made in either local or foreign currencies or through
internationally issued bank or credit cards. Bank or credit card charges are
pre-approved by the issuing entity prior to the completion of a sales
transaction and are normally paid in local currency within three to fourteen
days from the date of presentation by the Company to the issuing entity.
Approximately 40.0% of the Company's sales, as of June 30, 1997, are made via
bank or credit cards. Because of the potential credit risk involved,
management has provided an allowance for doubtful accounts which reflects its
opinion of amounts which will eventually become uncollectible. In the event
of complete non-performance, the maximum exposure to the Company is the
recorded amount of trade accounts receivable shown on the balance sheet at
the date of non-performance.
3. Inventory
---------
Inventory consists of goods purchased for resale and prepayment deposits made
to secure certain international products purchased for for resale through the
Company's duty free stores. These items are carried at the lower of cost or
market using the weighted-average cost method.
11
<PAGE>
KING POWER INTERNATIONAL GROUP CO., LTD.
Notes to Financial Statements - Continued
Note 2 - Summary of Significant Accounting Policies - Continued
4. Property, plant and equipment
-----------------------------
Property and equipment are recorded at historical cost. These costs are
depreciated over the estimated useful lives of the individual assets using
the straight-line method.
Gains and losses from disposition of property and equipment are recognized as
incurred and are included in operations.
5. Income taxes
------------
The Company utilizes the asset and liability method of accounting for income
taxes. At June 30, 1997 and 1996, respectively, where material, deferred tax
asset or liability accounts have been provided for temporary differences
between financial reporting methods and statutory tax reporting methods. The
Company files separate US tax returns for KPG and separate Thailand tax
returns for JMT Group and JMT Duty Free in accordance with local laws and
customs.
Due to the change in control related to the June 12, 1997 step reverse
merger, KPG has no US net operating loss tax carryforwards available for
future periods.
6. Earnings (loss) per share
-------------------------
Income (loss) per common share is computed by dividing the net income (loss)
by the weighted-average number of shares outstanding during the period.
7. Accounting principles adopted during the current year
-----------------------------------------------------
During the first quarter of 1997, effective at the beginning of the quarter,
the Company adopted Financial Accounting Standard No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of". In accordance with the Standard, the Company adopted the policy of
evaluating all qualifying assets as of the end of each reporting quarter. No
adjustments for impairment were charged to operations during either of the
first two quarters of 1997.
Note 3 - Refundable Value Added Taxes
Refundable Value Added Tax represents the excess of input tax (charged by
suppliers of goods and services to the Company) over the output tax (charged by
the Company to purchasers of goods and services). Per Thailand law, the value
added tax is approximately 7.0% on the value added at each stage of production,
distribution or sales to the point of ultimate consumption.
12
<PAGE>
KING POWER INTERNATIONAL GROUP CO., LTD.
Notes to Financial Statements - Continued
Note 4 - Restricted deposit
The restricted deposit represents amounts placed on deposit to secure the
issuance of letters of guaranty required under the respective licenses issued by
the Airports Authority of Thailand whereby JMT Group and JMT Duty Free were
granted exclusive and non-exclusive licenses, respectively, to sell various
products within the various airports in Thailand.
Note 5 - Common stock transactions
During November 1996, KPG affected an approximate one for 120 reverse stock
split. All share and per share amounts presented herein account for this action
as of the first day of the first period presented. Further, the 18,800,000
shares issued to effect the recapitalization, as discussed below, are also
presented as issued and outstanding as of the first day of the first period
presented.
On May 5, 1997, KPG, under a Form S-8, Registration Statement Under The
Securities Act of 1933, issued approximately 924,684 newly issued shares and
33,334 shares held in treasury to a party in conjunction with the
recapitalization and reactivation costs necessary to complete the then-proposed
step reverse merger transaction. This transaction was recorded at the 'fair
value' of the stock of approximately $0.08 per share (which approximates the
closing price of the stock on the NASDAQ Electronic Bulletin Board) at the date
of the transaction. The difference between this amount and the cash proceeds
received by KPG is reflected in the accompanying statement of operations as
compensation expense on common stock issued at less than 'fair value' for
recapitalization and reorganization expenses.
On June 12, 1997, KPG exchanged an aggregate of approximately 18,800,000 shares
of restricted, unregistered common stock was exchanged for 100.0% of the issued
and outstanding shares of J. M. T. Group Company, Ltd. and 95.0% of the issued
and outstanding shares of J. M. T. Duty Free Company, Ltd. This step reverse
merger was treated as a recapitalization of KPG. Accordingly, the assets,
liabilities and business operations of J. M. T. Group Company, Ltd. And J. M. T.
Duty Free Company, Ltd. are recognized at historical cost. The combined
historical financial statements of the KPG, J. M. T. Group Company, Ltd. and J.
M. T. Duty Free Company, Ltd. become the historical financial statements of King
Power International Group Co., Ltd.
The remaining 5.0% of issued and outstanding stock of J. M. T. Duty Free
Company, Ltd. which was not acquired by KPG is presented in the accompanying
financial statements as Minority Interest.
Note 6 - Income Taxes
As discussed in Note 2-5, KPG, JMT Group and JMT Duty Free file separate income
tax returns in either the United States, in the case of KPG, or Thailand, in the
cases of JMT Group and JMT Duty Free. JMT Group has a net operating loss
carryforward which may be utilized to offset future Thailand income taxes. As of
June 30, 1997, this net loss carryforward was approximately 344,355,500 Thai
Baht or approximately $13,347,000 in equivalent US Dollars.
The deferred tax asset related to the net operating loss of JMT Group has been
fully reserved as of June 30, 1997 due to the uncertainty of ultimate
realization of the benefits of the net operating loss carryforward.
Due to the availability of the JMT Group net operating loss and the respective
operations of KPG and JMT Duty Free, no provision for income taxes has been
provided for the periods reflected in the accompanying financial statements.
Note 7 - Contingencies
On July 2, 1997, the Thailand government announced the change to a "Managed
Float" system of currency conversion for the Thai Baht. This action caused a
change in the US Dollar equivalent from approximately 25 Baht per US Dollar to
approximately 30 Baht per US Dollar. Had this change been effect on June 30,
1997, the change would have created a charge to operations of approximately 3.12
million Baht or approximately $1.0 million US Dollars (approximately $(0.05) per
share).
13
<PAGE>
Part I - Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(1) Results of Operations
JMT Duty Free began operations during the second quarter of 1996. The results
for the six months ended June 30, 1997 show a continuing maturation and growth
in the duty free section of the Company's stores in the various Thailand
airports. Further growth is being experienced in general merchandise sales
through the JMT Group stores in the same airports as a result of increased
tourism and connecting passenger traffic through these facilities. Management
anticipates that Thailand will continue to be a significant destination and
transfer point for air travel throughout Asia.
For the six months ended June 30, 1997, the Company realized merchandise sale
revenues of approximately $56.1 million as compared to approximately $17.6
million for the same period in 1996. This growth relates to the trends and
business maturation as discussed above. The separate 1997 second quarter results
show merchandise sales of approximately $28.8 million as compared to
approximately $8.3 million for the same period in 1996. Much of this increase
relates directly to the first full year of operations within JMT Duty Free.
Additionally, airport passenger traffic during the second quarter of a Calendar
Year is the weakest, based upon Company statistics, due to limited holiday
travel and other events which curtail leisure travel in the Asian market.
Cost of sales for the six months ended June 30, 1997 and 1996, respectively,
were approximately $44.0 and $17.9 million with gross margins of approximately
22.84% and (0.01)%. Excluding concession fees paid to the Airports Authority of
Thailand, gross margins for the comparable six month periods were approximately
58.22% and 62.81%, respectively. The continuation of the maturing of the duty
free operations were contributing factors to these fluctuations.
Direct selling expenses, excluding depreciation, reflect the maturation of the
Company's business as they have improved from approximately 12.6% of merchandise
sales ($2.22 million) for the six months ended June 30, 1996 to approximately
10.2% ($5.73 million) for the six months ended June 30, 1997. General and
administrative expenses and interest expenses have fluctuated in relationship to
the overall growth of the Company's operations and inventory positions. These
items have been designated by management for constant and consistent review of
these items to control unnecessary expenditures.
Overall net income for the six months ended June 30, 1997 was approximately
$0.30 per share compared to approximately $(0.13) per share for the same period
in June 30, 1996. Net income for the period ended June 30, 1997 was
approximately $5.87 million as compared to a net loss of approximately $(2.49)
for the same period in 1996.
(2) Liquidity
As of June 30, 1997, the Company has negative working capital for the periods
ended June 30, 1997 and 1996, respectively. The principal cause of this deficit
is the existence of short-term bank debt used to finance inventory and
operations. Management anticipates improvement in this area as sales continue to
grow and operational needs stabilize. The Company achieved positive cash flows
from operations of approximately $4.0 million during the first six months of
1997 as compared to cash used in operations of approximately $(2.95) during the
same period of 1996. Further, JMT Group has a net operating loss carryforward of
approximately $13 million (US Dollars) to offset future Thailand income taxes,
if any, in future periods.
The Company has identified specific needs for capital expenditures related to
its various airport stores and to facilitate the acquisition of various
management contracts, which remain under negotiation at this time, with various
related parties controlling similar general merchandise and duty free operations
within Thailand and other Asian countries. To fulfill these anticipated capital
requirements, the Company is interviewing various investment banking
institutions to facilitate the sale of Company securities totaling an estimated
$50 million. Additional liquidity requirements mandated by future business
expansions or acquisitions, if any are specifically identified or undertaken,
are not readily determinable at this time as no definitive plans have been
formulated by management.
14
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Part II - Other Information
Item 1 - Legal Proceedings
None
Item 2 - Changes in Securities
None
Item 3 - Defaults on Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
The Company has held no regularly scheduled, called or special meetings of
shareholders during the reporting period.
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
June 22, 1997 Form 8-K/A to disclose step reverse merger to recapitalize the
Company and acquire 100.0% of the issued and outstanding shares
of J. M. T. Group Company, Ltd. and 95.0% of the issued and
outstanding shares of J. M. T. Duty Free Company, Ltd.
15
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
KING POWER INTERNATIONAL GROUP CO., LTD.
September 11 , 1997 /s/ Vichai Raksriaksorn
---------- ----------------------------------------
Vichai Raksriaksorn
President, Chairman of the Board
and Director
September 11 , 1997 /s/ Viratana Suntaranond
---------- -----------------------------------------
Viratana Suntaranond
Chief Financial Officer and Director
16
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