UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A2
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Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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For the fiscal year ended December 31, 1997
Commission File Number: 1-13205
KING POWER INTERNATIONAL GROUP CO., LTD.
(Exact name of registrant as specified in its charter)
NEVADA 75-2641513
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation organization)
26th &27th Floors, Siam Tower, 989 Rama I Road, Patumwan, Bangkok 10330 Thailand
(Address of principal executive offices)
Registrant's telephone number, including area code: 011 (662) 658-0090
Securities registered pursuant to Section 12(b) of the Act: Title of class:
Common Stock, $.001 par value per share
Name of exchange on which registered: American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in a definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB.
Number of shares of Common Stock of the registrant outstanding as of February
28, 1998: 20,250,000 shares.
The aggregate market value of the voting stock held by non-affiliates of the
registrant based upon the closing price of $3.75 per share for the registrant's
common stock as reported by the American Stock Exchange as of March 20, 1998 was
approximately $29,152,938.
Transitional Small Business Disclosure Format (check one): Yes ____ No__X__
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TABLE OF CONTENTS
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Item
Number Page
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Part I
1. Business 3
2. Properties 9
3. Legal Proceedings 10
4. Submission of Matters to a Vote of Security Holders 10
Part II
5. Market for the Company's Common Stock and Related Stockholder Matters 10
6. Management's Discussion and Analysis of Financial Condition 11
and Results of Operations
7. Index to Financial Statements 19
8. Changes In and Disagreements with Accountants on Accounting
and Financial Disclosure 20
Part III
9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act 20
10. Executive Compensation 24
11. Security Ownership of Certain Beneficial Owners and Management 26
12. Certain Relationships and Related Transactions 27
13. Exhibits and Reports on Form 8-K 29
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CAUTION REGARDING FORWARD-LOOKING INFORMATION
This report contains certain forward-looking statements and information relating
to the Company that are based on the beliefs that the Company or its management
as well as assumptions made by and information currently available to the
Company or its management. When used in this document , the words "anticipate",
"believe", "estimate", "expect", and "intend" and similar expressions , as they
relate to the Company or its management, are intended to identify
forward-looking statements. Such statements reflect the current view of the
Company regarding future events and are subject to certain risks, uncertainties
and assumptions, including the risks and uncertainties noted. Should one or more
of these risks or uncertainties materialize, or should underlying assumptions
prove incorrect, actual results may vary materially from those described herein
as anticipated, believed, estimated, expected or intended. In each instance,
forward-looking information should be considered in light of the accompanying
meaningful cautionary statements herein.
PART I
ITEM 1 BUSINESS
General
The global duty free business is a multi-billion dollar industry in which
luxury and brand name merchandise such as perfumes and cosmetics, liquor and
tobacco and general merchandise products are sold to travelers exempt from
import duties and taxes, within certain allowances, at their respective
destinations. Since 1993, the global duty free business grew at a compounded
annual growth rate of 5.4% in terms of revenue from US$17 billion in 1993 to
US$21 billion in 1997.
The duty free industry in Asia began to develop in 1964 when Japanese
retailers began establishing duty free shops around the region. As trade among
the countries within the region increased, the Asian duty free business began to
grow further. The Asian duty free industry was given additional impetus when
trade between Asian countries and the United States and European countries began
to increase. This increase in trade resulted in the increase in tourism by
travelers from the United States and Europe. Consequently, Thailand was the
second most popular travel destination in Asia, welcoming more than 25 million
travelers into the capital of Thailand in 1997. Over the last five years the
number of visitors to Thailand has increased at a compounded average growth rate
of 7% from 19.1 million visitors in 1993 to 25 million visitors in 1997,
according to the Airport Authority of Thailand.
Thailand, like all of its neighboring countries, has been affected by the
economic deterioration that has spread over the entire Asian region in 1997. The
Asian economic crisis has caused the Thai Baht to depreciate over 70% versus the
US Dollar from July 1, 1997 when the Baht was first allowed to freely float to
the end of 1997. As a result of the financial crisis, the Thai economy declined
while the Thai duty free business grew; for example, revenues from the
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Company's duty free/tax free operations grew 128% from US$42 million in 1996 to
US$96 million in 1997. The growth in this industry was due mainly to the
increased purchasing power of the tourists and travelers coming to Thailand,
coupled with the promotional campaign known as "Amazing Thailand 1998-1999",
sponsored by the Tourism Authority of Thailand. Thailand saw an increase in the
number of visitors passing through the airports throughout the Kingdom. In
addition, the Company expanded its retail space in order to accommodate the
increase in travelers, as well as complimenting the Amazing Thailand campaign by
adding two new shops focusing on selling locally made specialty goods at
discount prices.
King Power International Group Co., Ltd. (the ACompany@) is the leading
duty free operator in Thailand. The Company operates and manages 15 duty free
and 29 tax free stores, via two concession agreements with the Airport Authority
of Thailand (the "AAT"), throughout all of Thailand's major airports. At the end
of 1997, the Company had approximately 38,566 square feet of retail space at the
Bangkok International Airport and approximately 42,843 square feet of retail
space overall, which represented growth in retail space from the end of 1996 of
174% and 179%, respectively,
Organization and Operations
The Company (formerly known as Immune America, Inc.) was incorporated under
the laws of the State of Nevada in 1985 to pursue research and development of
nutritional products to treat malfunctions of the body caused by immune
deficiencies. The Company began having financial difficulties in early 1988 and
subsequently ceased operations and liquidated its assets in the second quarter
of that year. From that time through June 12, 1997, the previous management had
kept the Company inactive. The inactive Company was classified as a development
stage company.
On June 12, 1997, The Company engaged in a step reverse merger transaction
with the shareholders of J.M.T. Group Company Limited and J.M.T. Duty Free
Company Limited, whereby 94% of the Company or an aggregate 18,800,000 shares of
restricted, unregistered common stock was exchanged for 99.94 % of the issued
and outstanding shares of J.M.T. Group Company Limited and 94.95% of the issued
and outstanding shares of J.M.T. Duty Free Company Limited. As these two
Thailand-based corporations are active operating companies, therefore, the
Company was no longer a development stage company after June 12, 1997.
The reverse merger was treated as a recapitalization of the Company.
Accordingly, the assets, liabilities and business operations of J.M.T. Group
Company Limited and J.M.T. Duty Free Company Limited are recognized at
historical cost. The consolidated historical financial statements of the
Company, J.M.T. Group Company Limited and J.M.T. Duty Free Company Limited
become the historical financial statements of the Company.
Concurrent with the reverse merger, the company changed its corporate name
from Immune America, Inc. to King Power International Group Co., Limited.
Subsequently, on September 9, 1997 J.M.T. Duty Free changed its corporate name
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to King Power Duty Free Company Limited and on October 10, 1997 J.M.T. Group
changed its corporate name to King Power Tax Free Company Limited.
Since the reverse merger, the Company has operated and managed both
corporations to become the leading Duty Free and Tax Free retailer in Thailand
with 44 stores and employing over 1,500 people throughout Thailand.
The Company operates two divisions in its current operations: the Tax Free
Division and the Duty Free Division.
Tax Free Division
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King Power Tax Free Company Limited (the ATax Free Division@) is a Thai
corporation engaged in selling various souvenirs and consumer products in the
international and domestic terminals of all of the major airports located within
Thailand to international and local travelers. The Tax Free Division holds the
exclusive operating license granted by the Airport Authority of Thailand (the
"AAT") for all shops of this specific nature.
At the end of 1997 the Tax Free Division operated 29 stores within
Thailand=s major international and domestic airports, totaling more than 21,800
square feet of retail space. There are 19 shops located within the Bangkok
International Airport, where 11 of these 19 shops are located in the airside
departure terminals. The landside shops are established in eight different
locations in the departure and arrival halls of both terminals. The Tax Free
Division sells domestically manufactured general merchandise including Thai
silk, pewter, Benjarong porcelain, Thai dolls, jewelry, watches, pens, lighters,
leather goods and confectioneries, free of Thailand's value-added-tax.
There are ten shops located in the domestic terminal of Bangkok, Chiang
Mai and Phuket domestic and international airports, selling indigenous general
merchandise of Thailand, together with local speciality goods.
During 1997 the Tax Free Division opened four additional shops in both
airside departure terminals of Bangkok International Airport, thus providing a
wider selection of tax free merchandise to the traveling public. The new shops
increased the total retail space by almost 5,000 square feet and together with
an expansion of 1141 square feet in two existing shops in the airside departure
terminal gave the Tax Free Division more than 20,000 square feet in this
airport.
The Company is proud to be an active association in the promotional
campaign known as "Amazing Thailand" for the years 1998 and 1999. Of the four
new shops, two shops were opened in joint operations with the AAT, the Tourism
Authority of Thailand (the "TAT"), and the Department of Industrial Promotion
from the Ministry of Industry and dedicated to the "Amazing Thailand".
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The Duty Free Division
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King Power Duty Free Company Limited (the ADuty Free Division@) is a Thai
corporation engaged in selling duty free merchandise to the traveling public
under the supervision of Thai Customs in duty free shops located in the
international terminals of all of Thailand's major airports. The Duty Free
Division holds the non-exclusive license from the AAT to operate all shops of
this specific nature until December 2001.
The Duty Free Division operates 15 duty free stores, with approximately
21,000 square feet of retail space, in Thailand=s International Airports in
Bangkok, Chiang Mai, Phuket and Hat Yai. The Duty Free Division controls and
operates 50% of the total duty free retail space currently used in these four
airports. The Duty Free Division=s merchandise mix consists of top quality
brands name liquor and tobacco products, luxury goods such as watches, perfumes,
cosmetics, fashion accessories, gourmet food and chocolates. In Thailand all
imported merchandise is subject to import duties and governmental taxes.
However, the Duty Free Division=s goods are sold exclusively for departing
passengers and are free of all import duties, excise taxes and the
value-added-tax imposed by the Thai government.
The Duty Free Division started its operations on January 1, 1997. Currently,
the Duty Free Division is in the process of developing a series of specialty
stores in Bangkok International Airport. For example, Harrods of Knightsbridge
U.K will be the first of this kind of store and is scheduled to be in operation
at the Bangkok International Airport sometime in the first half of 1998.
Additionally, the Company is in the process of developing specialty stores
focusing on well known fashion designers such as Ferragamo, Versace, Cartier,
Dunhill, Etro, Fendi, Bally, Lanvin, Givenchy and Celine and part of these
stores will be in operation in 1998.
Both the Duty Free Division's and the Tax Free Division's sales and their
overall performance and results are subject to the influence of external
factors, some of which are beyond the Company's control. These include the
distribution of airlines at particular terminals, the routes that are serviced
by those airlines, loading levels of airline passengers, and economic and other
conditions affecting the airlines serving Thailand in general. The Company
strategically manages those factors within its control in order to maximize its
performance and minimize the effects of those that it cannot control. The
Company believes that the devaluation of the Thai Baht, relative to the US
dollar, will encourage an increased level of tourists and travelers to come to
Thailand which should result in a significant positive effect on the Company's
business.
King Power International Group (Thailand) Co. Ltd.
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King Power International Group (Thailand) Co., Ltd. is a management company
which provides a variety of management services for the Company and its
subsidiaries and for some privately owned companies located in Thailand.
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Regulation
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Duty Free operations are subject to the regulated supervision of the Customs
Department of Thailand ( ACustoms@). All imported merchandise is received and
stored in the Company's bonded warehouses in Thailand where they are exempt from
all import duties, excise taxes and the value-added-tax of Thailand. Since the
merchandise is sold without duties or taxes, it must remain within the bonded
warehouses until it is requested to transfer to the respective Duty Free stores
for sales.
The Company has a total of four bonded warehouses, located in Bangkok,
Chiang Mai, Phuket and Hat Yai, serving all of the Duty Free Division's shops
across Thailand. Transfer of any bonded merchandise must be documented and
approved by Customs before these products are transferred for sales to the
traveling public at the Company's various retail stores. Customs makes regular
checks on the inventory in both the bonded warehouses and shop premises. With
the tightly regulated control from Customs, customers are assured that all
products sold by the Company are genuine and of the highest quality.
Suppliers, Distribution and Inventory Control
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The Company purchases both local and imported merchandise from more than 550
vendors worldwide. This supplier base gives the Company a choice to selectively
purchase the highest quality products and to negotiate with vendors the lowest
cost, in order for the Company to supply its customers with the best possible
value for their money. Currently the Company does not have any long-term
purchase commitments.
Through the Company's historically strong relationships with many of its
suppliers, the Company has secured exclusive agreements from numerous suppliers
to be the sole agent for the sale of their products in Thailand in the duty free
shops. Furthermore, the Company receives significant sales support from these
vendors. These supports include in-store displays, gift-with-purchase items,
sales incentives, advertisements, staff training, signages and sales personnel.
Merchandise is generally shipped directly from vendors to the Company's
bonded warehouses for the Duty Free Division and delivered to the Company=s
warehouses at the airport or downtown in Bangkok for the Tax Free Division. The
Company's inventories are strictly controlled to comply with Custom=s
regulations. Detailed records documenting the receipt, the transfers and sale of
all merchandise are kept by the Company to certify the authenticity and
excellence of the products sold by the Company.
The Company uses an outside shopping contractor to provide the services of
customs clearing for the imported merchandise into Thailand and directly to the
Company's bonded warehouses.
In order to control inventory levels, the Company uses automated
replenishment systems. Transfers are made to stores, in accordance with demands
identified by the respective store's managers. The Company maintains the overall
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control of enough stock displays in stores and repurchasing point of inventory
level in warehouses.
The Company's computerized inventory control system allows the Company to:
(1) identify the merchandise needs at each store, (2) promptly reorder this
merchandise from the vendors, and (3) comply with the Custom=s record-keeping
requirements. Through the Company=s automated system, appropriate product mixes
are maintained to maximize merchandise turnovers. The Company has rarely
experienced problems with obsolescence because most inventories turnover
frequently and slow moving products are quickly identified.
Economic Conditions and Exchange Rates
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The principal customers of the Company are the traveling public utilizing
the international and domestic airports of Bangkok, Chiang Mai, Phuket and Hat
Yai. The Company=s businesses closely tie up with the economic conditions of the
countries where the travelers come from. The Company has strategically
confronted the current economic turmoil of the Asia Pacific region with decisive
actions to minimize the adverse effects on its operations.
In 1997 the Tax Free Division was able to maintain its operational trends
because most of its merchandise consists of products purchased in Thai Baht.
Additionally, the Tax Free Division has always been able to sell its merchandise
in U.S.dollars. Although the Thai Baht was floated there was a minimal impact on
this division's operations because there was very little difference in the
purchasing power of the customers.
The Duty Free Division imports all of its products from suppliers across the
world whereas the purchasing commitments are tied to either U.S. dollars or
currencies of the originating countries. The Company partially offset the impact
of the weak Thai Baht by adjusting, as often as daily, both the Company's
pricing policy and point of sale exchange rates to reflect the current exchange
rate of the Thai banks. By this policy, the Company is able to minimize the
realized and unrealized loss of exchange when purchasing activities are
denominated in foreign currencies.
Competition
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The Company foresees no competition for the Tax Free Division. During 1997
the Company has been granted the extension of the Tax Free Division's license
for the exclusive right to operate and sell gifts and general merchandise at the
Bangkok International Airport from the AAT for a further five year term
extending from 1998 to 2003.
The Company has developed strong relationships with the AAT over the years
and as a result of this relationship and the contributions which the Company has
made to increase tourism to Thailand, the Company believes that the renewal and
extension of the Duty Free Division's exclusive license will be on terms
favorable to the Company.
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In Thailand there are several barriers on parties wishing to enter into the
duty free business. Any new entrant company must be of Thai ownership with
proven Asian regional duty free experience, particularly to international
passengers and Thai nationals. The new entrant company's management must be
comprised of Thai nationals and it must reach a minimum turnover in duty free
business. Additionally, the new entrant must possess bonded warehouse facilities
located in Thailand and should already be carrying all major international
brands in its portfolio of merchandise.
Expansion
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The Company intends to expand the existing operation through acquisitions
and the development of additional retail space. With the expansion program for
the existing Bangkok International Airport and the projected completion of the
Second Bangkok International Airport, tentatively scheduled for 2003, the
Company believes that there will be a significant number of opportunities for
additional expansion and growth of the Company's operations in the near future.
ITEM 2 PROPERTIES
The Company=s principal office is located at the 26th and 27th floors of the
Siam Tower, at 989 Rama I Road, Patumwan, Bangkok 10330 Thailand. The telephone
number is 011- (662) 658-0090. This office, which is leased from the Bangkok
Intercontinental Hotels Co., Ltd., contains 29,353 square feet of space and is
leased for three years at an annual cost of $142,992 at an average exchange rate
for 1997 of 33.8825 Thai Baht to US$1. This lease expires in October 2000.
The Company operates 44 retail stores located in the international and domestic
airports of Thailand located at Bangkok, Chiang Mai, Phuket and Hat Yai. All of
the stores are leased from the Airport Authority of Thailand (the AAAT@) under
varying lease agreements for the Company's two divisions. Under these lease
agreements, the Company is subject to a monthly rental fee (exclude duty charge
and other expenses)for the actual utilized space. During the 1997 fiscal year
the Company paid a total of $1,196,067 to the AAT. The Company anticipates that
the total sum due under these lease agreements for the 1998 fiscal year will be
approximately $975,667 at the exchange rate of US$1 = 47.247 Thai Baht as of
December 31, 1997.
The Company leases five warehouses containing almost 30,000 square feet in
Bangkok, Chiang Mai, Phuket and Hat Yai from the AAT. The bonded warehouses
contain 25,300 square feet of space for the Duty Free Division and 4,700 square
feet of warehouse space for the Tax Free Division. The Company owns and occupies
6,886 square feet of warehouse space in Bangkok, Chiang Mai and Hat Yai which is
utilized by the Tax Free Division. The Company believes its facilities are
adequate for its current operations.
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All payments with regard to properties are made in Thai Baht. The Company used
the average exchange rate, US$1 = 33.8825 Thai Baht to translate these expenses
into US$ during 1997.
ITEM 3 LEGAL PROCEEDINGS
The Company is not currently a party to any material litigation, or any
litigation which if it were decided against the Company would likely have a
result which would be materially adverse to the Company, its current or future
financial condition, or the Company's present or anticipated methods of
operation.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5 MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock trades on the American Stock Exchange under the
ticker symbol "KPG". The approximate number of holders of record of shares of
common stock, excluding the number of beneficial owners whose securities are
held in street name, was 359 at February 28, 1998. The Company believes that 624
stockholders currently own and hold the stock in street name.
The following table sets out the high and low reported sales prices for the
common stock as reported by the American Stock Exchange since it was listed on
July 30, 1997:
High Low
First Quarter of 1998
(through March 20, 1998) $9.75 $1.19
Fourth Quarter of 1997 $13.38 $12.88
Third Quarter of 1997 $16.75 $12.88
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The Company has never paid any cash dividends. Future earnings will be retained
for use in the Company's business. The Company does not intend to pay any cash
dividends on its common stock for the foreseeable future.
ITEM 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(1) Caution Regarding Forward-Looking Information
This annual report contains certain forward-looking statements and information
relating to the Company that are based on the beliefs of the Company or
management as well as assumptions made by and information currently available to
the Company or management. When used in this document, the words Aanticipate@,
Abelieve@, Aestimate@, Aexpect@, and Aintend@ and similar expressions, as they
relate to the Company or its management, are intended to identify
forward-looking statements. Such statements reflect the current view of the
Company regarding future events and are subject to certain risks, uncertainties
and assumptions, including the risks and uncertainties noted. Should one or more
of these risks or uncertainties materialize, or should underlying assumptions
prove incorrect, actual results may vary materially from those described herein
as anticipated, believed, estimated, expected or intended. In each instance,
forward-looking information should be considered in light of the accompanying
meaningful cautionary statements herein.
(2) Effects of the Change in Foreign Currency Exchange System
On July 2, 1997, the Thai Government announced that the Thai Baht would
thereafter be converted to a AManaged Float@ system for the relationship of the
Baht to other international currencies. This change had an immediate impact on
the Company=s operations and the results of its operations.
The Company=s subsidiaries conduct their business with selling and purchase
prices based on Thai Baht, US Dollars, and other currencies. Sales are made both
in Thai Baht and other currencies but eventually converted into Thai Baht.
Accordingly, the Company bears foreign currency transaction risks between the
date of purchase of goods for resale and the ultimate payment of the goods in
the appropriate negotiated currency.
King Power Duty Free Company Limited (KPD) incurred an economic and financial
loss as a result of the devaluation and subsequent float of the Thai Baht on the
settlement of accounts in currencies owed other than Thai Baht. To minimize the
impact of this event, KPD has increased its retail prices three times to
compensate for the currency fluctuations of the imported merchandise purchased
in foreign currencies. Moreover, KPD intends to establish the point of sale
prices of goods in US Dollars with posted conversion table of other
international currencies, which could be updated as necessary.
King Power Tax Free Company Limited (KPT) has been selling goods at prices based
upon the US Dollar since its inception. Further, KPT deals in predominately
Thailand produced goods whereby all purchases are settled in Thai Baht.
Therefore, the devaluation of the Thai Baht had minimal effect on the settlement
of open trade payables of KPT. Accordingly, the devaluation had an opposite
economic impact on the operations of KPT whereby the Thai Baht devaluation
increased the overall profitability of this subsidiary.
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King Power International Group (Thailand) Company, Limited (KPIG) was
incorporated on September 11,1997 with no activities until December 31, 1997 as
a cost center for the Company and its affiliates to provide management services
for, and to disburse mainly management charges and rental expenses among, the
various subsidiaries and affiliates of the Company. In KPIG's Statement of
Earnings for the period starting September 11,1997 and ending December 31, 1997,
this company had no income; it had interest expenses of US$25,577 and
administrative expenses of US$90,628. All transactions were recorded in Thai
Baht and were converted to US Dollars using an average exchange rate of 33.8825
to 1.
The overall effect of the Thai Baht devaluation was an increase in the
attractiveness of Thailand as a tourist destination. This increase in tourists
had a direct impact on increasing the Company=s sales in the post-devaluation
time period.
The Company=s financial statements and all accompanying discussions in this
document are presented in US Dollars
In accordance with generally accepted accounting principles, the Company has
separately presented the following items in its statement of income for the year
ended December 31, 1997:
Realized gain on foreign exchange $2.4 million
Realized loss on foreign exchange $3.3 million
Unrealized gain on foreign exchange $1.4 million
Unrealized loss on Thai Baht devaluation $1.6 million
Unrealized loss on foreign exchange $3.3 million
Unrealized gain on foreign exchange of $1.39 million was due to a US Dollar
denominated management contract in the amount of $2.17 million between KPT and a
related company, Downtown D.F.S. (Thailand) Co., Ltd. The contract was executed
on January 1,1997 when the exchange rate for the Thai Baht to the US Dollar was
25.56 to 1. By December 31, 1997 that exchange rate had increased to 47.247 to
1, thus leaving a gain on the exchange rate of 21.687 Thai Baht per US Dollar.
However, when converting unrealized gain on foreign exchange from Thai Baht to
US Dollar, the average exchange rate of 33.8825 was used, resulting in $1.39
million, the figure which appears in the Company's income statement.
The calculation of unrealized foreign exchange losses of $1.63 million and $3.31
million are shown in charts labeled A and B, respectively.
CHART A
The calculation of unrealized loss on foreign exchange due to the Thai Baht
devaluation of US$1,625,558 was calculated on a one-time basis at July 2,1997,
when the Thai government announced the "Managed Float" system to be used on Thai
Baht against other international currencies. This resulted in an immediate
unrealized loss on foreign exchange on financial obligations in international
currencies as shown below:
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CALCULATION OF THE UNREALIZED LOSS ON THE THAI BAHT DEVALUATION
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Accounts Payable in Foreign Currency at June 30, 1997
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CURRENCY AMOUNT EXCHANGE RATE TOTAL BAHT EXCHANGE RATE TOTAL BAHT
6/30/97 7/02/97
AUSTRALIAN 163,740.00 19.34 3,166,731.60 22.1099 3,620,275.03
DOLLAR
SWISS FRANC 1,024,436,47 17.83 18,265,702.26 20.0238 20,513,110.99
GERMAN 435,903.82 14.88125 6,486,793.72 16.8435 7,342,145.99
DEUTSCHMARK
FRENCH FRANC 2,997,354.82 4.43 13,278,281.85 4.9756 14,913,638.64
BRITISH 61,017.50 43.075 2,628,328.81 48.4575 2,956,755.51
STERLING
HONG KONG 28,669,997.33 3.34375 95,865,303.57 3.7813 108,409,860.90
DOLLAR
ITALIAN LIRE 18,708,500.00 0.0155 289,981.75 0.0174 325,527.90
US DOLLAR 7,826,397.98 25.84 202,234,123.80 28.9 226,182,901.62
JAPANESE YEN 618,590.00 0.226575 140,157.03 0.256204 158,485.23
SINGAPORE 58,464.80 18.21125 1,064,717.09 20.5398 1,200,855.30
DOLLAR
TOTAL 343,420,121.49 385,623,557.11
BALANCE PER GENERAL LEDGER 343,420,121.49
EXCHANGE LOSS FROM BAHT DEVALUATION ON ACCOUNTS PAYABLE IN FOREIGN CURRENCY 42,203,435.62
Trust Receipts in Foreign Currency at June 30, 1997
CURRENCY AMOUNT EXCHANGE RATE TOTAL BAHT EXCHANGE RATE TOTAL BAHT
6/30/97 7/02/97
BRITISH 240,990.78 43.075 10,380,677.85 48.4575 11,677,810.72
STERLING
US DOLLAR 2,560,381.06 25.84 66,160,246.59 28.9 73,995,012.63
SINGAPORE 769,688.80 18.21125 14,016,995.16 20.5398 15,809,254.01
DOLLAR
HONG KONG 2,616,192.00 3.34375 8,747,892.00 3.7813 9,892,606.81
DOLLAR
AUSTRIAN 321,244.00 2.13 684,249.72 2.3888 767,387.67
SHILLING
GERMAN 111,856.20 14.88125 1,664,560.08 16.8435 1,884,049.90
DEUTSCHMARK
JAPANESE YEN 2,490,470.00 0.226575 564,278.24 0.2562 638,058.41
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FRENCH FRANC 786,754.84 4.43 3,485,323.94 4.9756 3,914,577.38
TOTAL 105,704,223.58 118,578.757.55
BALANCE PER GENERAL LEDGER 105,704,223.58
EXCHANGE LOSS FROM BAHT DEVALUATION ON TRUST RECEIPTS IN FOREIGN CURRENCY 12,874,533.97
ADD:
EXCHANGE LOSS FROM BAHT DEVALUATION ON ACCOUNTS PAYABLE IN FOREIGN CURRENCY 42,203,435.62
TOTAL EXCHANGE LOSS FROM BAHT DEVALUATION AS OF JULY 2, 1997 55,077,969.59
CONVERSION TO US DOLLARS AT 33.8825 BAHT = ONE DOLLAR US$1,625,558.
</TABLE>
CHART B
The calculation of unrealized loss on foreign exchange of US$3,313,213 was
calculated on accumulated basis with quarterly adjustments on financial
obligations in international currencies, unrealized gain on exchange on accounts
receivable in foreign currencies, and cash on hand in foreign currencies as
shown below:
CALCULATION OF UNREALIZED LOSS ON FOREIGN EXCHANGE AT 12/31/97
Accounts Payable in Foreign Currency at December 31, 1997
<TABLE>
<S> <C> <C>
CURRENCY AMOUNT EXCHANGE RATE AT TOTAL BAHT
12/31/97
AUSTRIAN SHILLING 210,229.64 3.8126 801,521.53
SWISS FRANC 491,262.45 32.8197 18,123,086.23
GERMAN 123,496.23 26.6223
FRENCH FRANC 767,301.92 7.9839 6,126,061.80
HONG KONG DOLLAR 2,233,307.85 6.1501 13,735,066.61
ITALIAN LIRE 18,708,500.00 0.0275 514,483.75
SINGAPORE DOLLAR 181,977.60 28.5054 5,187,344.28
US DOLLAR 5,392,235.36 47.556 256,433.144.78
TOTAL 302,208,462.66
BALANCE PER GENERAL LEDGER 288,920,521.02
EXCHANGE LOSS ON ACCOUNTS PAYABLE IN FOREIGN CURRENCY 13,287,941.64
Trust Receipts in Foreign Currency at December 31, 1997
14
<PAGE>
CURRENCY AMOUNT EXCHANGE RATE 12/31/97 TOTAL BAHT
GERMAN 57,761.20 26.6223 1,537,735.99
DEUTSCHMARK
FRENCH FRANC 2,756,969.44 7.9839 22,011,368.31
BRITISH STERLING 10,400,00 79.0259 821,869.36
HONG KONG DOLLAR 902,656.00 6.1501 5,551,424.67
ITALIAN LIRE 561,194,465,45 0.0275 15,432,847.80
US DOLLAR 1,828,462.20 47.556 86,954,348.38
SINGAPORE DOLLAR 497,986.80 28.5054 14,195,312.93
JAPANESE YEN 5,477,907.47 0.3665 2,007,653.09
TOTAL 148,512,560.53
BALANCE PER GENERAL LEDGER 110,446,114.46
Exchange loss from trust receipts in foreign currency 38,066,446.07
ADD: Exchange loss on accounts payable in foreign currency 13,287,941.63
LESS: Exchange gain on accounts receivable in foreign currency (59,590)
LESS: Exchange gain on cash on hand in foreign currency (1,694,208)
TOTAL EXCHANGE LOSS AS OF 12/31/97 49,600,589.82
ADD: Exchange loss as of 9/30/97 117,737,328.98
LESS: Exchange loss from Baht Devaluation as of July 2, 1997 (55,077,970)
NET UNREALIZED EXCHANGE LOSS AS OF 12/31/97 112,259,949.21
CONVERSION TO US DOLLARS AT 33.8825 THAI BAHT = ONE DOLLAR US$3,313,213
</TABLE>
(3) Results of Operations, comparing fiscal years ended December 31, 1997 and
1996
KPD began retail operations in 1997 and the revenue of this subsidiary is a
direct result of the increase in tourists to Thailand as a result of the Thai
Baht devaluation. Further growth was experienced in general merchandise sales at
the KPT stores in the Thailand airports due to an increase in tourism traffic.
Management anticipates that Thailand will continue to be an attractive tourist
destination during future periods and will expand as a focal point for air
travel throughout Asia.
Sales revenue for 1997 was approximately $96 million as compared to
approximately $42 million for 1996. This increase is directly attributable to
the factors previously discussed. Additionally, as a result of the Thai Baht
devaluation, KPD has changed its retail prices three times or approximately 54%,
after the July 2, 1997 Baht devaluation, in order to reduce the unrealized loss
of merchandising costs. Further, commencing in the last half of 1997, the Thai
Government began the AAmazing Thailand@ marketing campaign for the 1998-1999
time period to coincide with various events occurring in Thailand or other
countries located near Thailand. This marketing campaign is international in
scope and directly targeted to attract additional new and repeat visitors to
Thailand. The Company expects that this promotional campaign will directly
impact the Company=s operations in a positive manner during and subsequent to
this time period.
15
<PAGE>
Cost of sales for the years ended December 31, 1997 and 1996 were approximately
$38.5 million and $14.5 million, respectively. The factors for this increase
relate to the expansion of the KPD subsidiary and a larger number of customers
at the KPT stores for consumer goods. In addition, KPT=s concession agreement to
maintain its locations within the Thai airports requires payments based upon a
fixed amount. In the time period from the year ended December 31, 1996 to the
year ended December 31, 1997, the Company=s concession fee as a percentage to
sales revenue dropped from approximately 47.84% in 1996 to approximately 35.77%
in 1997.
Direct selling expenses, excluding depreciation and others, also reflect the
commencement of KPD=s business and the increase in traffic at KPT=s stores.
These expenses were approximately $4.8 million for 1996 and approximately $8.7
million in 1997. In terms of percentage of sales, 1996 expenses were
approximately 11.5% of sales and 1997 expenses were approximately 9.1% of sales.
The improvement of these expenses as a percentage of sales is attributable to
the effectiveness and efficiency of the Company=s sales force through
improvements in training and management supervision.
Administrative expenses for the years ended December 31, 1997 and 1996 were
approximately $3.8 million and $0.9 million, respectively. As a percentage of
total sales, these expenses were approximately 4.0% and 2.2%, respectively.
Administrative expenses have grown due to the growth in the Company=s business.
Management has designated these expenses for constant monitoring in order to
control their levels in relation to the Company=s size, sales volume and
operational necessity.
Net income for the year ended December 31, 1997 was approximately $7.9 million,
or $0.40 per share (basic), and approximately $1.6 million, or $0.09 per share
(basic), for the year ended December 31, 1996. However, included as a component
of net income is the cumulative effect of both realized and unrealized gains and
losses from foreign exchange causing charges to operations of approximately $4.4
million or approximately $0.22 per share (basic) for the year ended December 31,
1997.
The ratio of inventory divided by revenue for the years ended December 31, 1997
and 1996 was approximately 13.7% and 16.1%, respectively. This reduction is due
to the significant increase in sales volume during 1997 which exceeded the
inventory level as projected.
(4) Liquidity and Capital Resources
As of December 31, 1997 and 1996, the Company had negative working capital of
approximately $(0.6 million) and $(7.35 million), respectively. The principal
cause of this shortage was due to the extensive use of short-term bank debt to
finance the increase in inventory and capital expenditures of both KPD and KPT
during 1996 and 1997 with the principal use of these resources being inventory
acquisition. Management anticipates improvement in this area as sales continue
to grow and operations mature and stabilize. Furthermore, the Company is
negotiating with its suppliers for more favorable credit terms and with its
financial institutions to convert short-term debt to longer term instruments
concurrent with the expansion of the Company=s operations. The Company achieved
positive cash flows from operations of approximately $4.4 million during the
year ended December 31, 1997 as compared to consuming approximately $(2.1
million) in operations during the year ended December 31, 1996. The Company
anticipates that the current positive trend will continue and these funds will
be available to allow for expanded inventory levels, as needed, and to reduce
the borrowings incurred for initial expansion in prior years.
16
<PAGE>
The Company has identified specific needs for capital expenditures related to
(1) its existing airport stores; (2) facilitate potential acquisition of various
management contracts for similar operations in Thailand and other countries
within the Asian market, which remain under negotiation and discussion at this
time; and (3) facilitate either acquisition of or management contracts with
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 currently interviewing various investment banking
and financial institutions to facilitate a sale of the Company=s securities or
to arrange for the extension of additional credit facilities. There is no
assurance that such plans can be successful or achieved at rates, in amounts, or
on terms that will be favorable to the Company.
(5) Monetary Assets and Liabilities Denominated in Thai Baht
As of December 31, 1997 the amount of monetary assets and liabilities which are
denominated in Thai Baht are as follows:
TYPE OF MONETARY ASSET US DOLLARS
Cash and equivalents 1,018,285
Accounts Receivable
Trade 404,598
Related Parties 957,061
Refundable value-added-tax 963,528
Directors 1,322,782
Inventories 13,140,356
Other current assets 2,031,855
Restricted deposit 6,465,680
Other non-current assets 4,315,060
TYPE OF MONETARY LIABILITY
Bank overdraft 958,635
Bank loan 1,693,229
Notes payable 423,307
Current portion of installment purchase payable 22,930
Current portion of long-term loan 5,719
Accounts Payable
Unrelated parties 4,469,640
Related parties 590,858
Other accrued liabilities
Concession fees 6,216,070
Other 948,076
Installment purchase payable-net 24,540
Long-term loan-net 202,946
17
<PAGE>
(6) Results of Operations, comparing fiscal years ended December 31, 1996 and
1995.
Sales revenue for 1996 was approximately $42 million as compared to
approximately $26 million for 1995. This increase is attributable to the
exemption of the Thai 7% value-added-tax, which had been waived by the
government in order to promote tourism and increase spending on local
merchandise in 1996, as well as the Company's expansion in the shops area in the
Bangkok domestic airport and in the first phase of Terminal 2, a newly
constructed area which is part of the expansion of the Bangkok International
Airport.
Cost of sales for the years ended December 31, 1996 and 1995 were approximately
$14.5 million and $10.7 million, respectively. This increase is directly related
to the increased volume of sales of inventory. Further, KPT's concession
agreement with the AAT requires payments based upon a fixed amount and a
concession fee on Terminal 2 that is significantly less than the original
concession fee charged on Terminal 1. The Company's concession fee as a
percentage of sales revenue dropped from 58.91% in 1995 to 47.84% in 1996.
Direct selling expenses, excluding depreciation and others, increased as a
result of the significant expansion in the area occupied by the Company's
stores. These expenses were approximately $2.7 million for 1995 and
approximately $4.8 million for 1996. In terms of percentage of sales, 1995
expenses were approximately 10.3% of sales and 1996 expenses were approximately
11.5% of sales. This increase in the percentage of sales is attributable to the
under utilization of the rented space while the stores were being constructed.
Administrative expenses for the years ended December 31, 1996 and 1995 were
approximately $0.9 million and $0.2 million, respectively. As a percentage of
sales, these expenses were approximately 2.2% and 0.9%, respectively.
Administrative expenses have increased due to the growth in the Company's
business. Management has designated these expenses for constant monitoring in
order to control their levels in relation to the Company's size, sales volume
and operational necessity.
Net income for the year ended December 31, 1996 was approximately $1.6 million,
or $0.09 per share (basic), contrasted to a loss of approximately ($2.6
million), or a loss of ($0.86) per share (basic), for the year ended December
31, 1995. This turnaround resulted directly from the significant increase in
sales revenue achieved by the Company.
(7) Year 2000 Concerns
The Company's existing computer system does not support beyond the year 2000.
Due to the expansion of business and the need to operate more efficiently,
management has decided to change the computer system to fully support the
integration of all systems and all subsidiaries in order to generate centralized
management reports and more effectively control all aspects of the business.
This system is scheduled to be implemented in the first half of 1999. The cost
of this change is not expected to exceed US$750,000.
(8) New Accounting Pronouncements
The Financial Accounting Standards Board ("FASB") has recently issued Statements
of Financial Accounting Standards ("SFASs") that may affect the Company's
financial statements as follows:
18
<PAGE>
In June 1997, the FASB issued SFAS No. 130,"Reporting Comprehensive Income"
("SFAS 130"), which establishes standards for reporting and display of
comprehensive income, its components and accumulated balances. Comprehensive
income is defined to include all changes in equity except those resulting from
investments by owners and distributions to owners. Among other disclosures, SFAS
130 requires that all items that are required to be recognized under current
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements.
Also, in June 1997, FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" which supersedes SFAS No. 14, "Financial
Reporting for Segments of a Business Enterprise." SFAS No. 131 establishes
standards for the way that public companies report information about operating
segments in annual financial statements and requires reporting of selected
information about operating segments in interim financial statements issued to
the public. It also establishes standards for disclosure regarding products and
services, geographic areas and major customers. SFAS No. 131 defines operating
segments as components of a company about which separate financial information
is available that is evaluated regularly by the chief operating decision maker
in deciding how to allocate resources and in assessing performance.
SFAS Nos. 130 and 131 are effective for financial statements for periods
beginning after December 15, 1997 and require comparative information for
earlier years to be restated. Because of the recent issuance of these standards,
management has been unable to fully evaluate the impact, if any, that these
standards may have on future financial statement disclosures. Results of
operations and financial position, however, will be unaffected by the
implementation of these standards.
In February 1998, the FASB issued SFAS No. 132, "Employer's Disclosures about
Pensions and Other Postretirement Benefits" which standardizes the disclosure
requirements for pensions and other postretirement benefits and requires
additional information on changes in the benefit obligations and fair values of
plan assets that will facilitate financial analysis. SFAS No. 132 is effective
for years beginning after December 15, 1997 and requires comparative information
for earlier years to be restated, unless such information is not readily
available. Management believes the adoption of this statement will have no
material impact on the Company's financial statements.
ITEM 7 INDEX TO FINANCIAL STATEMENTS
Consolidated Financial Statements of the Company (Audited)
F-1 Independent Auditors' Report
F-2 Balance Sheets as of December 31, 1997 and 1996
F-4 Statements of Income for the Years Ended December 31, 1997 and 1996
F-5 Statements of Cash Flows for the Years Ended December 31, 1997 and
1996
F-7 Statements of Changes Shareholders's Equity for the Years Ended
December 31, 1997 and 1996
F-8 Notes to Financial Statements
ITEM 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
The accounting firm of Cheshier and Fuller, LLP, the independent
accountants for the Company, was dismissed effective December 12, 1997 as
19
<PAGE>
directed by a vote of the Company's Board of Directors. During the fiscal years
ended December 31, 1995 and 1996, and the interim period subsequent to December
31, 1996, there have been no disagreements with Cheshier and Fuller, LLP on any
matter of accounting principles or practices, financial statement disclosure or
auditing scope or procedure or any reportable events. Cheshier and Fuller, LLP's
report on the financial statements for the fiscal year ended December 31, 1996
contained no adverse opinion or disclaimer of opinion and was not qualified or
modified as to uncertainty, audit scope or accounting principles.
The Company engaged the accounting firm of BDO Binder (Thailand) Ltd. as
independent accountants for the Company effective as of December 12, 1997. The
engagement of BDO Binder (Thailand) Ltd. was approved by the Company's Board of
Directors. During the fiscal years ended December 31, 1995 and 1996, and the
interim period subsequent to December 31, 1996, there have been no consultations
with BDO Binder (Thailand) Ltd. on any matters of accounting principles with
respect to a specific transaction, either completed or proposed, or the type of
audit opinion that might be rendered on the Company's financial statements.
PART III
ITEM 9 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT
Name Age Position
- ---- --- ---------
Vichai Raksriaksorn 40 Group Chairman, Chief Executive
Officer and Director
Viratana Suntaranond 57 Group Executive Director, Chief Financial
Officer, Secretary and Director
Antares Cheng 41 Group Managing Director and Director
Aimon Boonkhundha 41 Deputy Group Managing Director and Director
Dharmnoon Prachuabmob 64 Director
Suwan Panyapas 54 Director
Benjamin B. Fattedad 55 Group Director of Development and Director
Each of these persons is also a director of King Power Duty Free Company Limited
and King Power Tax Free Company Limited.
Set forth below is a description of the backgrounds of the executive officers
and directors of the Company.
20
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Vichai Raksriaksorn
- -------------------
1997-Present Group Chairman, Chief Executive Officer and Director of KingPower International Group Co., Ltd.
Managing Director of King Power Duty Free Co., Ltd.
Chairman of King Power Development Co., Ltd.
Thai National Dressage Team Manager
Privilege Committee of Thailand Equestrian Federation
1995-Present Chairman of King Power Duty Free (Macau) Co., Ltd.
Chairman of King Power Duty Free (C.B.O.) Limited, Hong Kong
1994-Present Managing Director of Top (China) Group Co., Ltd.
Chairman of King Power International Co., Ltd.
Managing Director of Forty Seven Co., Ltd.
Chairman of Beijing Great Wall (Top) Tourist Services Co., Ltd.
Chairman of V&A Holdings Co., Ltd.
Chairman of Hong Kong Kai Tak International Airport Duty Free Shop Co., Ltd.
1993-Present Chairman of King Power Tax Free Co., Ltd.
Chairman of Capitalux Co., Ltd.
1992-Present Chairman of Lengle (Thailand) Co., Ltd.
1991-Present Chairman of TAT (Phnompenh) Duty Free Co., Ltd.
1989-Present Managing Director of Downtown D.F.S. (Thailand) Co., Ltd.
1989-1991 Managing Director of Europa Prince Downtown Shop, Hong Kong
1989-1990 General Manager/ Duty Free Division of Tourism Authority of Thailand
1984-Present Director of Thai Nishigawa International Co., Ltd.
1980-Present Managing Director of Sriaksorn (1980) Co., Ltd.
Viratana Suntaranond
- -------------------
1997-Present Group Executive Director, Chief Financial Officer, Secretary and Director of King Power
International Group Co., Ltd.
Executive Director and Managing Director of King Power Duty Free Co., Ltd.
1994-Present Director of Big Hand Co., Ltd.
1993-Present Managing Director of King Power Tax Free Co., Ltd.
1992-Present President of U.M.P. Commercial Co., Ltd.
1989-1990 Managing Director of Airport Duty Free Co., Ltd., Bangkok, Chieng Mai, Phuket, Hat Yai
International Airport
1987-1990 Managing Director of D&TFS Co., Ltd. (Bangkok International Airport General Merchandise &
Gifts)
Managing Director of Ratana Phan Co., Ltd. (Bangkok International & Domestic Airport Car Park
Business)
1985-Present President of Niji (Thailand) Co., Ltd., (manufacturer of writing instruments)
1984-Present Managing Director of Thai-Tai International Trading Co., Ltd.
1984-1986 Owner & Director of Ratana Pat Company (Bangkok International Airport Merchandise & Gifts)
1973-1983 Owner & Director of P.C. Thai Silk Shop and V.R. Shop (Bangkok International & Domestic Airport
General Merchandise & Gifts)
1968-1972 Brand Manager (Marketing) of Kimberly-Clark and A. Wander Product, Diethelm Co., Ltd.
Antares Cheng
- -------------
1997-Present Group Managing Director and Director of King Power International
Group Co., Ltd.
1995-Present Managing Director of Hong Kong Kai Tak International Airport
Duty Free Shop Co., Ltd.
General Manager of King Power Duty Free (Macau) Co., Ltd.
1994-Present Director of China Ferry Terminal GM Shop
1993-Present Managing Director of Top Group (Thailand) Co., Ltd.
1992-Present Managing Director of King Power Group
Deputy Managing Director of Downtown DFS (Thailand) Co., Ltd.
1990-Present Director of TAT Phnom Penh Duty Free Co., Ltd., Cambodia
Shareholder, Director and General Manager of Europa Prince
Department Store
21
<PAGE>
1989-Present Managing Director of Railway Duty Free, Hong Kong
1989-1990 Director of Europa Prince Department Store, Hong Kong
1987-1988 Deputy General Manager in the Hong Kong Airport Duty Free Shop.
1986-Present Managing Director of Group Central Buying Office
1979-1989 Overall in charge of China Duty Free Shops
1978-1982 Manager in charge of a Tourist Department Store in Merchandising Department.
1976-1978 Manager of an International Professional Firm of Accountants.
Aimon Boonkhundha
- -----------------
1997-Present Deputy Group Managing Director and Director of King Power International Group Co., Ltd.
1996-Present Executive Director of King Power Duty Free Co., Ltd.
1994-Present Executive Director of Beijing Great Wall (Top Tourist Service Co., Ltd.)
1993-Present Director of King Power Tax Free Co., Ltd.
Executive Director of TAT Phnom Penh Co., Ltd.
1989-1990 Managing Director of Tourism Authority of Thailand (TAT) Duty
Free Co., Ltd.
1989-Present Managing Director of Thai Nishigawa International Co., Ltd.
1983-1989 Director of Thai Nishikawa International Co., Ltd.
Suwan Panyapas
- --------------
1997-Present Director of King Power International Group Co., Ltd.
1996-Present Senator of Thai National Assembly
1991-Present Advisor to TAT Duty Free Co., Ltd.
1989-Present Advisor & Shareholder of Downtown DFS (Thailand) Co., Ltd.
1989-1991 Managing Director of TAT Duty Free Co., Ltd.
1988-1989 General Manager of TAT Duty Free Co., Ltd.
1986 Senior Chief Judge of Thonburi Civil Court.
Acting in the position of Court of Appeal Judge.
Assistant to Court of Appeal Judge.
1983 Secretary to Court of Appeal.
1981 Chief Judge of Udon Thanee District Court.
1980 Acting in the position of Civil Court Judge.
1978 Chief Judge attached to the Ministry of Justice.
Acting in the position of Chief Judge of Pathumthanee Court.
Acting in the position of Secretary to Supreme Court Judge.
Acting in the position of Juvenile Court Judge.
1976 Provincial Judge of Pathumthanee Court.
1972 Provincial Judge of Ubon Rachathanee Court.
Special Positions held include:
o Member of Committee Training Successful Candidates appointed to Juvenile Court.
o Member of Sub-Committee on the Development of Judicial and Ministerial System.
o Member of Committee/Secretary on Selection Test for Judicial Officer for a position of Judge Trainee in 1983-
1984.
o Committee Member for organizing events on legal matters, Public Relations Division and Ministry of Justice.
22
<PAGE>
Dharmnoon Prachuabmoh
- ---------------------
1987-Present Director of King Power International Group Co., Ltd.
Life Member, Pacific Asia Travel Association (PATA)
1995-1996 Member of Thai Parliament, House of Representatives
Advisor to Deputy Minister, Ministry of Communications and Transport
Vice Chairman, Tourism Committee
1988-1995 President of Thailand Incentive and Convention Association (TICA)
1988-1989 President of Pacific Asia Travel Association
1987-1988 Member of National Legislative Council
President of East Asia Travel Association (EATA)
Vice President of Pacific Asia Travel Association
Secretary of Ad hoc Committee on Tourism and Sports
1986-1994 Governor of the Tourism Authority of Thailand (TAT)
1986-1991 Senator of Thai National Assembly
Secretary of Ad hoc Committee on Tourism Promotion of the Senate
Member of Committee on Education and Culture
1986-1988 Board of Directors of Pacific Asia Travel Association
1985-1986 Chairman of International Congress and Convention Association
(ICCA-Thailand National Committee)
1983-1985 Chairman of International Congress and Convention Association
(ICCA-Asia Pacific Chapter)
1979-1986 Deputy Governor Tourism Authority of Thailand (TAT)
1974-1976 Deputy Director General, Tourism Organization of Thailand (TOT)
Benjamin B. Fattedad
- ---------------------
1997-Present Group Director of Development and Director of King Power International Group Co., Ltd.
Director of Hong Kong Kai Tak International Airport Duty Free Shop Co., Ltd.
Director of King Power Alpha Limited
1995-1997 Advisor of Hong Kong Kai Tak International Airport Duty Free Shop Co., Ltd.
1993-Present Advisor of Top (China) Group Co., Ltd.
1990-Present Director of Grosse Hong Kong Ltd.
1989-1990 Shareholder of Europa Prince Department Store, Hong Kong
1989-1995 Consultant of TAT Duty Free Co., Ltd., Thailand
Managing Director of Deveg Ltd.
1980-1994 Consultant, Singapore Crocodilarium & Tourist oriented department Store, Singapore
1972-1994 Consultant of Kaiyo Reptile Pte, Ltd., Singapore
1967-1989 Director of Deveg Ltd.
1962-Present Director, Reliance Trading Co., Ltd.
</TABLE>
All directors of the Company hold office until the next annual meeting of
stockholders or until their successors have been elected and qualified. Vichai
Raksriaksorn and Aimon Boonkhundha are husband and wife. None of the other
directors or executive officers are related. Executive officers are elected by
the Company's Board of Directors to hold office until their respective
successors are elected and qualified.
The Company's bylaws provide that directors may be paid their expenses, if any.
Directors are not paid an annual retainer and in 1997 were paid $6,800 each to
attend meetings of the Board of Directors or of its committees.
All directors attended 100% of the Board meetings held in 1997.
23
<PAGE>
Committees of the Board of Directors
The Board of Directors has two committees: the Audit Committee and Compensation
Committee. The Audit Committee is composed of Vichai Raksriaksorn, Suwan
Panyapas and Dharmnoon Prachuabmoh and Mr. Raksriaksorn is Chairman. The Audit
Committee is responsible for recommending the annual appointment of the
Company's auditors, with whom the Audit Committee will review the scope of audit
and non-audit assignments and related fees, accounting principals used by the
Company in financial reporting, internal auditing procedures and the adequacy of
the Company's internal control procedures. The Compensation Committee is
composed of Vichai Raksriaksorn, Viratana Suntaranond, and Antares Cheng and Mr.
Raksriaksorn is Chairman. The Compensation Committee is responsible for
reviewing and making recommendations to the Board of Directors concerning all
forms of compensation paid to the Company's executive officers.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Based solely on the review of Forms 3,4 and 5 and amendments thereto provided to
the Company pursuant to Rule 16a-3(e), no individuals have failed to file on a
timely basis the reports required to be filed under that rule or as required by
Section 16(a) of the 1934 Act during the period from the date that the Company's
Common Stock was registered under Section 12 of the Securities Exchange Act of
1934, as amended, to December 31, 1997 except that the following individuals
failed to file a Form 3 report with the Securities and Exchange Commission until
March 19, 1998: Vichai Raksriaksorn, Viratana Suntaranond, Aimon Boonkhundha,
Antares Cheng, Benjamin B.
Fattedad, Suwan Panyapas, and Dharmnoon Prachuabmoh.
ITEM 10 EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth certain information about
the cash and non-cash compensation paid by the Company to its four Executive
Officers for the fiscal years ended December 31, 1995, 1996 and 1997. None of
the Company's other executive officers or directors received or were entitled to
receive cash or non-cash compensation totaling in excess of $100,000 for any of
these fiscal years.
Summary Compensation Table
<TABLE>
Annual Compensation Long Term Compensation
<S> <C> <C> <C>
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Name Year Salary Bonus Other Restricted Option/ LTIP All Other
& Title Annual Stock SARs(#) Payouts Compensat
Compensation(5) Awards ion
Vichai 1997 -0- - 6,800 - - - -
Raksriaksorn 1996 -0- - - - - - -
Group Chairman 1995 -0- - - - - - -
& CEO
24
<PAGE>
(1)
Viratana 1997 -0- - 6,800 - - - -
Suntaranond 1996 -0- - - - - - -
Executive 1995 -0- - - - - - -
Director & CFO
(2)
Antares Cheng 1997 -0- - 6,800 - - - -
Group 1996 -0- - - - - - -
Managing 1995 -0- - - - - - -
Director
(3)
Aimon 1997 -0- - 6,800 - - - -
Boonkhundha 1996 -0- - - - - - -
Deputy Group 1995 -0- - - - - - -
Managing
Director(4)
</TABLE>
(1) The Company had planned to pay Mr. Raksriaksorn a salary of $220,000
in both 1995 and 1996 and a salary of $480,000 in 1997. In fact he was not paid
any salary or other compensation in any of these years.
(2) The Company had planned to pay Mr. Suntaranond a salary of $120,000
in both 1995 and 1996 and a salary of $250,000 in 1997. In fact he was not paid
any salary or other compensation in any of these years.
(3) The Company had planned to pay Mr. Cheng a salary of $100,000 in both
1995 and 1996 and a salary of $200,000 in 1997. In fact he was not paid any
salary or other compensation in any of these years.
(4) The Company had planned to pay Ms. Boonkhundha a salary of $140,000
in 1997. In fact she did not receive any salary or other compensation in any of
these years.
(5) All sums in this column represent director's fees paid in cash.
In the Company's annual report to the SEC on Form 10-KSB, the planned
amounts were reported as paid. This was in error. The Company's Board of
Directors requested and these four Executive Officers agreed to waive cash
salaries for the years in question after reviewing the financial results that
the Company actually achieved in those fiscal years.
The Company currently has no employment contracts with any of its
executive officers or directors.
ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 15, 1998 with
regard to the beneficial ownership of Common Stock (i) by each person known to
the Company to be a beneficial owner of 5% or more of its outstanding Common
Stock, (ii) by the officers, directors and key employees of the Company
individually and (iii) by the officers and director as a group.
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<TABLE>
<S> <C>
(1) (2) (3)
Name and Address Number of Shares Beneficially Owned Percent
Vichai Raksriaksorn (1) 5,248,000 (1) 25.92%
Viratana Suntaranond (2) 3,000,000 (2) 14.81%
Aimon Boonkhandha (3) 3,000,000 (3) 14.81%
Antares Cheng 100,000 *
Benjamin B. Fattedad 90,000 *
Suwan Panyapas -0- *
Dharmnoon Prechuabmoh -0- *
Niphon Raksriaksorn (4) 1,037,883 (4) 5.13%
TOTAL: 8 persons 12,475,883 (1)(2)(3)(4) 61.61%
</TABLE>
* less than 1 %
(1) This excludes 3,000,000 shares owned by his wife, Aimon Boonkhundha, as her
separate property. Mr. Raksriaksorn disclaims all beneficial interest in those
shares, as well as any right to vote or control the disposition of those shares.
(2) This excludes 1,000,000 shares owned by his wife, Umaratana Suntaranond, as
her separate property, as well as 150,000 shares in the aggregate owned by his
three children. Mr. Suntaranond disclaims all beneficial interest in those
shares, as well as any right to vote or control the disposition of those shares.
(3) This excludes 5,248,000 shares owned by her husband, Vichai Raksriaksorn, as
his separate property, as well as 5,000 shares owned by her mother, Auemporn
Boonkhant. Ms. Boonkhundha disclaims all beneficial interest in those shares, as
well as any right to vote or control the disposition of those shares.
(4) This excludes 5,248,000 shares owned by his uncle, Vichai Raksriaksorn. Mr.
Niphon Raksriaksorn disclaims all beneficial interest in those shares, as well
as any right to vote or control the disposition of those shares.
ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following companies, which are owned or controlled by one or more of the
directors of the Company, had transactions with the Company during the 1997
fiscal year and are likely to have similar transactions with the Company in the
future. The related amounts are disclosed in Note 7 "Related Party Transactions"
in Notes to Consolidated Financial Statements. All transactions were on terms
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<PAGE>
and conditions and at prices substantially similar to those which these
companies would have negotiated with unrelated third parties for the same goods
and services.
Thai Nishigawa International Co., Ltd.
Mr. Vichai Raksriaksorn and Ms. Aimon Boonkhundha are Director and Managing
Director, respectively, and owners of this company, which sells local and
imported merchandise of various categories, such as costume jewelry and leather
goods, to King Power Tax Free Co., Ltd.
Lengle (Thailand) Co., Ltd.
Mr. Vichai Raksriaksorn is the Chairman and Mr. Suwan Panyapas is a Director of
this company.
Along with Mr. Viratana Suntaranond, Mr. Antares Cheng and Ms. Aimon
Boonkhundha, they are stockholders of this company which acts as a Central
Buying Office of local merchandise which is sold to King Power Tax Free Co.,
Ltd.
Thai Sky Travel & Intertrade Co., Ltd.
Messrs. Vichai Raksriaksorn, Viratana Suntaranond, Antares Cheng and Dharmnoon
Prachuabmoh are the directors and owners of this company which sells most of the
travel services which are used by the Company's management.
King Power Duty Free (C.B.O.) Limited, Hong Kong
Mr. Vichai Raksriaksorn is the Chairman and Mr. Antares Cheng is the Managing
Director and they are owners of this company which sells a substantial amount of
imported merchandise to the Company.
Niji (Thailand) Co., Ltd.
Mr. Viratana Suntaranond is the President and owner of this company which sells
all of the shopping bags utilized by the Company. Forty Seven Co., Ltd.
Messrs. Viratana Suntaranond and Dharmnoon Prachuabmoh are Directors, Mr. Vichai
Raksriaksorn is the Managing Director, and all are shareholders of this company.
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This company is engaged in the construction of buildings, commercial buildings,
residential buildings, offices, roads, bridges, dams, tunnels, and all other
types of construction, including civil work.
Top China Group Co.,Ltd.
Messrs, Viratana Suntaranond and Antares Cheng are Directors, Mr. Vichai
Raksriaksorn is the Managing Director, and all are shareholders of this company.
Mr. Dharmnoon Prachuabmoh is also a shareholder. This company provides all kinds
of services related to travel.
King Power International Co., Ltd.
Messrs. Vichai Raksriaksorn and Viratana Suntaranond and Ms. Aimon Boonkhundha
are Directors, Mr. Vichai Raksriaksorn is the Chairman, and all are shareholders
of this company. This company is engaged in selling duty free merchandise to
international travelers in a store located in downtown Bangkok.
Downtown D.F.S. (Thailand) Co., Ltd.
Messrs. Vichai Raksriaksorn, Antares Cheng and Suwan Panyapas are shareholders
of this company. This company's Directors include Messrs. Raksriaksorn and Cheng
and Ms. Aimon Boonkhundha. Mr. Vichai Raksriaksorn is the Managing Director and
Mr. Antares Cheng is the Deputy Managing Director. This company is engaged in
selling general merchandise to the general public.
Airport Authority of Thailand (AAT)
AAT is a governmental agency and it owns five percent of the stock of King
Power Duty Free Co., Ltd. In its capacity as a governmental agency and following
the rules and procedures established by the government of Thailand, it has
granted the concessions and leases under which both King Power Duty Free Co.,
Ltd. and King Power Tax Free Co., Ltd. operate. (See BUSINESS, Organization and
Operations, above.)
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PART IV
ITEM 13 EXHIBITS AND REPORTS ON FORM 8-K
Documents filed as a part of this report
(A) Exhibits filed with this report:
Number 23.1 Consent of BDO Binder (Thailand)Ltd.
(B) Reports on Form 8-K
The Company filed the following reports with the SEC on Form 8-K:
(a) August 18, 1997, reporting the completion of the sale of 250,000
shares of common stock in a private placement.
(b) December 12, 1997, reporting a change in Company's independent
accountants, with BDO Binder (Thailand) Ltd. replacing Cheshier and
Fuller, LLP.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this amended report (Form 10-KSB/A2) to
be signed on its behalf by the undersigned, thereunto duly authorized, this 24th
day of October, 1998.
KING POWER INTERNATIONAL GROUP CO., LTD.
By: /s/ Vichai Raksriaksorn
Vichai Raksriaksorn
Group Chairman, Chief Executive Officer and Director
By: /s/ Viratana Suntaranond
Viratana Suntaranond, Group Executive Director,
Chief Financial Officer, Secretary, Director and
Chief Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Company and in
the capacities and on the dates indicated.
Signature Title Date
/s/ Vichai Raksriaksorn
Vichai Raksriaksorn Group Chairman, Chief Executive October 24 ,1998
Officer and Director
_/s/ Viratana Suntaranond
Viratana Suntaranond Group Executive Director, Chief October 24 ,1998
Financial Officer, Secretary and Director
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- ------------------
Antares Cheng Group Managing Director October , 1998
and Director
/s/ Aimon Boonkhundha_
Aimon Boonkhundha Deputy Group Managing October 24, 1998
Director and Director
- ------------------------
Dharmnoon Prachuabmoh Director October ,1998
/s/ Suwan Panyapas
Suwan Panyapas Director October 24, 1998
- ---------------------
Benjamin B. Fattedad Group Director of Operations October ,1998
and Director
31
