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FORM 10-Q
- --------------------------------------------------------------------------------
For the quarterly period ended September 30, 2002
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 0R 15(d) OF THE SECURITIES
- ------ EXCHANGE ACT 0F 1934
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
- ------ EXCHANGE ACT OF 1934
For the transition period from______to ______
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Commission File Number: 1-13205
KING POWER INTERNATIONAL GROUP CO., LTD.
(Exact name of registrant as specified in its charter)
Nevada 75-2641513
(State of incorporation) (IRS Employer ID number)
25th-27th Floor, Siam Tower, 989 Rama 1 Road, Patumwan, Bangkok 10330 Thailand
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(Address of principal executive offices)
011 (662) 658-0090
------------------
(Registrant's telephone number, including area code)
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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 proceeding 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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 6th September, 2002: 20,250,000
1
KING POWER INTERNATIONAL GROUP CO., LTD.
Form 10-Q for the Quarterly ended September 30, 2002
Table of Contents
Page
Part I - Financial Information
Item 1 Financial statements 3
Item 2 Management's Discussion and Analysis or Plan of Operation 25
Item 4 Controls and Procedures 31
Part II - Other Information
Item 1 Legal Proceeding 31
Item 2 Changes in Securities 32
Item 3 Defaults Upon Senior Securities 32
Item 4 Submission of Matters to a Vote of Securities Holders 32
Item 5 Other Information 32
Item 6 Exhibits and Reports on Form 8-K 33
2
Part I - Financial Information
Item 1 Financial statements
Independent Accountants' Review Report
The Board of Directors and Shareholders
King Power International Group Co., Ltd. and Subsidiaries
We have reviewed the consolidated balance sheet of King Power International
Group Co., Ltd. and Subsidiaries (a Nevada Corporation) as of September 30, 2002
and 2001, and the related consolidated statements of operations, shareholders'
equity and cash flows for the three months and nine months then ended, in
accordance with Statements on Standards for Accounting and Review Services
issued by the American Institute of Certified Public Accountants. All
information included in these financial statements is the representation of the
management of King Power International Group Co., Ltd. and Subsidiaries
A review consists principally of inquiries of Company personnel and analytical
procedures applied to financial data. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principals.
SMITH, GRAY, BOYER & DANIELL
A Professional Limited Liability Company
Dallas, Texas
November 13, 2002
3
(UNAUDITED)
KING POWER INTERNATIONAL GROUP CO., LTD AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
Note 2002 2001
------------- -------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 4,101,281 $ 3,955,240
Trade accounts receivable 385,891 676,073
Refundable value added tax 4 633,473 626,537
Trade accounts and management fee receivable from related
companies, net 11 281,035 1,455,691
Merchandise inventories, net 32,517,568 21,185,208
Restricted fixed deposits 3 15,219,721 11,650,467
Deferred income tax assets 10 3,723,057 3,541,113
Prepaid expenses 141,896 416,176
Other current assets 2,307,462 315,409
------------- -------------
Total current assets 59,311,384 43,821,914
Property, plant and equipment, net 5 6,457,947 3,719,476
Loans and accrued interest from related companies and directors, net 11 10,097,184 11,764,840
Investments and other assets 2,992,306 202,590
------------- -------------
TOTAL ASSETS $ 78,858,821 $ 59,508,820
============= =============
The accompanying notes are an integral part of these consolidated financial
statements
See Accountants' Review Report
4
(UNAUDITED)
KING POWER INTERNATIONAL GROUP CO., LTD AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
September 30, December 31,
2002 2001
Note ------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Bank overdraft and bank loans 6 $ 20,213,549 $ 21,562,684
Current portion of long-term loan 8 660,780 33,275
Trade accounts payable 12,430,987 10,893,026
Accrued concession fees 7 4,603,778 2,737,366
Accrued corporate income tax 5,250,890 1,391,145
Other current liabilities 3,296,650 2,151,468
------------- -------------
Total current liabilities 46,456,634 38,768,964
Long-term loan, net 8 297,860 140,245
------------- -------------
Total liabilities 46,754,494 38,909,209
------------- -------------
Minority interest 1,338,700 775,887
Shareholders' equity 9
Common stock, $0.001 par value,
100,000,000 shares authorized,
20,250,000 shares issued and outstanding 20,250 20,250
Additional paid in capital 20,848,145 20,848,145
Retained earnings (deficit) 12,063,173 1,446,618
Legal reserve 82,233 82,233
Translation adjustments (2,248,174) (2,573,522)
------------- -------------
Total shareholders' equity 30,765,627 19,823,724
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 78,858,821 $ 59,508,820
============= =============
The accompanying notes are an integral part of these consolidated financial
statements
See Accountants' Review Report
5
(UNAUDITED)
KING POWER INTERNATIONAL GROUP CO., LTD AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE QUARTERS ENDED SEPTEMBER 30, 2002 AND 2001
Nine months ended September 30, Three months ended September 30,
Note 2002 2001 2002 2001
------------- ------------- ------------- -------------
Sales revenue $ 123,170,813 $ 84,988,638 $ 38,875,649 $ 27,055,057
Cost of sales
Cost of merchandise sold 60,657,056 40,840,993 20,162,097 12,748,939
Concession fees 7 23,940,152 16,173,612 8,022,680 5,210,067
------------- ------------- ------------- -------------
Total cost of sales 84,597,208 57,014,605 28,184,777 17,959,006
------------- ------------- ------------- -------------
Gross profit 38,573,605 27,974,033 10,690,872 9,096,051
Operating expenses
Selling and administrative expenses 22,490,393 21,287,189 8,498,155 6,513,329
Provision for obsolescence stock 376,887 -- 71,535 --
------------- ------------- ------------- -------------
Total operating expenses 22,867,280 21,287,189 8,569,690 6,513,329
------------- ------------- ------------- -------------
Income from operations 15,706,325 6,686,844 2,121,182 2,582,722
Other income (expense)
Interest income 999,680 531,598 248,701 343,411
Interest expense (1,066,492) (943,111) (302,416) (333,689)
Gain (loss) on foreign exchange, net (66,800) 183,297 (16,791) 34,530
Gain on investment in marketable securities 2,586 -- 2,586 --
Other income 774,272 518,862 218,535 245,599
------------- ------------- ------------- -------------
Total other income (expense) 643,246 290,646 150,615 289,851
------------- ------------- ------------- -------------
Net income before income tax 16,349,571 6,977,490 2,271,797 2,872,573
Income tax expense 10 (5,181,204) (2,453,270) (791,125) (1,094,714)
------------- ------------- ------------- -------------
Net income before minority interest 11,168,367 4,524,220 1,480,672 1,777,859
Minority interest (551,812) (252,477) (90,389) (93,567)
------------- ------------- ------------- -------------
Net income attributed to common shares $ 10,616,555 $ 4,271,743 $ 1,390,283 $ 1,684,292
============= ============= ============= =============
Weighted average number of common shares
outstanding 20,250,000 20,250,000 20,250,000 20,250,000
Basic earnings per share $ 0.52 $ 0.21 $ 0.07 $ 0.08
The accompanying notes are an integral part of these consolidated financial
statements
See Accountants' Review Report
6
(UNAUDITED)
KING POWER INTERNATIONAL GROUP CO., LTD AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE QUARTERS ENDED SEPTEMBER 30, 2002 AND 2001
Nine months ended September 30, Three months ended September 30,
2002 2001 2002 2001
-------------- -------------- -------------- --------------
Net income attributed to common shares $ 10,616,555 $ 4,271,743 $ 1,390,283 $ 1,684,292
Other comprehensive income, net of tax:
Foreign currency translation adjustment 325,348 (423,780) (1,418,004) 342,045
-------------- -------------- -------------- --------------
Comprehensive income $ 10,941,903 $ 3,847,963 $ (27,721) $ 2,026,337
============== ============== ============== ==============
The accompanying notes are an integral part of these consolidated financial
statements
See Accountants' Review Report
7
(UNAUDITED)
KING POWER INTERNATIONAL GROUP CO., LTD AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE QUARTERS ENDED SEPTEMBER 30, 2002 AND 2001
Nine months ended September 30, Three months ended September 30,
2002 2001 2002 2001
-------------- -------------- -------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 10,616,555 $ 4,271,743 $ 1,390,283 $ 1,684,292
Adjustments to reconcile net income, to net cash
provided by (used in) operating activities:
1,146,184 1,042,810 433,343 350,457
Depreciation expense
Unrealized loss (gain) on foreign exchange (85,945) (74,852) (84,209) 19,167
Deferred income tax assets (181,944) 95,826 140,832 (15,718)
Provision for obsolescence stock 376,887 -- 71,535 --
Decrease (increase) in operating assets:
Trade accounts receivable 288,333 (221,712) 117,961 (274,089)
Refundable valued added tax (6,936) 111,892 392,210 (35,666)
Receivables and loans to related companies 2,832,736 (749,766) 1,463,788 1,476,026
and directors
Merchandise inventories (11,709,247) (4,031,995) 2,508,206 (1,564,510)
Prepaid expenses and other current assets (1,717,773) (244,697) (1,612,868) 310,783
Other long-term assets (2,789,716) (4,776) (823,568) 1,716
Increase (decrease) in operating liabilities:
Trade accounts payable 1,566,898 (2,253,363) 1,008,036 181,806
Advances from director -- (446,186) -- (2,054,859)
Accrued concession fees 1,866,412 (197,687) 905,196 48,230
Other current liabilities 5,004,928 (522,367) 1,473,382 (470,617)
Minority interest 562,813 144,506 32,977 14,436
Translation adjustments 325,348 (423,780) (1,418,004) 342,045
-------------- -------------- -------------- --------------
Net cash provided by (used in) operating $ 8,095,533 $ (3,504,404) $ 5,999,100 $ 13,499
activities
The accompanying notes are an integral part of these consolidated financial
statements
See Accountants' Review Report
8
(UNAUDITED)
KING POWER INTERNATIONAL GROUP CO., LTD AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
FOR THE QUARTERS ENDED SEPTEMBER 30, 2002 AND 2001
Nine months ended September 30, Three months ended September 30,
2002 2001 2002 2001
-------------- -------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
$ (3,884,655) $ (314,167) $ (1,587,734) $ (308,498)
Purchases of fixed assets
(Increase) decrease in restricted fixed deposits (3,569,254) (1,297,324) 1,889,071 (623,565)
-------------- -------------- -------------- --------------
Net cash provided by (used in) investing activities (7,453,909) (1,611,491) 301,337 (932,063)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayment of) bank overdrafts 388,402 119,792 986,263 27,400
Proceeds from (repayment of) bank loans (1,776,753) 4,844,881 (8,763,734) 948,161
Proceeds from (repayment of) long-term loan 785,119 (28,556) 383,195 (4,596)
-------------- -------------- -------------- --------------
Net cash provided by (used in) financing activities (603,232) 4,936,117 (7,394,276) 970,965
Effect of exchange rate changes on cash and cash
equivalents 107,649 (7,519) 137,777 (10,041)
-------------- -------------- -------------- --------------
Net increase in cash and cash equivalents 146,041 (187,297) (956,062) 42,360
Cash and cash equivalents, beginning of period 3,955,240 2,633,890 5,057,343 2,404,233
-------------- -------------- -------------- --------------
Cash and cash equivalents, end of period 4,101,281 2,446,593 4,101,281 2,446,593
============== ============== ============== ==============
Supplemental cash flow information
Cash paid during the period:
Interest $ 1,200,362 $ 852,062 $ 426,431 $ 278,504
Income taxes $ 3,099,667 $ 2,474,362 $ 1,662,898 $ 1,809,429
The accompanying notes are an integral part of these consolidated financial
statements
See Accountants' Review Report
9
(UNAUDITED)
KING POWER INTERNATIONAL GROUP CO., LTD AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE QUARTERS ENDED SEPTEMBER 30, 2002 AND 2001 (in US $)
Common Stock Additional Comprehensive Retained
Shares Amount Paid in Capital Income Earnings
-----------------------------------------------------------------------
Balances at January 1, 2001 20,250,000 20,250 20,848,145 (3,018,454)
Net Income 4,271,743 4,271,743
Other comprehensive income, net of tax
Reserve (82,233)
Foreign currency translation adjustment (423,780)
-----------
Comprehensive Income 3,847,963
---------------------------------------------===========---------------
Balances at September 30, 2001 20,250,000 20,250 20,848,145 1,171,056
========================================= ===========
Balances at January 1, 2002 20,250,000 20,250 20,848,145 1,446,618
Net Income 10,616,555 10,616,555
Other comprehensive income, net of tax
Foreign currency translation adjustment 325,348
-----------
Comprehensive Income 10,941,903
---------------------------------------------===========---------------
Balances at September 30, 2002 20,250,000 20,250 20,848,145 12,063,173
========================================= ===========
Accumulated
Other
Legal Comprehensive
Reserve Income Total
-----------------------------------------
Balances at January 1, 2001 (2,250,195) 15,599,746
Net Income 4,271,743
Other comprehensive income, net of tax
Reserve 82,233 --
Foreign currency translation adjustment (423,780) (423,780)
Comprehensive Income
-----------------------------------------
Balances at September 30, 2001 82,233 (2,673,975) 19,447,709
=========================================
Balances at January 1, 2002 82,233 (2,573,522) 19,823,724
Net Income 10,616,555
Other comprehensive income, net of tax
Foreign currency translation adjustment 325,348 325,348
Comprehensive Income
-----------------------------------------
Balances at September 30, 2002 82,233 (2,248,172) 30,765,627
=========================================
The accompanying notes are an integral part of these consolidated financial
statements
See Accountants' Review Report
10
KING POWER INTERNATIONAL GROUP CO., LTD AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTERS ENDED SEPTEMBER 30, 2002 AND 2001
See Accountants' Review Report
1. BASIS OF PRESENTATION
King Power International Group Co., Ltd. (formerly Immune America,
Inc.) (here in the "Company") was incorporated under the laws of the State of
Nevada on July 30, 1985.
On June 12, 1997, the Company exchanged 18,800,000 shares of its common
stock for 99.94% of the issued and outstanding common shares of King Power Tax
Free Company Limited [(formerly J.M.T. Group Company Limited)-KPT thereafter]
and 95% of the issued and outstanding common shares of King Power Duty Free
Company Limited [(formerly J.M.T. Duty Free Company Limited)-KPD thereafter].
This exchange of the Company's common stock to the former KPT and KPD
shareholders resulted in those former shareholders obtaining a majority voting
interest in the Company. Generally accepted accounting principles require that
the company whose stockholders retain the majority interest in a combined
business be treated as the acquirer for accounting purposes. Consequently, this
transaction was accounted for as a "reverse acquisition" for financial reporting
purposes and KPT and KPD were deemed to have acquired 94% of equity interest in
the Company as of the date of acquisition. The relevant acquisition process
utilized the capital structure of Immune America, Inc., and the assets and
liabilities of KPT and KPD were recorded at historical cost.
Concurrent with the reverse acquisition, the Company changed its
corporate name from Immune America, Inc. to King Power International Group Co.,
Ltd.
KPD is a Thailand-based corporation engaged in selling duty free
merchandise to the traveling public under the supervision of Thai customs, in
stores located in the international terminals of the various airports located in
Thailand. KPD holds from the Airports Authority of Thailand, an exclusive
license to operate duty free stores for all stores of this specific nature.
Prior to January 1, 2002, KPD held a non-exclusive license to operate duty free
stores of this specific nature (see Note 7). For the duty free store operation,
KPD is exempt from input value added tax on purchases of import merchandise and
from output value added tax on sales of merchandise.
KPT is a Thailand-based corporation engaged in selling various
souvenirs and consumer products to the general public in the international and
domestic terminals of the various airports located throughout Thailand. KPT
holds the operating license granted by the Airports Authority of Thailand for
all shops of this specific nature. For the tax free operation, KPT is subject to
input value added tax on purchases of merchandise and is exempt from output
value added tax on sales of merchandise for shops within Bangkok International
Airport's departure halls.
On October 10, 1997, the Company acquired 4,900 shares of common stock
in King Power International Group (Thailand) Company Limited (KPG Thai),
equivalent to 49% of the registered capital. KPG Thai was established in
Thailand on September 11, 1997, and has registered capital totaling Baht 1
million divided into 10,000 shares of common stock with Baht 100 per share. On
the same date, KPT acquired 5,093 shares of common stock in KPG Thai, equivalent
to 50.93% of the registered capital. Ultimately, the Company owns 99.93% of
equity interest in KPG Thai.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - The consolidated financial statements,
which include the accounts of the Company and its subsidiaries, are prepared in
accordance with accounting principles generally accepted in the United States of
America. All significant intercompany accounts and transactions have been
eliminated in consolidation. Investments in other companies under 20% of
interest are accounted for using the cost method. At December 31, 2001 and 2000,
these investments have been written down due to an assumed permanent impairment
of their value. The consolidated financial statements are presented in U.S.
dollars.
Cash and Cash Equivalents - The Company considers all highly liquid
investments with an original maturity of three months or less to be cash
equivalents.
Merchandise Inventories - Merchandise inventories are stated at the
lower of cost or market. Cost is determined on a weighted average basis.
Provision for Doubtful Accounts - Estimated collection losses of the
Company are provided for based on the Company's collection experience together
with a review of the financial position of each debtor. Where the Company
determines reserves are necessary, it will provide a provision for the total
receivable and accrued interest outstanding.
11
KING POWER INTERNATIONAL GROUP CO., LTD AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE QUARTERS ENDED SEPTEMBER 30, 2002 AND 2001
See Accountants' Review Report
Marketable Securities - Securities held for trading are marked to
market at year-end with the resulting gain or loss being included in current
income.
Foreign Currency Translation and Transactions - The financial position
and results of operations of the Company's foreign subsidiaries are determined
using the local currency as the functional currency. Assets and liabilities of
these subsidiaries are translated at the prevailing exchange rates in effect at
each period end. Contributed capital accounts are translated using the
historical rate of exchange when capital was injected. Income statement accounts
are translated at the average rate of exchange during the year. Translation
adjustments arising from the use of different exchange rates from period to
period are included in the cumulative translation adjustment account in
shareholders' equity. Gains and losses resulting from foreign currency
transactions are included in operations. Gains or losses on foreign exchange
transactions are recognized as incurred in the consolidated statements of
income. Differences between the forward rate and the spot rate in forward
exchange contracts are amortized as revenue and expense over the period of the
contract.
The exchange rates at September 30, 2002 and December 31, 2001 were $1=
Baht 43.364 and Baht 44.227, respectively. The average exchange rates for the
nine months ended September 30, 2002 and 2001 were $1= Baht 43.0152, Baht
44.4083, respectively.
Property, Plant and Equipment - Property, plant and equipment are
stated at cost. Depreciation is computed by using the straight-line method over
the estimated useful lives of the assets as follows:
Buildings 20 Years
Leasehold improvements Term of lease
Selling office equipment and fixtures 5 Years
Vehicles 5 Years
Maintenance, repairs and minor renewals are charged directly to expense as
incurred.
Store Pre-Opening Costs - Store pre-opening costs are expensed as
incurred.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
financial statements, and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from these estimates.
Revenue Recognition - The Company recognizes revenue from sales of
merchandise at the point of sale.
Concession Fees - According to the concession agreement with the
Airports Authority of Thailand, KPT is required to pay concession fees, rental
and services fees, and other related expenses at the fixed charges per month
defined in the concession agreement. According to the concession agreement with
the Airports Authority of Thailand, KPD is required to pay concession fees at a
fixed percentage of sales, greater than or equal to the fixed charges as defined
in the concession agreement, and pay rental and service fee and other related
expenses.
Concentrations of Credit Risk - The Company's retail businesses are
cash flow businesses. Most sales take place with cash receipts or credit card
payments. The Company maintains its cash accounts with various financial
institutions. In Thailand, such accounts are insured for the full amount of
their value by the Thai government. U.S. bank deposits are within Federal
insurance limits. In addition, see Note 11 with respect to loans and advances to
directors and affiliated companies.
Fair Value of Financial Instruments - The carrying amount of cash,
trade accounts receivable, notes receivable, trade accounts payable, and accrued
payables are reasonable estimates of their fair value because of the short
maturity of these items. The carrying amounts of the Company's credit facilities
approximate fair value because the interest rates on these instruments are
subject to fluctuate with market interest rates.
Income Taxes - The Company accounts for income taxes using the
liability method, which requires an entity to recognize the deferred tax
liabilities and assets. Deferred income taxes are recognized based on the
differences between the tax basis of assets and liabilities and their reported
amounts in the financial statements, that will result in taxable or deductible
amounts in future years. Further, the effects of enacted tax laws or rate
changes are included as part of deferred tax expense or benefits in the period
that covers the enactment date. A valuation allowance is recognized if it is
more likely than not that some portion, or all of, a deferred tax asset will not
be realized.
12
KING POWER INTERNATIONAL GROUP CO., LTD AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE QUARTERS ENDED SEPTEMBER 30, 2002 AND 2001
See Accountants' Review Report
The Company does not provide for United States income taxes on
unlimited earnings of its Thailand-based subsidiaries since the Company's
intention is to reinvest these earnings in their operations.
Earnings Per Share - Basic earnings per share has been computed based
on the average number of common shares outstanding for the period. There are no
potentially dilutive securities outstanding.
Reclassification - Certain amounts in the 2001 financial statements and
related footnotes have been reclassified to conform with 2002 presentation.
3. RESTRICTED FIXED DEPOSITS
September 30, 2002 December 31, 2001
------------------ -----------------
Restricted fixed deposits $ 15,219,721 $ 11,650,467
Interest rates 0.75%-3.50% 1.00%-4.00%
As of September 30, 2002 and December 31, 2001, the restricted fixed
deposits with maturities from three to twelve months were pledged as collateral
to a commercial bank for bank credit facilities of subsidiaries. As these are
current obligations of the Company, the deposits are shown as current assets.
4. REFUNDABLE VALUE ADDED TAX
For Thailand-based subsidiaries, refundable value added tax (VAT)
represents, on a cumulative basis, the excess of input tax (charged by suppliers
on purchases of merchandise and services) over the output tax (charged to
customers on sales of merchandise and services). Value added tax is levied on
the value added at each stage of production and distribution, including
servicing, generally at the rate of 10% effective August 16, 1997. The Minister
of Finance, however, declared a new value added tax at the rate 7% commencing
April 1, 1999, in order to stimulate the domestic economy.
5. PROPERTY, PLANT AND EQUIPMENT, NET
September 30, 2002 December 31, 2001
------------------ ------------------
Land $ 606,033 $ 594,207
Building 379,259 116,844
Leasehold improvements 7,563,858 4,627,983
Office equipment and fixtures 3,363,660 2,663,704
Vehicles 1,042,936 788,678
Work in progress 22,857 338,498
------------------ ------------------
Total cost 12,978,603 9,129,914
Less: accumulated depreciation (6,520,656) (5,410,438)
------------------ ------------------
Net book value $ 6,457,947 $ 3,719,476
================== ==================
6. BANK OVERDRAFT AND LOANS FROM BANKS
September 30, 2002 December 31, 2001
------------------ ------------------
Bank overdraft $ 986,262 $ 597,861
Trust receipts 9,311,227 13,955,530
Short-term loan 9,916,060 7,009,293
------------------ ------------------
$ 20,213,549 $ 21,562,684
================== ==================
13
KING POWER INTERNATIONAL GROUP CO., LTD AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE QUARTERS ENDED SEPTEMBER 30, 2002 AND 2001
See Accountants' Review Report
As of September 30, 2002 and December 31, 2001, the Company has an
overdraft facility with commercial banks in Thailand totaling Baht 80.74 million
($ 1,861,913) and Baht 80.74 million ($ 1,825,582), respectively, bearing
interest at the Minimum Overdraft Rate ("MOR") plus 1.00% - 1.50% per annum. For
the nine months ended September 30, 2002, the average rate of MOR was 7.50% -
8.00% per annum, and for the year ended December 31, 2001 the average rate MOR
was 7.75% - 8.25% per annum. Available lines of credit for the bank overdrafts
are guaranteed by certain directors and collateralized by fixed deposits. (Note
3)
As of September 30, 2002 and December 31, 2001, trust receipts incurred
by KPD and KPT bear interest at the rates varying from 3.355% - 8.00% and 4.56%
- - 9.00% per annum, respectively, and are collateralized by fixed deposits, KPD's
land, and guaranteed by two directors of KPD, together with a related company.
As of September 30, 2002 and December 31, 2001, the Company has a
short-term loan with various commercial banks in Thailand, bearing interest at
rates of 2.56% - 7.50% and 2.875% - 8.75%per annum, respectively, and are
collateralized by fixed deposits and guaranteed by a director.
Trust receipts at September 30, 2002
Foreign currency borrowing by subsidiaries in Thailand Currencies Amount Interest rate (%)
-Under forward contract and T/R
Forward contract BAHT 44,319,990 $ 1,022,046 3.355 - 8.00
Trust receipt BAHT 291,004,018 6,710,728 4.55 - 8.00
-Without forward contract USD 687,316 689,202 4.2275 - 7.50
CHF 421,720 284,685 3.355 - 7.50
HKD 4,108,481 529,202 5.50 - 7.50
SGD 89,386 50,624 5.50 - 5.25
EUR 25,008 24,740 5.00 - 6.75
-----------
$ 9,311,227
===========
Trust receipts at December 31, 2001
Foreign currency borrowing by subsidiaries in Thailand Currencies Amount Interest rate (%)
-Under forward contract and T/R
Forward contract BAHT 233,728,932 $ 5,284,757 4.56 - 9.00
Trust receipt BAHT 327,100,775 7,395,952 5.50 - 9.00
-Without forward contract USD 833,074 835,574 4.56 - 9.00
CHF 219,305 131,561 6.00 - 9.00
GBP 15,081 21,998 7.25 - 9.00
HKD 1,277,545 164,662 5.625 - 9.00
SGD 25,816 14,035 5.67 - 9.00
EUR 120,179 106,991 6.50 - 9.00
-----------
$13,955,530
===========
As of September 30, 2002, and December 31, 2001, land and building are
pledged as collateral for credit lines, trust receipts, and a long-term loan
from a bank. (Notes 6 and 8)
14
KING POWER INTERNATIONAL GROUP CO., LTD AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE QUARTERS ENDED SEPTEMBER 30, 2002 AND 2001
See Accountants' Review Report
7. CONCESSION FEES
Accrued concession fees to the Airport Authority of Thailand as of
September 30, 2002, and December 31, 2001, respectively, were $4,603,778and
$2,737,366. Concession fee expense for the nine months ended September 30, 2002
and 2001, was $23,940,152 and $16,173,612, respectively.
In order to obtain the necessary rights to operate at the international
and domestic airports in Thailand, the Company has entered into various
agreements with the Airports Authority of Thailand and the Customs Department of
Thailand, which included the right to rent office space.
Both KPD and KPT are required to pay concession fees, rental and
service fees, property tax, and other expenses, and to pledge cash or obtain a
local commercial bank letter of guarantee, as collateral under the
aforementioned agreements with the Airports Authority of Thailand.
A summary of the concession and rental fees payable and the value of
collateral for the remaining period of the agreement (as amended) are as follows
(see Notes 11 and 12):
KPT (in 000's) KPD (in 000's)
- --------------------------------------------------------- --------------------------------------------------
Year Airport Rental, Service & Airport Rental, Service &
Concession Fees Other Expenses Collateral Concession Fees Other Expenses Collateral
- --------------------------------------------------------- --------------------------------------------------
2002 $ 2,398 $ 122 $ 4,695 $ 6,152 $ 380 $ 11,366
2003 2,315 105 4,253 25,069 1,582 11,736
2004 27 3 17 26,010 1,582 12,167
2005 - - - 27,551 - 12,522
2006 - - - 28,792 - 13,078
On March 20, 2001, the Airports Authority of Thailand awarded the
Company a contract, beginning January 1, 2002, to operate the duty free retail
space of other operator.
8. LONG-TERM LOANS, NET
Long-term liabilities as of September 30, 2002 and December 31, 2001 consist of
the following:
September 30, 2002 December 31, 2001
------------------ ------------------
Long-term loans $ 911,064 $ 168,861
Installment purchase payable 47,576 4,659
------------------ ------------------
958,640 173,520
Less: current portion of long-term debt (660,780) (33,275)
------------------ ------------------
Total $ 297,860 $ 140,245
================== ==================
As of September 30, 2002 and December 31, 2001, long-term loans consist of loans
from banks carrying interest rates of 7.00% - 7.25% per annum,The long-term
loans are secured by the Company's land and building and guaranteed by a
director of the Company. (See Note 5)
15
KING POWER INTERNATIONAL GROUP CO., LTD AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE QUARTERS ENDED SEPTEMBER 30, 2002 AND 2001
See Accountants' Review Report
Loans are due as follows:
September 30, 2002 December31, 2001
------------------ ------------------
Installment purchase obligation
2002 $ 3,481 $ 4,659
2003 12,026 --
2004 12,026 --
2005 12,026 --
2006 8,017 --
------------------ ------------------
Total $ 47,576 $ 4,659
================== ==================
Long-term loan installment payments
2002 209,954 28,616
2003 579,841 30,915
2004 121,269 33,395
Thereafiter -- 75,935
------------------ ------------------
Total $ 911,064 $ 168,861
================== ==================
9. SHAREHOLDERS'EQUITY
(a) Per the reverse acquisition agreement, the two Thailand-based companies
together received a total of 18,800,000 shares of common stock of
Immune America, Inc. which represented 94% of equity interest as of the
date the reverse acquisition agreement was effective. Therefore, the
18,800,000 shares were assumed to be issued and outstanding as of
January 1, 1996, for the purpose of presenting comparative financial
statements.
(b) Per the reverse acquisition agreement, 752,000 shares out of the total
18,800,000 shares were put in escrow subject to certain requirements
including that the Company shall have financial statements prepared in
accordance with U.S. GAAP and shall have reached certain criteria of
financial performance as of December 31, 1997. If, as of December 31,
1997, the Company failed to satisfy any of these conditions, the
752,000 shares were to be released to a financial consultant who was
also a party to the reverse requisition agreement. During the first
quarter of 1998, these shares were released from escrow and issued to
the financial consultant.
(c) Per the reverse acquisition agreement, 1,200,000 shares of common stock
as of June 12, 1997, when the reverse acquisition was effective,
represented the other 4% of equity interests. These 1,200,000 shares of
common stock were represented by the following components:
Additional
Common Stock paid-in Retained Treasury
Shares Amount capital earnings stock Total
-----------------------------------------------------------------------
Beginning Balance at
12/31/96 275,316 $ 275 $ 151,186 $(143,833) $ (6,000) $ 1,628
Form S-8 issuance at
5/8/97 924,684 925 69,717 -- -- 70,642
Reissuing of treasury stock -- -- -- -- 6,000 6,000
Net loss at 6/12/97 -- -- -- (78,270) -- (78,270)
-----------------------------------------------------------------------
Total shareholders' equity
At June 12, 1997 1,200,000 $ 1,200 $ 220,903 $(222,103) $ -- $ --
=======================================================================
16
KING POWER INTERNATIONAL GROUP CO., LTD AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE QUARTERS ENDED SEPTEMBER 30, 2002 AND 2001
See Accountants' Review Report
(d) On August 18,1997, the Company issued 250,000 shares of its common
stock to two foreign entities, 125,000 shares each, at a price of $8.00
per shares with net of proceeds of $1,887,000. Both entities are
located in Taipei, Taiwan, Republic of China. One half of these shares
(125,000) were placed in escrow until May 1, 1998, subject to an
additional payment by the purchaser of $4.00 per share on all 250,000
shares issued or ($1,000,000) in the event that the earnings per share
for the Company for the calendar year ended December 31, 1997, exceeded
a certain amount per share. If the earnings per share for fiscal year
1997 were below the specified goal, then the shares under escrow were
to be released to the purchasers without further consideration. These
shares have been released from escrow without further consideration. No
underwriter or placement agent was used. The issuance was conducted
pursuant to Regulation S promulgated under the United State Securities
Act of 1933, as amended.
(e) Dividend Declaration and Legal Reserve
At its ordinary shareholders' meeting held on August 1, 2001, KPD
passed a resolution to pay a dividend at the rate of Baht 40 per share
for a total of Baht 80,000,000 ($1.8 million), based on the results of
its operations for 1999. Further, in accordance with Thai law, a legal
reserve was created, equal to 5% of the total net profit for the year
on which the dividend is based. The 5% net profit reserve is required
by Thai law each time dividend is declared; until such reserve reaches
10% of the Company's authorized share capital.
10. INCOME TAX
The Company accounts for income taxes using the liability method, which
requires an entity to recognize the deferred tax liabilities and assets.
Deferred income taxes are recognized based on the differences between the tax
bases of assets and liabilities and their reported amounts in the financial
statements that will result in taxable or deductible amounts in future years.
Further, the effects of enacted tax laws or rate changes are included as part of
deferred tax expense or benefits in the period that covers the enactment date. A
valuation allowance is recognized if it is more likely than not that some
portion, or all of, a deferred tax asset will not be realized.
The provision for income taxes consists of the following:
September 30, 2002 September 30, 2001
------------------ ------------------
Current income tax (payable)
United States $ -- $ (20,542)
Foreign (4,999,260) (2,336,902)
------------------ ------------------
(4,999,260) (2,357,444)
Deferred income tax
United States -- --
Foreign (181,944) (95,826)
------------------ ------------------
(181,944) (95,826)
------------------ ------------------
Net income tax expense $ (5,181,204) $ (2,453,270)
================== ==================
Pre-tax income for foreign companies for the quarters ended September
30, 2002, was $17,269,400. Current taxes payable are included in current
liabilities.
The components of deferred income tax assets and liabilities were:
September 30, 2002 December 31, 2001
------------------ ------------------
Provision for doubtful accounts and investment obsolescence $ 3,977,295 $ 3,795,411
Net operating loss carried forward 343,706 21,081
------------------ ------------------
4,321,001 3,816,492
Less: valuation allowance (597,944) (275,379)
------------------ ------------------
Deferred income tax assets $ 3,723,057 $ 3,541,113
================== ==================
17
KING POWER INTERNATIONAL GROUP CO., LTD AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE QUARTERS ENDED SEPTEMBER 30, 2002 AND 2001
See Accountants' Review Report
As a result, the effective income tax rate for the subsidiaries is
different from the standard income tax rate. The following reconciliation shows
the differences between the effective and standard rates.
For nine months ended September 30,
2002 2001
--------------- ---------------
Standard income tax rate 35.00% 35.00%
Foreign tax rate difference (5.28%) (0.16%)
Less: valuation allowance 1.97% --
--------------- ---------------
Effective income tax rate 31.69% 35.56%
=============== ===============
As of September 30, 2002, and December 31, 2001, the Company has
deferred income tax assets relating to net operating loss carry forwards for
income tax purposes of $322,040 and $20,714, respectively, that expire in years
2001 through 2004. A valuation allowance on the United States loss carry forward
has been provided, as the Company has determined that it is more likely than not
that this deferred income tax asset will not be realized.
18
KING POWER INTERNATIONAL GROUP CO., LTD AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE QUARTERS ENDED SEPTEMBER 30, 2002 AND 2001
See Accountants' Review Report
11. RELATED PARTY AND DIRECTOR TRANSACTIONS
The Company and its subsidiaries have business transactions with and
have advanced funds to various entities affiliated by common ownership and
control and to its officers, directors and shareholders. Where management has
considered it necessary, reserves have been provided for losses on collection of
these balances. In certain instances, advances to affiliated companies have
been, in turn, advanced to other related parties, including directors and
shareholders of the company. Of the $8,954,634 and $12,105,524 shown in the
following schedule as receivable from King Power International Co., Ltd. (KPI),
as of September 30, 2002, and December 31, 2001, respectively, reserves have
been provided for $1,292,698 and $1,293,470, respectively. Of the $3,639,262 and
$3,455,458 shown on the following schedule as receivable from King Power On
Board Sales and Services Co., Ltd. (KPO), as of September 30, 2002, and December
31, 2001, respectively, reserves have been provided for $1,035,765 and
$1,090,540, respectively. KPO's operating license expired in April, 2002, and it
has ceased operations, but it has not been liquidated. It does not have assets
adequate to pay its obligation to the Company. The payment of the net,
unreserved receivables from KPI and KPO are personally guaranteed by two
officer/director/ shareholders of the Company who have collateralized their
guarantee by the pledge of 9,373,000 shares of the Company's stock. The
guarantors have agreed to begin payments of Approximately $115,000 per month in
January, 2003, to retire KPO's debt.
Balances at September 30, 2002, and December 31, 2001, with related companies
and directors are as follows (in $000s)
-------------------------------------------------------------------------------
Loans to and receivables from related
Companies and Directors
As of September 30, 2002 Accounts Interest & other Management Fee Accounts
Receivable Loans receivables Receivables Total Payable
--------------------------------------------------------------------------------
King Power International Co., Ltd. -- 7,718 1,201 35 8,954 1,085
Forty Seven Co., Ltd. -- 2,402 601 -- 3,003 --
Downtown D.F.S. (Thailand) Co., Ltd. 390 2,214 317 2,128 5,049 --
Top China Group Co., Ltd. -- 231 13 -- 244 --
Lengle (Thailand) Co., Ltd. -- 831 88 -- 919 --
Lengle TAT Phnom Penh Duty Free Co., Ltd. 108 -- -- -- 108 --
King Power On Board Sales and Services Co., Ltd. 138 3,167 334 -- 3,639 --
Thai Nishigawa International Co., Ltd. -- -- -- -- -- 90
Niji (Thailand) Co., Ltd. -- -- -- -- -- 174
--------------------------------------------------------------------------------
636 16,563 2,554 2,163 21,916 1,349
Less: provision for doubtful accounts:
Related companies (390) (7,547) (1,477) (2,128) (11,542) --
--------------------------------------------------------------------------------
Total 246 9,016 1,077 35 10,374 1,349
================================================================================
Director - to/(from) -- -- 5 -- 5 --
================================================================================
19
KING POWER INTERNATIONAL GROUP CO., LTD AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE QUARTERS ENDED SEPTEMBER 30, 2002 AND 2001
See Accountants' Review Report
-------------------------------------------------------------------------------
Loans to and receivables from related
Companies and Directors
As of December 31, 2001 Accounts Interest & other Management Fee Accounts
Receivable Loans receivables Receivables Total Payable
--------------------------------------------------------------------------------
King Power International Co., Ltd. 1,196 10,233 599 75 12,103 --
Forty Seven Co., Ltd. -- 2,356 553 -- 2,909 --
Downtown D.F.S. (Thailand) Co., Ltd. 382 2,171 278 2,086 4,917 --
Top China Group Co., Ltd. -- 226 9 -- 235 --
Lengle (Thailand) Co., Ltd. -- 814 74 -- 888 --
Lengle TAT Phnom Penh Duty Free Co., Ltd. 50 -- -- -- 50 --
King Power On Board Sales and Services Co., Ltd. 136 3,147 168 -- 3,451 --
Thai Nishigawa International Co., Ltd. -- -- -- -- -- 43
Niji (Thailand) Co., Ltd. -- -- -- -- -- 94
--------------------------------------------------------------------------------
1,764 18,947 1,681 2,161 24,553 137
Less: provision for doubtful accounts:
Related companies (382) (7,659) (1,205) (2,086) (11,332) --
--------------------------------------------------------------------------------
Total 1,382 11,288 476 75 13,221 137
================================================================================
Director - to/(from) -- -- -- -- -- --
================================================================================
Additionally, the Airports Authority of Thailand owns 5% of KPD common shares.
As of September 30, 2002, and December 31, 2001, KPD has accrued concession fees
amounting to $4,603,534 and $2,737,366, respectively
20
KING POWER INTERNATIONAL GROUP CO., LTD AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE QUARTERS ENDED SEPTEMBER 30, 2002 AND 2001
See Accountants' Review Report
Effective July 1, 2001, KPD and KPT increased the interest rate charged
for new loans to related companies from a range of 2.00%-4.90% to 8.12%,
reflecting the increase in borrowing costs to KPD and KPT. The new rates apply
to total loans outstanding of each related company that borrowed additional
funds from KPD or KPT during 2001 and 2002. For related companies that did not
require additional loans from KPD and KPT, the interest rate charged to them did
not change.
The Company had operating transactions with related parties and
directors as follows (in $000s):
For the nine months ended September 30,
2002 2001
----------------- -----------------
Related Companies
Sales $ 634 $ 565
Interest income 850 385
Management fee income 352 332
Purchases 10,414 1,556
Concession fees 16,811 9,669
Purchases - assets 64 --
Service $ 577 $ --
12. COMMITMENTS AND CONTINGENT LIABILITIES (see Note 7)
Lease commitments
As of September 30, 2002, KPD and KPT had leasing commitments for
office space under non-cancelable operating lease agreements in excess of one
year. The obligations of the subsidiary companies under these lease agreements
are set forth as follows:
KPT KPD
----------------- -----------------
2002 $ 12,453 $ 102,767
2003 49,811 347,828
2004 $ 12,453 $ --
Letters of guarantee
As of September 30, 2002, and December 31, 2001, KPT and KPD were
contingently liable for bank guarantees totaling $17.17 million and $16.95
million, respectively, issued in favor of the Excise Department and the Airports
Authority of Thailand as a performance bond.
Unused letters of credit
As of September 30, 2002, and December 31, 2001, KPD and KPT have
unused letters of credit totaling $1.17 million and $7.99 million, respectively.
Land Acquisition
On June 17, 2002, KPD contracted to acquire two tracts of land for a
total price of 311.34 million Baht ($7,179,701 at September 30, 2002, exchange
rates), of which 120.03 million Baht ($2,768,058) has been paid directly to the
seller or deposited with KPD's agent for payment in September and is included in
Investments and Other Assets in the accompanying balance sheet. Under the terms
of the contract, KPD will owe the balance of 0.2 million Baht ($4,612 at
September 30, 2002 exchange rates) on the first tract on December 14, 2002. The
balance of 191.11 million Baht ($4,407,031 at September 30, 2002, exchange
rates) owed on the second tract is due between the first and second
anniversaries of the contract. If KPD fails to complete the payments, all
amounts deposited by KPD will be forfeited. If the seller cannot complete the
transfer of the land, all amounts deposited are to be refunded.
21
KING POWER INTERNATIONAL GROUP CO., LTD AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE QUARTERS ENDED SEPTEMBER 30, 2002 AND 2001
See Accountants' Review Report
13. ACQUISITION OF MINORITY INTERESTS
On October 15, 2001, the Company announced that shareholders holding
88.6% of the Company's stock (the Majority Shareholders) intented to acquire all
of the outstanding minority interest shares through a merger of the Company into
a newly formed Nevada corporation to be owned by the Majority Shareholders. The
acquisition price is to be set through negotiations between the Majority
Shareholders and a Special Committee appointed to represent the holders of
minority interests. The negotiations are ongoing and a final price has not been
agreed upon by the two groups. In the third quarter of 2002, three separate
lawsuits seeking class action have been filed against the Company and its
directors alleging that the directors are breaching their fiduciary duty by not
obtaining the highest price for the minority stock. They also seek to enjoin the
Company from consummating the merger. Management believes these suits are
without merit and intends to defend them. The ultimate outcome to the actions
and their effect on the merger are not known.
14. SEGMENT FINANCIAL INFORMATION
The following segment information of the Company for 2002 and 2001 are
disclosed in accordance with Statement of Financial Accounting Standard No.131
("SFAS 131"). Each legal entity is classified as a reportable segment under SFAS
131 because each entity is reported separately by management (in $000s).
Adjustment
Quarters Ended September 30, 2002 Duty Free Tax Free All and
Retail Retail Others Elimination Consolidated
------------ ------------ ------------ ------------ ------------
Segment Information
Revenue from external customers 101,800 21,396 -- (25) 123,171
Cost of merchandise sold 51,686 8,996 -- (25) 60,657
Concession fees 16,812 7,128 -- -- 23,940
Gross profit 33,303 5,271 -- -- 38,574
Interest Income 871 210 25 (106) 1,000
Interest expense 1,054 54 64 (106) 1,066
Segment net income (loss) 11,023 1,065 10,616 (11,536) 11,168
Segment total assets 69,726 12,041 33,131 (36,039) 78,859
Expenditures for segment assets 3,803 81 -- -- 3,884
Depreciation expense 925 221 -- -- 1,146
Unrealized gain (loss) on exchange 89 7 (10) -- 86
Deferred income tax assets 2,512 1,189 22 -- 3,723
Revenue Long-lived
Assets
------------ ------------
Geographic Information
Bangkok 117,802 8,868
Northern Thailand region 733 215
Southern Thailand region 4,636 367
------------ ------------
Total 123,171 9,450
============ ============
22
KING POWER INTERNATIONAL GROUP CO., LTD AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE QUARTERS ENDED SEPTEMBER 30, 2002 AND 2001
See Accountants' Review Report
Adjustment
Quarters Ended September 30, 2001 Duty Free Tax Free All and
Retail Retail Others Elimination Consolidated
------------ ------------ ------------ ------------ ------------
Segment Information
Revenue from external customers 65,249 19,760 -- (20) 84,989
Cost of merchandise sold 32,832 8,029 -- (20) 40,841
Concession fees 9,669 6,505 -- -- 16,174
Gross profit 22,749 5,225 -- -- 27,974
Interest Income 448 82 25 (23) 532
Interest expense 914 39 13 (23) 943
Segment net income (loss) 5,115 (34) 4,271 (4,828) 4,524
Segment total assets 43,926 10,504 20,608 (21,914) 53,124
Expenditures for segment assets 308 6 -- -- 314
Depreciation 816 227 -- -- 1,043
Unrealized gain (loss) on exchange 72 (4) 7 -- 75
Deferred income tax assets 2,353 1,149 21 -- 3,523
Revenue Long-lived
Assets
------------ ------------
Geographic Information
Bangkok 81,726 3,553
Northern Thailand region 371 45
Southern Thailand region 2,892 65
------------ ------------
Total 84,989 3,663
============ ============
15. SUBSEQUENT EVENT
On October 1, and November 7, 2002, KPD issued discounted bills of exchange with
a face value of 600 million Baht ($13,836,362) and 500 million Baht
($11,530,302), respectively. These bills mature 500 million Baht on each of the
first and second anniversaries of issue and 100 million Baht on the third
anniversary of issue. They are discounted to bear interest at annual rates
varying from 3.6% to 4.7632%, depending on the length of maturity. The proceeds
will be used to reduce bank debt, enabling the Company to both reduce its
interest expense and lengthen the maturities of its debt.
23
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
(1) Caution Regarding Forward-Looking Information
This quarter report contains certain forward-looking statements and information
relating to the Company that is 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 "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.
(2) Effects on 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 "Managed Float" system for the relationship of the
Baht to other international currencies. This change had an immediate impact on
the Company's operations and the results of its operations.
The Company's subsidiaries conduct their business with selling and purchase
prices based on Thai Baht, US Dollars, and other currencies. Sales are made both
in Thai Baht and other currencies, but eventually will be converted into Thai
Baht. Accordingly, the Company bears foreign currency transaction risks between
the date of purchase of goods for resale and the ultimate payment of the goods
in the appropriate negotiated currency.
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.
In accordance with generally accepted accounting principles, the Company has
separately presented the following items in its statement of income for the
quarter ended September 30, 2002:
Loss on foreign exchange, net $(66,800)
The calculation of loss on foreign exchange, net of $(66,800) is shown in charts
labeled A and B, respectively.
24
CHART A
-------
The calculation of unrealized gain on foreign exchange of US$136,586 was
calculated on an accumulated basis with quarterly adjustment on financial
obligations, receivable and cash on hand in foreign currency as shown below:
Account payable in foreign currency as of 9/30/02
- -------------------------------- ----------------------------- ----------------------------- ---------------------------------
Currency Amount Exchange Rate Total
9/30/02
- -------------------------------- ----------------------------- ----------------------------- ---------------------------------
Australian Dollar 107.10 23.8245 (2,552)
- -------------------------------- ----------------------------- ----------------------------- ---------------------------------
Swiss Franc 39,596.93 29.2732 1,159,129
- -------------------------------- ----------------------------- ----------------------------- ---------------------------------
German Deutschmark 22,705.00 19.6642 446,476
- -------------------------------- ----------------------------- ----------------------------- ---------------------------------
Europe 637,497.96 42.8997 27,348,471
- -------------------------------- ----------------------------- ----------------------------- ---------------------------------
French Franc 49,955.78 5.9052 294,999
- -------------------------------- ----------------------------- ----------------------------- ---------------------------------
British Pound Sterling 8,880.49 68.161 605,303
- -------------------------------- ----------------------------- ----------------------------- ---------------------------------
Hong Kong Dollar 332,730.15 5.5856 1,858,498
- -------------------------------- ----------------------------- ----------------------------- ---------------------------------
Italian Lire 18,274,812.00 0.0200 365,496
- -------------------------------- ----------------------------- ----------------------------- ---------------------------------
Netherland Guilder 2,876.40 17.4462 50,182
- -------------------------------- ----------------------------- ----------------------------- ---------------------------------
Singapore Dollar 11,810.10 24.5591 290,045
- -------------------------------- ----------------------------- ----------------------------- ---------------------------------
Japanese Yen - 0 0
- -------------------------------- ----------------------------- ----------------------------- ---------------------------------
US Dollar 2,931,645.98 43.4830 127,476,762
- -------------------------------- ----------------------------- ----------------------------- ---------------------------------
Total 159,892,809
- -------------------------------- ----------------------------- ----------------------------- ---------------------------------
BALANCE PER GENERAL LEDGER 158,214,824
---------------------------------
Unrealized gain on accounts payable in foreign currency 9/30/02 (1,677,985)
---------------------------------
Unrealized gain on accounts payable in foreign currency 01/01/02 2,922,719
---------------------------------
Net unrealized gain on account payable in foreign currency 9/30/02 1,244,734
---------------------------------
Unrealized gain on cash on hand as of 9/30/02
- --------------------------------- ------------------------------ ------------------------------ ------------------------------
Currency Amount Exchange rate Total
9/30/02 Baht
- --------------------------------- ------------------------------ ------------------------------ ------------------------------
Australian Dollar 11,480 23.3696 268,288
- --------------------------------- ------------------------------ ------------------------------ ------------------------------
Canadian Dollar 120 27.3419 3,281
- --------------------------------- ------------------------------ ------------------------------ ------------------------------
Swiss Franc 120 28.9639 3,476
- --------------------------------- ------------------------------ ------------------------------ ------------------------------
China Renminbi Yuan 165,077 5.2245 862,445
- --------------------------------- ------------------------------ ------------------------------ ------------------------------
Europe 149,290 42.371 6,325,567
- --------------------------------- ------------------------------ ------------------------------ ------------------------------
British Pound Sterling 365,804.04 67.4814 24,684,969
- --------------------------------- ------------------------------ ------------------------------ ------------------------------
Hong Kong Dollar 850,555.10 5.5409 4,712,841
- --------------------------------- ------------------------------ ------------------------------ ------------------------------
Korean Won 1,138,000 0.0355 40,399
- --------------------------------- ------------------------------ ------------------------------ ------------------------------
Singapore Dollar 24,206 24.2607 587,255
- --------------------------------- ------------------------------ ------------------------------ ------------------------------
Taiwanese Dollar 76,250 1.2406 94,596
- --------------------------------- ------------------------------ ------------------------------ ------------------------------
Japanese Yen 22,730,851 0.35329 8,030,582
- --------------------------------- ------------------------------ ------------------------------ ------------------------------
US Dollar 2,258,610.43 43.2960 97,788,797
- --------------------------------- ------------------------------ ------------------------------ ------------------------------
Total 143,402,496
- --------------------------------- ------------------------------ ------------------------------ ------------------------------
BALANCE PER GENERAL LEDGER 137,097,133
------------------------------
Unrealized gain on cash on hand in foreign currency 9/30/02 6,305,363
------------------------------
Unrealized gain on cash on hand in foreign currency 01/01/02 (1,674,813)
------------------------------
Net unrealized gain on cash in hand in foreign currency 9/30/02 4,630,550
------------------------------
Net unrealized gain on cash on hand in foreign currency 9/30/02 1,244,734
------------------------------
Net unrealized gain on exchange rate as at 9/30/02 5,875,284
------------------------------
US$ = 136,586 (US$1 = 43.0152 Baht)
25
CHART B
-------
The calculation of unrealized loss on foreign exchange of US$50,641 was
calculated on accumulated basis with quarterly adjustment on financial
receivable and cash on hand in foreign currency as shown below:
Unrealized loss on account receivable as of 9/30/02
- ------------------------------ --------------------------- ----------------------- --------------------------
Currency Amount Exchange Rate Total
9/30/02 Baht
- ------------------------------ --------------------------- ----------------------- --------------------------
Europe 2,395.40 42.3710 101,495
- ------------------------------ --------------------------- ----------------------- --------------------------
British Pound Sterling 607.30 67.4814 40,981
- ------------------------------ --------------------------- ----------------------- --------------------------
Hong Kong Dollar (4,253.95) 5.5409 (23,571)
- ------------------------------ --------------------------- ----------------------- --------------------------
Singapore Dollar 259.20 24.2607 6,288
- ------------------------------ --------------------------- ----------------------- --------------------------
US Dollar 158,916.85 43.2960 6,880,464
- ------------------------------ --------------------------- ----------------------- --------------------------
Total 7,005,657
- ------------------------------ --------------------------- ----------------------- --------------------------
BALANCE PER GENERAL LEDGER 7,003,851
--------------------------
Unrealized loss from account receivable 9/30/02 1,806
--------------------------
Unrealized loss from account receivable 01/01/02 (81,342)
--------------------------
Net unrealized loss from account receivable 9/30/02 (79,536)
--------------------------
Unrealized loss from loan from bank (trust receipt) as of 9/30/02
- ------------------------------ --------------------------- ----------------------- --------------------------
Currency Amount Exchange Rate Total
9/30/02 Baht
- ------------------------------ --------------------------- ----------------------- --------------------------
Swiss Franc 421,720 29.2732 12,345,094
- ------------------------------ --------------------------- ----------------------- --------------------------
Euro 25,008.01 42.8997 1,072,836
- ------------------------------ --------------------------- ----------------------- --------------------------
Hong Kong Dollar 4,108,480.95 5.5856 22,948,331
- ------------------------------ --------------------------- ----------------------- --------------------------
Singapore Dollar 89,386.36 24.5591 2,195,249
- ------------------------------ --------------------------- ----------------------- --------------------------
US Dollar 687,315.51 43.4830 29,886,540
- ------------------------------ --------------------------- ----------------------- --------------------------
Total 68,448,050
- ------------------------------ --------------------------- ----------------------- --------------------------
BALANCE PER GENERAL LEDGER 66,807,232
--------------------------
Unrealized loss from loan from bank in foreign currency 9/30/02 (1,640,818)
--------------------------
Unrealized loss from loan from bank in foreign currency 01/01/02 (46,087)
--------------------------
Net unrealized loss from loan from bank in foreign currency 9/30/02 (1,686,905)
--------------------------
Net unrealized loss from account receivable 9/30/02 (79,536)
--------------------------
Net unrealized loss on exchange rate as of 9/30/02 (1,766,441)
--------------------------
Unrealized loss from advanced from companies as at 9/30/02
- --------------------------------- ------------------------------ ------------------------------ ------------------------------
Currency Amount Baht Exchange rate Total
30/09/02 US$
- --------------------------------- ------------------------------ ------------------------------ ------------------------------
Baht Currency 83,681,781 43.364 1,929,752
- --------------------------------- ------------------------------ ------------------------------ ------------------------------
BALANCE PER GENERAL LEDGER 1,920,176
------------------------------
Net unrealized loss on advance 9/30/02 (9,576)
------------------------------
US$ = (50,641) (US$1 = 43.0152 Baht)
26
NET FOR UNREALIZED GAIN / (LOSS) EXCHANGE OF 9/30/02
(BAHT) (US)
------------------------
Net unrealized exchange gain as of 9/30/02 5,875,284
Net unrealized loss on exchange rate as at 9/30/02 (1,766,441)
----------
NET UNREALIZED EXCHANGE 4,108,843 95,521
----------
(9,576)
Net unrealized exchange GAIN KPG (US) as of 9/30/02
----------
NET UNREALIZED EXCHANGE 85,945
NET FOR REALIZED GAIN/(LOSS) EXCHANGE OF 30/09/02
Net realized loss on exchange rate of KPT as at 9/30/02 (13,435,152)
Net realized gain on exchange rate of KPD as at 9/30/02 6,864,797
-----------
NET REALIZED EXCHANGE (6,570,354) (152,745)
-----------
0
Net realized gain on exchange rate of KPG (US) as at 9/30/02
-----------
NET REALIZED EXCHANGE (152,745)
-----------
TOTAL NET REALIZED /UNREALIZED EXCHANGE RATE (66,800)
(3) Results of operations, comparing nine months ended September 30, 2002
and 2001
Sales revenue for the nine months ended September 30, 2002, was approximately
$123.2 million compared to approximately $85.0 million for 2001. This increase
is directly attributable to the Company's ability to obtain additional space
from the AAT to operate the Duty Free business throughout international airports
in Thailand, beginning January 1, 2002. Furthermore, according to the
statistical compilation provided by the Bangkok International & Domestic
Airport, the number of passengers traveling through its premises from January to
September, 2002, has increased 2.51% from the same period last year or from 23.2
million passengers in 2001 to 23.8 million passengers in 2002.
The cost of merchandise sold for the nine months ended September 30, 2002 and
2001, was approximately $60.7 million and $40.8 million, respectively. The
principal factor causing this increase is directly related to the increase in
merchandise sold. The ratio of the concession fees paid to the AAT, comparing
the nine months ended September 30, 2002, to the same period in 2001, increased
from 19.03% in 2001 to 19.44% in 2002. This increase is due to the concession
fee structure of KPT being based on fixed amount with additional annual
increment. The volume of sales generated by KPT for the nine months ended
September 30, 2002, has not kept up with such increment, thus causing the
increase in the ratio of the concession fees paid to the AAT. However, due to
the increase in sales volume generated from the KPD's operation, such percentage
increase of concession fee has been kept at minimal. Management anticipates that
a reduction in the ratio of these fees may result from the continuing increase
in sales volume generated from the KPD's operation.
27
Selling and administrative expenses were approximately $22.5 million for the
nine months ended September 30, 2002, and approximately $21.3 million for the
same period in 2001. In terms of percentage of sales, 2002 expenses were
approximately 18.26% of sales and 2001 expenses were approximately 25.05% of
sales. This decrease is associated with decrease in sales promotional campaign,
which is in-line with Management's expectation as the competition has been
lessened due to the Company's ability to expand the shopping space at the
international airports in Thailand.
Net income for the nine months ended September 30, 2002, was approximately $10.6
million, or $0.52 per share (basic), and approximately $4.3 million, or $0.21
per share (basic), for the nine months ended September 30, 2001.
The ratio of inventory divided by revenue for the nine months ended September
30, 2002 and 2001, was approximately 26.40% and 26.02%, respectively. This
increase is caused by the larger volume of merchandised orders required by the
Company's suppliers for their financial viability to support the new and
improved lines of products developed and initiated by the Company.
(4) Results of operations, comparing three months ended September 30, 2002
and 2001
Sales revenue for the three months ended September 30, 2002, was approximately
$38.9 million compared to approximately $27.1 million for 2001. This increase is
directly attributable to the Company's ability to obtain additional space from
the AAT to operate the Duty Free business throughout international airports in
Thailand, starting from January 1, 2002. Furthermore, according to the
statistical compilation provided by the Bangkok International & Domestic
Airport, the number of passengers traveling through its premises from July to
September, 2002, has increased 2.46% from the same period last year or from 7.7
million passengers in 2001 to 7.9 million passengers in 2002.
The cost of merchandise sold for the three months ended September 30, 2002 and
2001, was approximately $20.2 million and $12.7 million, respectively. The
principal factor causing this increase is directly related to the increase in
merchandise sold. The ratio of the concession fees paid to the AAT, comparing
the three months ended September 30, 2002, to the same period in 2001, increased
from 19.26% in 2001 to 20.64% in 2002. This increase is due to the concession
fee structure of KPT being based on fixed amount with additional annual
increment. The volume of sales generated from KPT for the three months ended
September 30, 2002, has not kept up with such increment thus caused the increase
in the ratio of the concession fees paid to the AAT. However, due to the
increase in sales volume generated from the KPD's operation, such percentage
increase of concession fee has been kept at minimal. Management anticipates that
a reduction in the ratio of these fees may result from the continuing increase
in sales volume generated from the KPD's operation.
28
Selling and administrative expenses were approximately $8.5 million for the
three months ended September 30, 2002, and approximately $6.5 million for the
same period in 2001. In terms of percentage of sales, 2002 expenses were
approximately 21.86% of sales and 2001 expenses were approximately 24.07% of
sales. This decrease is associated with decrease in sales promotional campaign
which is in-line with Management's expectation as the competition has been
lessened due to the Company's ability to expand the shopping space at the
international airports in Thailand.
Net income for the three months ended September 30, 2002, was approximately $1.4
million, or $0.07 per share (basic), and approximately $1.7 million, or $0.08
per share (basic), for the three months ended September 30, 2001.
(5) Liquidity and Capital Resources
For the quarter ended September 30, 2002, and the year ended December 31, 2001,
the Company had working capital of approximately $12.9 million and $5.1 million,
respectively. The improvement of this figure is due to the Company's ability to
expand operations and to generate increased sales, thereby increasing current
assets. Management anticipates that the current positive trend will continue as
sales continue to grow and operations are stabilized.
(6) Monetary Assets and Liabilities Denominated in Thai Baht
As of September 30, 2002, 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 774,339
Trade Accounts Receivable 469,902
Refundable value-added-tax 633,473
Advance to related companies / directors 9,015,668
Deferred income tax assets 3,723,057
Restricted deposit 15,219,721
Other current assets 3,356,615
Other non-current assets 2,990,070
29
TYPE OF MONETARY LIABILITY US DOLLARS
Bank overdraft & loan 18,635,096
Current portion of long-term debt 660,780
Accounts Payable 8,708,293
Concession fees 4,603,778
Other current liabilities 8,173,233
Long-term loan - net 297,860
(7) Recently Issued Accounting Principles
New Accounting Standards Not Yet Adopted - NONE
Item 4 - Controls and Procedures
Within ninety days prior to the date of this report, our Chief Executive Officer
and Chief Financial Officer performed an evaluation of our disclosure controls
and procedures, which have been designed so that the information required to be
disclosed in the reports we file or submit under the Securities Exchange Act of
1934, as amended, is recorded, processed, summarized and reported within the
time periods specified by the Commission. Based on this evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures were effective. We have made no significant changes in
our internal controls or in other factors that could significantly affect our
internal controls since the date of that evaluation.
Part II - Other Information
Item 1 - Legal Proceedings
On August 19, 2002, the Company announced in a press release that
o its management intended to continue to pursue a merger transaction in
which the Company will be taken private by shareholders Vichai
Raksriaksorn, Viratana Suntaranond, Aimon Raksriaksorn and Niphon
Raksriaksorn (collectively, the "Controlling Shareholders") and certain
other shareholders who together with the Controlling Shareholders hold
approximately 88.6% of the Company's common shares (collectively,
together with the Controlling Shareholders, the "Majority
Shareholders");
o the Controlling Shareholders have proposed a merger consideration of
US$2.52 per share; and
o the proposed merger consideration will be subject to negotiations
between the Special Committee and the Controlling Shareholders.
On August 30, 2002, the Company announced in a press release that the Special
Committee and the Controlling Shareholders met on August 22, 2002 to discuss and
negotiate the proposed merger consideration and the terms of the merger, and
that as a result of the on-going negotiations between the Special Committee and
the Controlling Shareholders on the price and other terms, on August 28, 2002,
the Controlling Shareholders had counter-proposed a price of $3.27 per share as
30
the merger consideration. The press release also stated that the foregoing price
proposal would be subject to further negotiations between the Special Committee
and the Controlling Shareholders.
On August 27, 2002, the Company was served with a complaint brought in the
District Court of Clark County, Nevada, by Pennsylvania Avenue Partners, LLC
against the Company and each of its directors and which seeks class action
status. The complaint alleged, among other things, that the directors of the
Company had breached their fiduciary duties in pursuing the proposed merger
transaction in which the Company would be taken private by certain shareholders
and in allegedly failing to obtain the highest price per share. The lawsuit
seeks to enjoin the proposed merger transaction and seeks payment of fees of
plaintiff's counsel and experts.
On September 16, 2002, the Company was served with a complaint brought in the
District Court of Clark County, Nevada, by Sean Collins against the Company and
each of its directors and which seeks class action status. The complaint
alleged, among other things, that the directors of the Company had breached
their fiduciary duties in pursuing the proposed merger transaction in which the
Company would be taken private by certain shareholders and in allegedly failing
to obtain the highest price per share. The lawsuit seeks to enjoin the proposed
merger transaction, damages not in excess of $75,000, and payment of fees of
plaintiff's counsel and experts.
On September 26, 2002, the Company was served with a complaint brought in the
District Court of Clark County, Nevada, by Byron Mikalson against the Company
and each of its directors and which seeks class action status. The complaint
alleged, among other things, that the directors of the Company had breached
their fiduciary duties in pursuing the proposed merger transaction in which the
Company would be taken private by certain shareholders and in allegedly failing
to obtain the highest price per share. The complaint also alleged that the
defendants and companies related to the defendants obtained loans from the
Company that were later forgiven. The lawsuit seeks to enjoin the proposed
merger transaction and seeks payment of fees of plaintiff's counsel and experts.
The Board has authorized and empowered a Special Committee, consisting of
independent directors and acting in the interest of shareholders other than
those certain shareholders taking the Company private under the proposed merger
transaction, to review and negotiate the merger consideration and terms of the
proposed merger and to make a recommendation to the full Board of Directors and
the Company's shareholders. The Special Committee is also advised by its own
independent financial advisor and legal counsel.
The Company believes that each of the lawsuits is without merit, and intends to
vigorously defend each suit. With respect to the first complaint brought by
Pennsylvania Avenue Partners, LLC, on October 30, 2002, the Company filed a
motion to dismiss for failure to state a claim.
Item 2 - Changes in Securities
None
Item 3 - Defaults Upon Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
None
Item 5 - Other Information
None
31
Item 6 - Exhibits and Reports on Form 8-K
Current Report on Form 8-K dated August 30, 2002
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned who are duly
authorized.
KING POWER INTERNATIONAL GROUP CO., LTD.
By: /s/ Vichai Raksriaksorn
----------------------------------------------------------
Vichai Raksriaksorn, President and Chief Executive Officer
November 14th, 2002
By: /s/ Viratana Suntaranond
----------------------------------------------------------
Viratana Suntaranond, Chief Financial Officer
November 14th, 2002
32
I, Vichai Raksriaksorn, certifies that:
1. I have reviewed this quarterly report on Form 10-Q of September 30th,
2002;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
(a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
/s/ Vichai Raksriaksorn
- -----------------------
Vichai Raksriaksorn
Chief Executive Officer
November 8th, 2002
33
I, Viratana Suntaranond, certifies that:
1. I have reviewed this quarterly report on Form 10-Q of September 30th,
2002;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
(a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
/s/ Viratana Suntaranond
- ------------------------
Viratana Suntaranond
Chief Financial Officer
November 8th, 2002
34