05 Feb 2018 22:26:00
Clarification of news or information requested by SET
SET requests to clarify news or information Subject : Clarification of news or information requested by SET Description : DCORP 014/2018 Date 5 February 2018 Subject: Clarification on the Information in the Financial Statements Quarter 3, ended 30 September 2017, as inquired by the Stock Exchange of Thailand To: President The Stock Exchange of Thailand In reference to 1. The financial statement of the Company for quarter 3 ended 30 September 2017 and the letters of the Company dated 13 and 27 December 2017 2. Notification of the Board of Governors of the Stock Exchange of Thailand Re: Disclosure of Information and Other Acts of Listed Companies Concerning the Connected Transactions 3. Regulation of the Stock Exchange of Thailand Re: Listing of Securities, Disclosure of Information, Reporting of Securities Holding and Delisting of Securities in the "Market for Alternative Investment (MAI)" B.E. 2558 (2015) Reference is made to Demeter Corporation Public Company Limited's (the "Company") submission to the Stock Exchange of Thailand of financial statement quarter 3, ended 30 September 2017, which has been audited by certified public accountants and additional reporting on the progress of items shown on such financial statement. The intention is to provide additional information to investors to help support the decision to invest in securities of the Company, with respect to the payment of capital investment in a company's business during the past one year, including the reporting of the progress of major operations of the Company; the Stock Exchange of Thailand, therefore, requested that the Company provide additional information through the information disclosure system of the Stock Exchange of Thailand as follows: 1. The payment of capital investments in the businesses which do not have operational results, amount to 5 items, totalling 545.45 million Baht, with the appropriation of reserve for security deposits which may not be refunded in the amount of 42.73 million Baht The Board of Directors' resolution date Item Descriptions Investment Value (Million Baht) Payment Made (Million Baht) 1. 16 Dec 2016 Acquisition of 50% of the shares in Aukkrarawat Plants Renewable Energies Co., Ltd. through the purchase of shares from the former shareholders valued 110 million Baht and making additional investment of 180 million Baht with the purpose to improve the power plant area to increase its capacity to 4.9 megawatts 290 83.35 2. 26 Jan 2017 Acquisition of 40% of the shares in Negros PH Solar Inc., the Philippines, which was later cancelled and a reserve for related transaction of 42.73 million Baht was recorded. 21.23 42.73 3. 3 May 2017 Acquisition of 30% of the shares in blue Finix digital Co., Ltd. by the purchase of shares from the former shareholders and subscription of shares issued from capital increase 74.37 74.37 4. 15 Sept 2017 12 Dec 2017 Acquisition of 35% of the shares in Hero Experience Co., Ltd. through the purchase of shares from the former shareholders and subscription of shares issued from capital increase 325 325 5 7 Nov 2017 (Executive Board Resolution) Joint investment with Triple CH Holding to operate the business of live broadcasting of football matches in the Philippines 30 20 Total 740.60 545.45 1.1 The investment in Aukkrarawat Plants Renewable Energies Co., Ltd., totalling 290 million Baht On 16 December 2016, the Company's Board of Directors resolved to approve the investment in biogas power plant which is located at Supanburi Province and managed by Aukkrarawat Plants Renewable Energies Co., Ltd. (Aukkrarawat) by acquiring 50 percent of the paid-up shares held by former shareholders, totaling 110 million Baht (74 million Baht has been paid, and the outstanding balance of 36 million Baht will become due on 30 November 2017), with the investment budget for the power plant area development of not exceeding 180 million Baht, totaling 290 million Baht. In this connection, the Company paid the brokerage fee of 9.34 million Baht to H.D. Commerce Co., Ltd. for the acquisition of such capital investment. Therefore, the value of the capital investment paid is 83.35 million Baht. The acquisition of the shares in Aukkrarawat, the power plant has the capacity to generate 0.6 megawatts due to deteriorated machines. The Company anticipates that, after the improvement and installation of new machines, the power plant may increase its production capacity in full equaling the amount to be sold to the PEA at 4.9 megawatts under the power purchase agreement. The Company anticipates that the acquisition of shares along with the improvement of power plant will result in the investment rate of return (IRR) of not less than 15 percent. The Board of Directors considered that such rate of return of the project is within the acceptable range; therefore, it decided to proceed with the project to support the investment of the Company in the energy business. Later on 21 April 2017, Aukkrarawat announced that it has to stop selling electricity to the PEA to improve its power plants. Nevertheless, on 8 December 2017, the Company disclosed the information on the progress of the project that, based on in-depth analysis of cost structure, it was found that the commercial feasibility of the project is rather low due to production costs being higher than the expected amount resulted from the expenses incurred from the transportation of water waste from ethanol (raw materials for the manufacture of biogas) factory to the factory being located more than 30 kilometers away and the costs incurred for the disposal of water waste from the biogas production line. The Stock Exchange of Thailand requested that the Company clarify the issues as follows: 1.1.1 Referring to the Board of Directors' opinion on 16 December 2016 that the investment in the power plant project offered an acceptable rate of return, while no more than 1 year later, it was discovered that the commercial feasibility of the project is rather low, please clarify how the Board of Directors had studied the information prior to the investment? Why there are differences in the information obtained from the project feasibility study resulting in the investment in the project being inconsistent with the informed information? Please also give the information on the opinions of the Board of Directors on the in-depth cost structure analysis. The consideration of the Board of Directors in the investment in Aukkrarawat power plant project on 16 December 2017 covered the examination of findings under the legal due diligence conducted by its legal advisor and the appraisal value of the project at 285 million Baht by an independent valuer (the Company will purchase 50 percent of the shares at the price of 110 million Baht). For technical due diligence on the project, the Company did not engage a technical advisor for this investment because (1) the power plant project is the project being commenced and currently in operation, and (2) the Company aims to improve the power plant by improving the area and installing new machines. Moreover, the Board of Directors has considered the Company's studies on the operational system of the power plant after the improvement, including the waste water treatment system for waste water created from power production. The Company discovered that the treatment of waste water created from power plants using biomass energy is by settling the water to let it precipitate which requires the water settling area. Moreover, based on the information received from the project owner and additional inspection by the Company's staff, in general, during the water settling process, the neighboring community around the project (within the 20 kilometres radius) would request for such waste water from the project to irrigate agricultural area of the community. After the improvement of the power plant, there will be more waste water from the system. The Company considered that there is sufficient agricultural area for the use of waste water from the project but additional area for waste water settling would be needed, and the Company will lease such additional area for this purpose. From the information that the Board of Directors has considered, it was resolved that the investment in the project is appropriate and the value of the investment as compared to the rate of return is acceptable. Nevertheless, during the project area development, it was found that the neighboring communities around project materially retrieve less waste water from the project. Based on the inspection, it was found that (1) there are new power plant projects in the area and the neighboring community which could retrieve waste water from Aukkrarawat may consider retrieving the waste water from such new projects if it takes less transportation time for them, and (2) the neighboring community receives waste water from similar power plants located in the same area, some of which transport their waste water to the community. Therefore, it is not necessary for the community to retrieve the waste water directly from the project. Due to such event, the Board of Directors has been informed about the change in the project. The Board of Directors, therefore, has assigned the management of the Company to conduct a study on impacts and possible solutions. Subsequently, the Board of Directors has received the result of the management's study on the chaing of water receiving process of the community, and other possibilities for waste water treatment including the transportation of such water waste to the communities, installation of waste water treatment machines, and the increase of water settling area, and then found that these effect the costs of the project. From the study on the information of increased costs, the possible method which least effects the project costs is the transportation of the waste water out of the project, but such method would result in the material increase of costs by around 30 percent. Therefore, the Board of Directors has considered additional facts and the study of the change in cost structure and found that the operation of the project in the same manner may result in an inability to acquire the benefits to Company and for shareholders as when the investment was previously approved. In such case, it is viewed that the executive shall explore the solutions so that the Company is least affected by the project, such as moving of the plant, reducing other costs or additional negotiation with another group of shareholders to amend the joint investment of the project, feasibility on the termination of the investment or sale of investment.] 1.1.2 Please clarify the terms or conditions or agreement with its counterparty and the performance and compliance of such conditions as regards the acquisition of capital investment and payment of shares. Please also clarify how has the Company agreed with its counterparty which is the former shareholder of Aukkrarawat to terminate or amend the investment project in order to protect benefits of the Company and the shareholders. Has the Company paid the remaining sale share consideration in the amount of 36 million Baht of which became due on 30 November 2017? Please clarify. According to the share purchase agreement between the Company and Aukkrarawat, the agreement with respect to payment of the sale share consideration, conditions of payment and termination of agreement as follows: Payment of sale share consideration The parties agreed to share consideration of 110,000,000 Baht (one hundred and ten million Baht only) by making the payment in instalments as follows: a) 36,078,245 Baht (thirty six million seventy eight thousand two hundred and forty five Baht) to the seller on the first completion date of the share sale and purchase; b) 37,921,755 Baht (thirty seven million nine hundred and twenty one thousand seven hundred and fifty five Baht only) to the seller on the second completion date of the share sale and purchase; and c) 36,000,000 Baht (thirty six million Baht only) to the seller on the third completion date of the share sale and purchase. Conditions precedent The Company, as the purchaser, is not obliged to purchase shares and make payment for the shares if the following material conditions are not fulfilled. Conditions precedent for the first completion of the share sale and purchase - The seller having procured that the company pays the outstanding debts in full to Thai Military Bank Public Company Limited under the Loan Agreement dated 28 September 2012 and all of the security related to the said Loan Agreement having been withdrawn or cancelled. Conditions precedent for the second completion of the share sale and purchase - The seller having procured that all of the company's directors submit resignation letters to resign from directorship of the company by specifying the second completion date of the share sale and purchase as the effective date. - The seller having procured that the meeting of the company's board of directors resolves to convene the general meeting of shareholders of the company in order to consider approving matters stipulated under the agreement as well as taking any necessary actions to convene the general meeting of shareholders of the company according to requirements under the laws and the company's articles of association. - The seller having procured that the company enters into a lease agreement to lease the land of Land Title Deed No. 17075, having the total approximate area of 32 Rai - 3 Ngan - 20 square wah, located at Songkrajome Sub-district, Donjaedee District, Supanburi Province with Mr. Tissanu Tanayatorn (as the owner of the land, not being related to the property of the company) under the following conditions: (a) The lease term is 10 years from the registration of the lease, whereby the lessor gives a promise to the lessee to renew the lease with the term of 10 years each time, at least twice, provided that if the lessee agrees to renew the lease term, the lessor agrees to proceed with the registration of the lease agreement without delay. (b) The rental is 100,000 Baht per month, throughout the lease term and the its renewal. (c) The lease agreement must be registered with the relevant land office. Conditions precedent for the third completion of the share sale and purchase - The seller and the purchaser having entered into the shareholders' agreement according to the agreed terms. Event of default as a cause for termination If either party fails to perform any of its material obligations on the completion date of the share sale and purchase (first, second or third), the other party has the right to take any of the following actions: (1) Immediately terminate this agreement without prejudice against the right to claim for damages incurred against the other party; (2) Exercise or waive any rights to proceed with the completion of the share sale and purchase on the completion date of the share sale and purchase; or (3) Determine the new completion date which shall be no more than 5 (five) business days from the previously stipulated completion date, provided that each of the parties performs its obligations on the rescheduled completion date of the share sale and purchase and such rescheduling may take place only once, unless otherwise agreed between the parties." In this regard, the Company agreed to extend the third completion of the share sale and purchase to 30 November 2017 in order to negotiate reagarding Aukkrarawat management with the seller. Currently, due to the fact that the Company and the seller are not able to fulfill the conditions precedent for the third completion of the share sale and purchase, the Company has yet not completed the third purchase of the shares. Moreover, if the parties are unable to proceed with the third completion of the share sale and purchase due to the conditions precedent could not be completely taken, the parties may consider to terminate the agreement and require the other party to pay damages (if any) incurred between them according to the laws. 1.1.3 Time frame for the completion of the improvement of Aukkrarawat's power plants and sale of electricity according to the agreement, including the progress of the operations, e.g. the progress in the improvement of the area, the procurement and installment of machines, the amount paid according to the investment budget categorized by the improvement items, expected date for the submission of production capacity increase or expansion plan to the PEA, the term of the Power Purchase Agreement (5 years) and the progress of other material operations (if any) With respect to the actions taken by Aukkrarawat after the Company's investment, Aukkrarawat is in the procurement process for contractors, biogas power plant advisors, including the supplier of main machines used in the power plant. The Company has compared the price and qualifications of each bidder, including engaging in the initial price negotiation to ensure the optimal use of project investment budget. If the procurement is completed, the project will be able to provide electricity to the PEA within 13 - 18 months after the commencement of the construction. Due to the reasons mentioned under paragraph 1.1.1, the Company has slowed down all actions relating to the area improvement, procurement and installment of machines. Currently, the Company has not made payments for area improvement, procurement and installation of machines. There is only outstanding account payable for sellers who initially performed factory area improvement in the amount of approximately 200,000 Baht. If the Company has made guidelines for the actions to be taken for the project, the Company will inform the shareholders accordingly. 1.1.4 How reasonable was the payment of brokerage fee made to H.D. Commerce Co., Ltd. in the amount of 9.34 million Baht to acquire capital investment in Aukkrarawat? Please indicate the criteria in determining the brokerage fee rate and conditions of responsibilities if the Company incurs any damage from the investment in Aukkrarawat (if any). Baed of the relevant facts regarding the brokerage fee with H.D. Commerce Co., Ltd., the Board of Directors have found that the brokerage fee in the amount of 9.34 million Baht was not included in the approval of the Board of Directors, on 16 December 2016, to invest in the biogas power plant project in Suphan Buri. In such case, the manangement has approved the payment of brokerage fee in addition to those approved by the Board of Directors. In consideration with relevant conditions in the brokerage agreement, the Board of Directors have found that the brokerage fee is 3.40 percent of the total value of the project which is 290 million BahtThe payment of the brokerage fees is the security deposit. If the Company cannot invest in Aukkrarawat according to the stipulated terms, the broker has the duty to return such security deposit in full under the following conditions: (1) When the Company has completely accepted the transfer of the sale shares, the security deposit shall be deemed the compensation for the broker's performance under the brokerage agreement in full; or (2) In the case where the Company does not accept the transfer of the sale shares and the share purchase agreement is terminated due to any cause, the broker agrees to return the security deposit in full to the Company without any interest, provided that the security deposit shall be returned within 30 days after the termination of the share purchase agreement. Therefore, if the third completion of the share sale and purchase does not take place, the Company is entitled to claim for such sum of money in full from the broker according to the conditions stipulated under the brokerage agreement. Preliminary, the Company has issued a letter dated 26 January 2018 to the broker informing about the refund of the security deposit since the over of the deadline dated 30 Novenber 2016. If, however, the third completion of the share sale and purchase is completed, the Company may not claim for such security deposit although the Company may incur any damage from the investment in Aukkrarawat as there are no warranties with respect to the result of the investment under the brokerage agreement. Nevertheless, in case the Company could not get the refund of the brokerage fee, or damaged from such payment in any case. The Board of Directors consider that the Company has to take the legal measures to the broker and related parties in order to protect the interests of the Company and the shareholders. 1.2 The payment for the investment in the power plants of Negros PH Solar Inc. in the amount of 34.10 million Baht On 19 May 2016, the Company executed 2 memorandums of understanding with Philippinos investors in order to engage in the due diligence exercise on 2 companies registered under the laws of the Philippines and engaged in the energy business in the Philippines by acquiring 40 percent of the shares in the 2 companies. On 11 August 2016, the Company paid the security deposit for the land lease for the construction of the solar power plant in the amount of 22.40 million Baht to representatives or authorized persons of the 2 companies as the owners of the land. If the project is not approved by the shareholders of the Company, the lessor shall return the security deposit in full within the period specified by the Company. The payment of such security deposit is approved under the capped amount of 50 million Baht from the meeting of the Board of Directors of the Company held on 13 July 2016. On 26 January 2017, the Company's Board of Directors approved the investment in the solar power plants of Negros PH Solar Inc. (NPSI) having the production capacity under the Solar Energy Contract at 50 megawatts, located in the Philippines, by the purchase of 40 percent of the total issued ordinary shares in NPSI, in the total amount of 600,000 million US Dollars. Such investment must also be approved by the shareholders' meeting with the vote of not less than three-fourth of the total votes. The Company expects that the construction of this power plant project can be completed and commercially able to distribute power within 2017, with the project rate of return at the rate of not less than 15 percent. The Board of Directors considered this to be reasonable and beneficial to the Company and the shareholders. After the parties have fulfilled or waived (as per the methods stipulated under the agreement within October 2017) the conditions precedent stipulated in the share purchase agreement, the Company has already made the payment. Nevertheless, on 10 November 2017, it was informed by the Company that NPSI could not obtain the construction permit for the project and may not provide the progress summary since there was a change in the policy with respect of the process and procedures of approval for the permit by the Department of Energy, the Ministry of Energy of the Philippines. Therefore, the Company had to cancel the investment in the project and the Company recorded the reserve for the security deposit which may not be refunded in the amount of 34.10 million Baht (consisting of the security deposit of the land lease 22.40 million Baht, the operational costs for the acquisition of the construction permit of the project 11.70 million Baht) and wrote-off unrecallable security deposit (expenses for legal advisors, financial advisors, and technical engineering advisors) of 8.63 million Baht. However, the Company has officially given the notice to demand the security deposit for the land lease to the lessor twice and will proceed with legal procedures accordingly. Later, on 8 December 2017, it was disclosed by the Company that the Company received the deposit for the sale shares in the amount of 21.23 million Baht from the escrow agent, while the security deposit for the land lease of 22.40 million Baht and the operational costs for the acquisition of the construction permit of the project in the amount of 11.70 million Baht, at the total amount of 34.10 million Baht, cannot be recalled. The Stock Exchange of Thailand requested for further clarification as follows: 1.2.1 Referring to the Board of Directors' opinion on 26 January 2017 that the investment in such power plants is reasonable and beneficial to the Company and the shareholders and proposed for the approval for the transaction from the shareholders within April 2017, while later, it was found that the project cannot be operated. Please clarify that, in the meeting of the Board of Directors to consider the investment in NPSI, has the feasibility study for the acquisition of the construction permit from the Department of Energy, the Ministry of Energy of the Philippines been conducted? Please explain. In the consideration of the Board of Directors for the investment in the solar power plant project of Negros PH Solar Inc. (NPSI) on 26 January 2017, the Board of Directors resolved that the investment in NPSI's power plant was reasonable by considering the information from technical and commercial inspections, as well as legal due diligence. For the technical inspection, the Company hired Infratech ASTM Co., Ltd. to conduct field inspection and evaluate the appropriateness of the area for the construction of the solar power plant through the tests of soil strength, the level of the area above the sea level and statistics of disasters, e.g. flood and wind storm in the past. For the construction of the power plant, the Company also prepared to hire a contractor which is a company ranked in the Fortune Global 500 to design and construct the power plant. In the consideration on the commercial feasibility, due the high competitive in the construction market in Philiphines, NPSI has been offered from a contractor to acquire 85 percent of the total funds for the construction of the project with NPSI being responsible for only 15 percent for the initial construction. The Company has further studied and found that other projects in the vicinity have received the same offer from other contruction companies. This advantage results in the project rate of return of not less than 15 percent. In this connection, the Company hired Sims Property Consultant Co., Ltd. to evaluate the value of NPSI. From the result of the evaluation of NPSI, the value of 40 percent of NPSI's shares is 757.20 million Baht. The valuation of the project is the valuation of NPSI when it is fully operated. The valuation assumption includes the initial capital for start up in the amount of 2,353.95 million Baht. The project can immedietly produce elcetricty with the duration of 25 years, and would be granted tax incentive from the government of Philiphines, exempted from tax in the first 7 years, and pay corporate income tax at the rate 10 percent in the year of 8-13, and pay corporate income tax at the rate 30 percent in the year of 14-25, with the electricity tariff at 5.70 Baht per unit. Sims Property Consultant Co., Ltd. has evaluated at the discounted cash flow of the future subject to the condition that NPSI has a full capacity of 50 MW for 25 years calculated by the discounted rate at 8 percent. Nevertheless, due to the investment of the Company was in the early stage of the application for a license to implement the project, the Company, therefore could negotiate for the purchase of 40 percent of shares at the price of 600,000 USD or approximately 21 million Baht. Comparing to the value of NPSI, with full operation, it is considered as reasonable remuneration. With regards to the legal feasibility, the Company hired DFDL (Thailand) Ltd., which worked with a legal office in the Philippines, to review legal documents and licenses of NPSI. From the result of the review, NPSI was in the process of obtaining main documents, i.e. the construction permit for the project. The Company prescribes a condition for payment in the form of security deposit, whereby the security deposit shall be returned if the conditions precedent are not fulfilled, including the acquisition of the said construction permit by NPSI. In the meeting of the Board of Directors, the consideration on the conditions and procedures for the acquisition of the construction permit of NPSI was considered and NPSI may obtain the construction permit when the Department of Energy, the Ministry of Energy of the Philippines has considered the application and conditions of the permits performed by NPSI and submitted to the Ministry of Energy. In this respect, the Ministry of Energy will announce the result of the approval of the development and construction of the project on the Ministry of Energy's website. Nevertheless, the change of government of the Philippines resulted in the change in policy for the approval of the renewable energy power plant, whereby NPSI's project is pending for approval and the result of the acquisition of the construction permit of the project is delayed without a specified period. 1.2.2 Why did the Board of Directors approve the payment of the security deposit of 34.10 million Baht before the shareholders approved of the investment in the project? Did the Company make the payment after due diligence exercise of NPSI? Please clarify. Was the payment pro rata to the shareholding in NPSI and in accordance with the authority procedures of the Company and how? The Board of Dierctors has considered that the payment of security deposit of 34,102,184.62 Baht is necessary and appropriate for the investment in the project because such payment is under the terms for the refund in various conditions including the condition that the project needs the approval from the shareholders. The security deposit is an appropriate amount when comparing to the value of the NPSI when it is fully operated. Further, the security deposit of the land lease, and the operational costs are necessary as follows: 1) Security deposit for the land lease in the amount of 22,398,461.41 Baht which was paid after the preliminary result of due diligence exercise on NPSI The Company considered making this part of payment prior to the approval of the shareholders because, for power plant projects in the Philippines, the location of the land for which the power plant is to be located is the material factor in the approval of the project. The Company entered into an agreement to have the possessory right over the land so that NPSI may apply for the right to develop the project without the land procurement risk. The Company did not make this payment in proportion to the shareholding percentage because the Philippinos shareholders agreed to be responsible for the procurement of the possessory right over the land while the Company agreed to make the security deposit payment. Eventually when the project can be operated, the security deposit will be deemed as expenses of the project whereby NPSI has the duty to return to the Company in the propotion in which the Company has overly paid. 2) The payment for the operational costs for the acquisition of the project construction permit in the amount of 703,723.21 Baht was made after the consideration of the result from due diligence exercise on NPSI. The Company considered and made the payment for this sum prior to the approval of the shareholders because, for power plant projects in the Philippines, NPSI must obtain the project construction permit. The Company did not make the payment in proportion to its shareholding because the Filipinos shareholders agreed to be responsible for the acquisition of the project construction permit while the Company agreed to make the payment for the operational costs. Eventually when the project can be operated, the security deposit will be deemed as expenses of NPSI whereby NPSI has the duty to return to the Company in the propotion in which the Company has overly paid. Apart from the above, for the 2 investment items in the total amount of 34,102,184.62 Baht, the Company paid for such payment on the condition that the Company can demand for a return of the capital investment from NPSI's shareholders if NPSI may not operate the project and if the shareholders of NPSI refuse to return the security deposit, the Company is entitled to file a suit against NPSI's shareholders under the conditions stipulated under the agreement. 1.2.3 The names of the shareholders of NPSI, the lessor, the relationship between the Company in terms of shareholding, directors, executives or related party. The names of the shareholders of NPSI and the lessor of the land is MS. MARIA CELIA RAMONA S. MONFORT, a citizen of the Philippines, who has no relationship with the Company in terms of shareholding, director, executive, or related party. 1.2.4 Please indicate the conditions that the Company may receive the refund of the capital investment of 34.10 million Baht. Does the decision of the Board of Directors to cancel the investment in NPSI result in the inability of the Company to receive the refund of the capital investment under such conditions? Please clarify. Please also indicate the litigation progress for the claim of the investment capital. 1. The security deposit of 22,398.461.41 Baht is under the agreement for the Company to place the security deposit for the land reserved in order for NPSI to lease the land at a later date. The conditions for the Company to claim for the refund of the security deposit are as follows: (1) When the conditions of entering into the project land lease agreement has been fulfilled or waived by the relevant contracting party. (2) When NPSI may not enter into the project land lease agreement with the land owner. (3) When the Company is not approved to lease the project land. Therefore, due tofor the cancellation of the Company to invest in NPSI is considered as the disapproval of the lease of the land, the Company received the refund of the capital investment placed as the security deposit. Currently, the payment due date is under the negotiation and the Company expects that the Company will receive the refund within Quarter 3/2018. 2. For the security deposit for the operational costs for the acquisition of the construction permit, the conditions for the Company to receive the refund are as follows: 1) When the parties may not procure that NPSI obtains the construction permit. 2) When the Company is not approved to proceed with the project. The cancellation of the investment in NPSI resulted in the Company's entitlement in the full refund of the security deposit. Currently, the Company is under the negotiation for the counterparty to return the security deposit. In this connection, the counterparty agreed to enter into the letter of debt acknowledgement for the return of the security deposit to the Company. At present, the payment due date is under the negotiation and the Company expects to receive the refund within Quarter 3/2018. 1.3 Acquisition of Shares in Blue Finix Digital Co., Ltd. in the amount of 74.30 million Baht On 3 May 2017, the Company's Board of Directors resolved to approve the execution of the share purchase agreement in relation to Blue Finix Digital Co., Ltd. (Blue Finix), which engages in the application and website development business for internet transactions, to purchase 30 percent of the shares, totaling 74.37 million Baht, hoping to receive the return on investment at the rate of approximately 20 percent. Later, from the financial statements quarter 3, ended on 30 September 2017, it was found that the Company recognized 2.91 million Baht as its share of loss and on 8 December 2017, the Company disclosed the information that Blue Finix still cannot increase the number of customers and fail to reach the target; therefore, the Company requires Blue Finix to propose clear expenditure and revenue plans to the Board of Directors of the company within 14 November 2017 and the Company is continuously following up on such plans. The Stock Exchange of Thailand, consequently, requested the Company to clarify that, in the consideration to invest in Blue Finix, how did the Board of Directors analyze the business feasibility of Blue Finix? Why did the investment not correspond to the anticipation within a short period of time? In the consideration to invest in Blue Finix, the Board of Directors had analyzed the business feasibility of Online Live Streaming business which it viewed to have grown tremendously in the past few years. In 2016, the market value of the Online Live Streaming business was about 3,400 million Baht which is viewed as the strong point as compared to other competitors in the same business due to: 1. Business cooperation from professional content providers which is superior to other competitors. 2. There were more than 350 social network celebrities contracted to broadcast their own programs on FINIX TV prior to the business launch and it was expected that these group of persons will help promote FINIX TV in the social network and attract users promptly upon the service launch. 3. FINIX TV System is the system developed by the company, not a system purchased from overseas alike other competitors, which can be altered promptly and better understands consumers' popularity in Thailand. The company hired an independent valuer, The Valuation and Consultants Co., Ltd., which is an independent valuer approved by the Securities and Exchange Commission (SEC), to appraise the value of Blue Finix. The appraisal result shows that Blue Finix has a value of 719.57 million Baht and the Company purchased 30 percent of the shares in Blue Finix at the price of 74.37 million Baht. Notwithstanding, due to the fact that the competition in the Online Live Streaming business is very intense and, recently, there are new competitors entering the market, including the fact that Blue Finix cannot adapt itself towards the increased competition, the operating results of the company were not as expected. After the Company's investment in 30 percent of the business of Blue Finix, totaling 74.37 million Baht, the Company has already started to recognize income from June 2017. From the financial statement quarter 3/2017 of Blue Finix, totaling 4 months of income recognition (from June to September 2017), Blue Finix has earned 7.15 million Baht mainly from the sales of Gift to Angel on Duty and FINIX TV (currently, Angel on Duty and FINIX TV have consolidated their platforms). With respect to income from Social Portal Media Platform, such income has not arisen and, according to the action plan, the commencement of the income recognition in this part will start within quarter 1/2017. After Blue Finix's success in August 2017, the official press conference was held and there were celebrities attended such press conference, e.g. Professor Kata Chinnabanchon, Seksan Sukpimai, Kon-bai-krai-kriad crew members and Miss Supranational. The Company has given support and helped with the coordination. Later, executives of Blue Finix saw the opportunity to be an alliance with Electronics Extreme Co., Ltd., an importer of online games, to jointly use resources to achieve the best business benefits, including the proposal of work expansion plan to the leading media business group in the Republic of Vietnam in October 2017. Nevertheless, Blue Finix was not able to increase the number of customers to achieve the revenue targeted. The Company considered that such effect may result from the lack of strategic planning and marketing operational plan. Especially, there was a lack of budget allocation and prioritizing, which adversely affect the determination of budget allocation for each marketing tools. Moreover, the current economic circumstances have not positively encourage the operation as anticipated. Therefore, the Company proposed, in the Board of Directors' meeting of Blue Finix on 7 November 2017, that the executive board of Blue Finix should prepare clear quarterly action plan, budget plan, and expenditure plan and propose the drafts to the Board of Directors of the Company for consideration within 14 November 2017. In this regard, the Company has not been received the plan. Nevertheless, in January 2018, the management of Blue Finix has proposed new business plan which is business oppretunities for Blue Finix as follows: 1. Business opportunity in Thailand, the business cooperation plan between Blue Finix and ONE HD channel which has content with a large number of followers, and its own application ("ONE HD Application") which is OTT (Over-the-top) service. The ONE HD Application has been available in App Store for for more than 2 years and has been downloaded by over 2 million people. Nevertheless, at present, it has managerial problems leading to the out of date application and the decrease of the usages. For this collaboration, Blue Finix shall be responsible for management of ONE HD Application to be in active status. ONE HD Application has the advantage from other applications because it has its own content which could be provided as VOD (Video on Demand). The business plan has been separted to be two phrases: (1) advertisement sales phrase expected to get the sponsors within May 2018 which has the revenue share according to the agreement and (2) the phrase that Blue Finix shall use its existing Live Platform Engine plugs with ONE HD Application. As such, the actors of the channel could live during the filming (Sneak Peak Exclusive Content). This is expected to be launched within June 2018. The revenue sharing would be the same model as exsiting online streaming model of Blue Finix. 2. Business opportunity in a foreign country, the business cooperation plan between Blue Finix and Cat Thien Sa in in the Republic of Vietnam. The channel has famous programme such as The Face, The Voice, etc. At present, Cat Thien Sa has revenue approximately 5,000 million Baht per annum which comes from online sector approximatedly 1,000 million Baht per annum. For this collaboration, Blue Finix shall be responsibe for procuring and manufacturing the operating system ("Viva TV Application") which is OTT service, and Cat Thien Sa shall be responsible for procuring and producing the content of the programme including providing registration network for Viva Tv Application monthly subscription. The management of Blue Finix has considered that Mobile OTT is currently in the growth in the Republic of Vietnam since the increase of mobile subscribers. As such, the forecast revenue would be around 80 million Baht per annum. At present, Blue Finix and Cat Thien Sa has already signed a MOU and in the process of negotiation. It is expected that the project would be launched within 4 months once the agreement has been signed, and then the revenue would be immedietly recognized. 1.4 Purchase of shares in Hero Experience Co., Ltd. 325 million Baht On 15 September 2017, the Board of Directors of the Company resolved to approve the investment in the hyper reality development business, the Marvel Experience Thailand: Theme Entertainment Attraction (TMX) of Hero Experience Co., Ltd. (Hero Experience) by the purchase of 32.5 percent of the newly issued shares by Hero Experience Co., Ltd., totaling 280 million Baht. Later, on 12 December 2017, the Company's Board of Directors approved the additional purchase of 5 percent of the new shares issued by the capital increase of Hero Experience, totaling 45 million Baht, thereby resulting in the total combined shareholding of 37.5 percent of 325 million Baht in total. It is expected that the return on investment will be at the rate of at least 20 percent. The construction permit for the TMX Project was granted; the construction commenced since September 2017 and the company will recognize income within May 2018. On 27 December 2017, it was informed by the company that the investment transaction has been completed with the payment of capital investment of 325 million Baht. The Stock Exchange of Thailand, consequently, requested the Company to clarify as follows: 1.4.1 The summary of the Joint Venture Agreement between Hero Experience Co., Ltd. and Hero Venture of the United States of America, wherein Hero Experience received the royalty fee during August 2017 by giving the details on the term of the agreement, value of return, conditions for the royalty payment and any other material terms (if any) Material terms of the Joint Venture Agreement between Hero Experience (Hero) and Hero Venture (HVI) of the United States of America: - HVI is the licensee of copyrights and trademarks of Marvel characters owned by Marvel Characters B.V. (Marvel). - HVI grants Hero the right to use copyrights and trademarks of Marvel characters, Marvel story lines/cartoons and other creations ("Intellectual Property Rights") under the Project . - The term of the agreement is three (3) years which may be renewed for another term of three (3) years with the permission of HVI and Marvel. - Hero shall be required to pay the license fee for the term of three (3) years, at the amount which cannot be disclosed, in 3 instalments. So far, Hero has paid 2 instalments. - Hero shall be required to pay the royalty fees in proportion to its income to Marvel and HVI annually. The Company cannot disclose the related royalty amount since such information is trade secrets of the Company and the counterparty. 1.4.2 Following the notification by the Company that the construction of the TMX project started since September 2017 and expected to realize income within May 2018 with the estimated income per annum of at least 1,000,000 Baht, please clarify how the Board of Directors considered to ensure that the investment in Hero Experience will not result in damage alike other previous investments. Please indicate the preventive or remedial measures for damage which may arise in the future. The Board of Director of the Company has considered the advantage of TMX project as follows: 1. Marvel brand is an international brand having the global reputation; Marvel Entertainment, LLC was incorporated in May 1939 and it has been 78 years until now. At the initial stage, it sold comic books and created world famous characters, e.g. Captain America, Ironman, Spider-Man, etc. In 2008, Marvel produced the first movie, i.e. Iron Man, and was able to earn more than 585 million US Dollars. The second movie was The Incredible Hulk which could raise income for more than 263 million US Dollars in the same year. Consequently, The Walt Disney Company (Disney) saw the capacity of Marvel and acquired Marvel on 31 December 2009 at 4,300 million US Dollars. Thereafter, Marvel has produced several movies and continued to be successful. 2. The official support from the Ministry of Tourism and Sports and the Board of Investment On 21 August 2017, Hero attended a meeting with Mrs. Kobkarn Wattanavrangkul, the Minister of the Ministry of Tourism and Sports, and Mr. Pongpanu Svetarundra, the Permanent Secretary of the Ministry of Tourism and Sports. In this respect, the Tourism Authority of Thailand (TAT), as the public sector, agreed to promote the joint investment by the private sector in the TMX project as the project supports and promotes good relationship in the family (Family Attraction) with the aim to make TMX as one of the tourist attractions of Bangkok. Moreover, it is eligible for the promotion of the Office of the Board of Investment (BOI) for the exemption of import duties for the import of machines and equipment and the exemption of income tax for a period of 5 years. 3. The location (Mega Bangna) has the capacity to encourage the income growth Mega Bangna is the largest shopping mall in Bangna District. At present, there are about 120,000 customers in Mega Bangna daily, or 40 million customers per year. 98 percent of the customers are Thais and 2 percent are tourists while the number is continuously increasing at the average rate of 10 percent. Currently, there are about 8,000 parking spaces (5,000 in-door spaces, and 3,000 outdoor spaces). Mega Bangna has the plan to develop the department store into "Mega City" by increasing the parking spaces, entertainment zone, leisure, sport, education and the hotel which would encourage TMX to be a more complete tourism location. 4. The growth of the number of foreign tourists in Thailand Based on the foreign tourist statistics from the Department of Tourism in 2016, the total number of foreign tourists in Thailand is more than 32 million persons which grew 45 percent, or more than 10 million persons, within the past 5 years, with the tendency to grow continuously. Among the growth, 60 percent of the growth results from Chinese tourists. In 2016, approximately 9 million Chinese tourists visited Thailand per year, or approximately 24,000 persons per day, approximately 60 percent of which or 14,400 persons per day visited Bangkok. If TMX is one of the tourist attractions, the Company expects that more than 30 percent of the tourists will use the service and create income for TMX. The tourism location is in the form of digital hyper reality over the area of 12,395 square meters which can support up to 10,950 tourists per day. Currently, 70 percent of the construction has been completed and the area has been expaned to be 16,500 square meters from the excellent design as shown in the photos. 5. The estimated revenue of the Company from the study The Company has estimated the revenue from the TMX project, based on an estimated 3,000 visitors per day, or about 1.2 million per annum. It would generate revenue approximately 1,000,000,000 Baht per annum, which is a reasonable and acceptable return on the project. The revenue would come from four main areas as follows: 1) Revenue from ticket sold 2) Revenue from souvenirs and merchandises sold 3) Revenuse from food and drinks sold 4) Revenue from sponsorship and barter systems Nevertheless, the Company tries to minimize the risk which may arise from the investment to the extent possible by including conditions for the management of Hero into the related agreements as follows: 1. 3 out of 9 directors of Hero must be nominated by the Company in order for such persons to perform duties on behalf of the Company as the shareholder; 2. Hero must maintain insurance policies to protect property from damage from events, such as fire, flood, and political unrests; 3. The directors nominated by the Company shall jointly sign with the directors nominated by other shareholders with the affixation of the company seal for transactions having a value exceeding Baht 10,000,000; 4. The consideration of financial and accounting policies and related matters must always be proposed for acknowledgement or approval by the Board of Directors; 5. The quorum of the board of directors must consist the attendance by at least 1 director that is the Company's representative, whereby the quorum is formed and the meeting may commence; 6. The quorum for the shareholders' meeting must always consist of the Company attending the meeting to form the quorum and the meeting may commence; 7. The prescription of shareholders' reserved matters which require the consideration and approval of the shareholders with the majority vote of not less than 75 percent of the total votes of the attending shareholders as follows: 1) Amendment of the company's articles or memorandum of association; 2) Capital increase or capital decrease of the company; 3) Issuance of instruments, bonds, debentures, or any debt instruments of the company; 4) Issuance of any other shares besides ordinary shares; 5) Increase or decrease of rights attached to the shares; 6) Taking out loans or entering into any agreement, including raw materials supply agreement, service agreement, management agreement, project development agreement, or creating encumbrances or capital expenditure having a value of more than 10,000,000 Baht (ten million Baht); 7) Guarantee, mortgage, issuance of letter of guarantee, debenture, creation of debts or any action on behalf of the company which results in the decrease in value of the company's fixed assets (including land); 8) Appointment, removal of the President, directors, Managing Director, Chief Executive Officer, Chief Operating Officer, Chief Financial Officer who are authorized to manage the company, including the prescription of special benefits for directors and employees which includes the fixing of directors' compensation; 9) Appropriation of the company's legal capital as dividends, reserves or other savings for other appropriate purposes, or cancellation of the reservation or savings in compliance with laws; 10) Direct or indirect expenses and/or benefits for the company directors which result in benefits other than those stipulated in business plans, yearly budget and regulations; 11) Appointment of accounting auditors and fixing of the auditor's remuneration; 12) Approval of balance sheet, statement of cash follow, and income statement of the company; 13) Entering into an agreement or creating encumbrances over the company or acquisition of assets (including land) of the company having a value of more than 10,000,000 Baht (ten million Baht); 14) Participating in agreements which create commitments, amalgamation, joint investment or investment in a subsidiary; 15) Amendment of the terms with respect to quorum required for the meeting of shareholders or the Board of Directors; 16) Declaration of dividends and conditions for the payment to each type of shareholders entitled to receive such dividends, including the notification of the amendment in the dividends to be distributed to the shareholders; 17) Change of the company's nature of business, or investment in any company having the objectives not directly relevant to the normal operation of the company; and 18) Consideration of any other matters which the Civil and Commercial Code requires the special resolution. 1.5 The progress on joint investment with Triple CH Holdings Co., Ltd. 30 million Baht On 7 November 2017, the board of directors of the Company resolved to approve the joint investment with Triple Ch Holdings Company Limited (Triple CH), who is licensed to live broadcast football in the Philippines, having 35 percent stake in the joint investment, valued at 30 million Baht, to engage in the business of live broadcasting football in the Philippines. Triple CH had an agreement as regards the guarantee on business operation for a period of 18 months, starting from 1 December 2017 that revenue that the Company receives shall not be less than the investment that the Company has made to support the operation of live broadcasting football matches. In addition, the Company has a condition on the payment of the joint venture that the payment is subject to the opinions of the Company's legal advisor on legal status of Triple CH and the due authorization and license to operate the business of live broadcasting football matches. On 8 December 2017, it was disclosed by the Company that the Company has already made a payment of 20 million Baht in November 2017. The Stock Exchange of Thailand requested for the opinion of the legal advisor of the Company as regards the status of Triple CH and the due authorization and license to operate the business of live broadcasting football matches. Did the Company make a payment for the joint investment of 20 million Baht, following having considered the opinions of its legal advisor on the legal status of Triple CH? Please clarify. Also, has the Company made another payment of 10 million Baht? Please clarify. The Company hired LEUNG WAI LAW FIRM through Norton Rose Fulbright (Thailand) Co., Ltd. to provide opinions on the status of Triple CH, which can be summarized as follows: - Triple CH is a foreign company, registered in Samoa in accordance with the International Company Act 1988 on 14 September 2014 and would expire on 30 November 2017, unless it is being extended. - Triple CH is a company duly established in accordance with the laws and has never violated any laws of Samoa. - Triple CH has the registered capital of 1,000,000 USD, divided into 1,000,000 shares, at the value of 1 USD per share. The Company also hired Apisith and Alliance Co., Ltd. to review the rights under the Licensing Agreement between beIN Sports Asia Pte Limited ("beIN") and Triple CH dated 1 December 2017, under which the terms can be summarized as follows: - beIN agreed to grant to Triple CH the right to sub-license to ABS-CBN Corporation ("ABS-CBN") the right to live broadcast the Premier League, EUFA Champions League and La LigaSeason 2017-2018 (the "Live Program") in the Philippines. - beIN agreed to grant Triple CH the right to sub-license to ABS-CBN the right to use the logo of football clubs and trademarks which has been procured and authorized by the authorized persons of each of the clubs in connection with the Live Program, as well as the promotional activities relating to the Live Program. - The license to live broadcast exclusively belongs to Triple CH in the Philippines. However, Triple CH is only licensed to live broadcast and rerun through free TV (FTA TV) transmissions only. The Company has considered the opinions of the legal advisor regarding the status of Triple CH and the license, as well as the method of business operation and then made a decision to enter into the joint investment. The payment as regards the joint investment of 10 million Baht will be paid when Triple CH is able to renew the license with beIN. 2. Litigation and collection of debts owned by debtors 2.1 Litigation against a trade receivable - MUSE Group Bangkok Co., Ltd. (86.43 million Baht)The Company has filed a case against MUSE Group Bangkok Co., Ltd. to the Southern Bangkok Civil Court for the payment due under the terms stipulated in a Hire Agreement to run a Golf Thailand Classic tournament, whereby MUSE is a trade receivable who is in default of the refund of sponsoring money received from the sport competition event which the Company had made a financial investment of 86.43 million Baht. The Company has managed to collect partially, i.e. only 31.27 million Baht. On 27 November 2017, the Court ruled that MUSE is obliged to pay the Company 18.25 million Baht in total, together with the interest of 7.5 percent per annum. On the date of the reading of the judgement, the debt obligation under the judgement was 21.61 million Baht. Nonetheless, the Company is currently awaiting for opinions from a legal advisor to consider to appeal. On 8 December 2017, the Company declared that a full judgement was being transcribed. The Stock Exchange of Thailand requested the Company to provide an update on the appeal and clarify the plans of the Board of Directors to compensate for damages incurred to the Company. The Company and its legal advisor had a meeting and concluded facts and legal issues for the appeal of the judgement ruled by the Court of First Instance. The Company has filed the appeal on 26 January 2018. The Board of Directors reviewed the judgement of the Court of the First Instance and disagreed since the Board of Directors opined that Muse should pay additional payment in the amount of 86,755,397.55 plus interest at the rate 7.5 percent per annum calculated from 15 June 2015, and expenses and litigation fee to the Company. Therefore, the Board of Directors are of the opinion that the Company will implement all legal measures to protect the interest of the Company and shareholders. 2.2 The collection of debts owned by the debtor - Media Agency Thai Co., Ltd (352.95 million Baht) According to the note to financial statement No. 12.1, the Company has entered into an agreement with Media Agency Thai Co., Ltd (MAT) to reach an agreement on the method of repayment of the obligation under the Agreement to purchase the right to manage air time. On 30 September 2017, the total obligation and outstanding debts amounts to 299.45 million Baht. Due to MAT's failure to comply with the terms of the agreement and absence of clear plans to repay the debt, the Company then filed a case against MAT to Thonburi Civil Court, with the amount of claims of 323.30 million Baht. The Court set the date for mediation and plaintiff witness hearing on 20 November 2017. The Stock Exchange of Thailand requested the Company to report on the result of mediation on 20 November 2017, as well as to clarify the plans of the Board of Directors to compensate for damages incurred by the Company if MAT does not repay its obligation in accordance with the Agreement on debt restructuring. On 20 November 2017, which is the date of mediation or plaintiff witness hearing, the Court settled the issues and arrange an appointment to rule on how to proceed the case because the amount of claims of this case is high. However, the defense lawyer appointed a proxy to apply a motion requesting to postpone the case, reasoning that other Courts have already set the appointment date, and would like to negotiate. Having considered by the Court, the postponement was granted and the file was passed to the Mediation Center. The mediation date is set on 19 January 2018. If both parties is not able to reach the conclusion, the Court will settle the issues, arrange an appointment to rule on how to proceed with the case or conduct plaintiff witness hearing on 13 February 2018. - What are the plans of the board of directors to compensate for damages incurred by the Company? The Board of Directors opined that the Company will implement all legal measures to protect the interest of the Company and shareholders. 3. Short-term loan of 10.38 million Baht According to the note the financial statement No.7 dated 28 June 2017, a subsidiary has entered into a loan agreement to grant a loan to an unrelated company in the amount of 10 million Baht, with the interest rate of 15 percent, for a period of 7 months, having accrued interest receivable of 0.38 million Baht. The Stock Exchange of Thailand requested for the following clarifications: 3.1 Summary of information relating to the lending company, i.e. company name, date of establishment, paid-up capital, nature of business, operating results of the company, and financial position for the past 3 years, names of shareholders and shareholding ratio, board of directors and executives, as well as its relationship with the Company whether the lending company has the same the shareholders, directors, executives, and related parties? Please explain. Summary of general information relating to the lending company (1) General information of WGC International Co., Ltd. Name : WGC International Co., Ltd. Address Relationship with the Company and its subsidiaries : : No. 1 Q House Lumpini Building, South Sathorn Rd., Thung Maha Mek Sub-district, Sathon District, Bangkok 10120 There is no relationship with the Company and its subsidiaries, in terms of shareholders, directors, executives, and related persons. Nature of business : Activities relating to engineering works and consultancy services on technicality relating to engineering works Registration date of the company : 18 November 2009 Registered capital Paid-up capital Names of shareholders : : 4,000,000 Baht 4,000,000 Baht 1. Mr. Kenny Isac Jackle percentage 49.5 2. Ms. Kirana Narasuwan percentage 40.5 3. Mr. Wee Kangwankitti percentage 10.0 Board of directors : 1. Mr. Kenny Isac Jackle 2. Ms. Kirana Narasuwan Summary of financial position for the past 3 years Items Fiscal year 31 December 2016 31 December 2015 31 December 2014 Assets Cash and deposits at financial institutions 161,362.12 2,060,076.39 48,435.87 Accounts receivables 5,399,937.46 2,553,708.71 3,361,295.93 Accounts receivable and trade notes receivable, net 5,399,937.46 2,553,708.71 3,361,295.93 Total short-term loans 15,925.91 0.00 2,400,000.00 Other current assets 709,054.68 532,418.55 452,475.88 Total current assets 6,286,280.17 5,146,203.65 6,262,207.68 Total loans and long-term investments - - - Property, plant and equipment, net 1,448,238.76 1,785,965.07 2,228,496.31 Other non-current assets - 0.00 12,380.00 Total non-current assets 1,448,238.76 1,785,965.07 2,240,876.31 Total assets 7,734,518.93 6,932,168.72 8,503,083.99 Liabilities and shareholders' equity Liabilities Accounts payable 3,006,406.12 3,626,353.55 4,030,436.55 Total accounts payable and notes payable 3,006,406.12 3,626,353.55 4,030,436.55 Total short-term borrowings 5,256,427.42 3,278,460.67 - Other current liabilities 814,029.65 1,100,884.98 973,992.15 Total current liabilities 9,076,863.19 8,005,699.20 5,004,428.70 Other non-current liabilities 92,234.38 613,563.99 1,083,843.93 Total non-current liabilities 92,234.38 613,563.99 1,083,843.93 Total liabilities 9,169,097.57 8,619,263.19 6,088,272.63 Shareholders' Equity Authorised share capital 4,000,000.00 4,000,000.00 4,000,000.00 Issued and fully paid-up share capital - ordinary shares 4,000,000.00 4,000,000.00 4,000,000.00 Retained earnings (Deficit) -5,434,578.64 -5,687,094.47 -1,585,188.64 Total shareholders' equity -1,434,578.64 -1,687,094.47 2,414,811.36 Total liabilities and shareholders' equity 7,734,518.93 6,932,168.72 8,503,083.99 3.2 The persons who authorized subsidiaries to grant loans to an unrelated company, and reasons and necessity as to why the subsidiaries grant loans to the unrelated company. Please provide summary of the loan agreement, including credit facilities, collateral and repayment terms. The persons who authorized subsidiaries to grant loans to an unrelated company are 2 then authorized directors, i.e. Mr. Chen Chongping and Mr. Kunpoj Kittirattasiri. Nevertherless, when the Board of Directors is aware, the Board of Directors has assigned the management to demand for debt immediately. At present, the borrower has accelerated repayment of such loan. The Company received the loan of Baht 3 million Baht on 24 January 2018. For the remaining loan and interest, The Company is in the process of demanding and taking legal action. Summary of the Loan Agreement Credit facility : 10,000,000 Baht Interest rate : 15 percent per annum Collateral : 1. Share certificates of WGC International Co., Ltd. 2. A document showing the transfer of right to payment from DWP City Space Ltd. 3. A guarantee agreement by Ms. Kirina Narasuwan Repayment terms : Within 7 months from 30 June 2017 3.3 Is the aforementioned short-term loan deemed as connected transaction in accordance with the referred Notification No. 2? If it is considered as a connected transaction, has the Company proceeded in accordance with the rules stipulated? Please clarify. The aforementioned short-term loan does not fall under the scope of a connected transaction in accordance with the referred Notification No. 2. 4. Policy on business operations of the Company As appeared in the separate financial statement of quarter 3/2017, the Company's total revenue is only 0.08 million Baht. On 8 December 2017, the Company declared that, as its plan to solve the revenue issues, the Company is undergoing revenue restructuring process. There are more competition in its existing business, i.e. media business, resulting in lower rate of return. At the moment, the Company has a stream of cash flow of more than 500 million Baht which is ready to be invested. The direction of the Company will focus on being a holding company, or acquiring shares or increasing the capital of companies which have the potential to produce high return in the long term. The Stock Exchange of Thailand inquired about the status of the Company whether the Company still operates its own business or its main operation is being a holding company. If the operation is a holding company, the Company shall specify its core company and the operations in accordance with the referred rule No.3. Currently, the Company still operates its own business and there is no policy to change its business into being a holding company. According to the information appeared in the financial statement, the Company has total revenue, excluding those from subsidiaries, of only 0.08 million Baht. This is because most of the company's business nature is to enter into a license agreement to acquire the rights to copyrights, which has termination date. In addition, during the said period, each of the agreements expires. However, the policy of the Company is still to operate its own business and the Company is in the process of considering different projects in connection with licensing. However, if the Company wishes to change its status to a holding company, the Company will comply with the aforementioned rules. Please be informed accordingly. Yours sincerely, Demeter Corporation Public Company Limited Teerawit Charuwat (Mr. Teerawit Charuwat) Director and Chief Executive Officer Signature ___________________________ ( Mr.Teerawit Charuwat ) Director and Chief Executive Officer Authorized to sign on behalf of the company ______________________________________________________________________ This announcement was prepared and disseminated by listed company or issuer through the electronic system which is provided for the purpose of dissemination of the information and related documents of listed company or issuer to the Stock Exchange of Thailand only. The Stock Exchange of Thailand has no responsibility for the correctness and completeness of any statements, figures, reports or opinions contained in this announcement, and has no liability for any losses and damages in any cases. 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