SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to ______________________
Commission file number 0-27494
LEISUREPLANET HOLDINGS, LTD.
(formerly known as First South Africa Corp., Ltd.)
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(Exact name of Registrant as specified in its charter)
Bermuda N/A
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Clarendon House, Church Street, Hamilton HM CX, Bermuda
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(Address of Principal Executive Offices with Zip Code)
Registrant's telephone number, including area code (441) 295-1422
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
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("Common Stock")
Class A Redeemable Warrants
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("Class A Warrants")
Class B Redeemable Warrants
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("Class B Warrants")
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K. [ ]
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates of the Registrant. The aggregate market value shall be
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such common equity, as of a specified date within 60
days prior to the date of filing. (See definition of affiliate in Rule 405, 17
CFR 230.405).
The aggregate market value of the Registrant's Common Stock held by
non-affiliates of the Registrant as of September 17, 1999, was $26,196,480.
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date.
As of September 17, 1999, there were 5,468,447 shares of the Registrant's Common
Stock outstanding and 946,589 shares of the Registrant's Class B Common Stock
outstanding.
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PART 1
ITEM 1. DESCRIPTION OF BUSINESS
We are the parent company of LPI Limited. LPI Limited is a provider of
international online travel services for leisure travelers. We are also the
parent company of First South African Holdings (Pty.) Ltd. which maintains a
majority interest in First Lifestyle Holdings. First Lifestyle Holdings is the
owner of the companies through which we conduct our lifestyle products business.
HISTORY
We were founded in September 1995 to pursue opportunities in South
Africa as an emerging market. We were originally organized to acquire, own and
operate seasoned, closely held companies in South Africa with annual sales in
the range of approximately $5 million to $50 million. Recently, we broadened our
focus to the Internet and e-commerce sectors through our acquisition in February
1999 of an 81% interest in LPI Limited, an international online travel services
company. We are currently engaged in the following industry segments:
o Internet and e-commerce travel services; and
o Lifestyle products.
DESCRIPTION OF OUR CORE INDUSTRY SEGMENTS
INTERNET AND E-COMMERCE TRAVEL SERVICES
Through LPI Limited, our international online travel services company,
we offer our consumers a comprehensive online leisure travel service, including
the ability to shop online for airline tickets, hotel rooms, car rentals and
cruises. We have established a database of over 10,000 independent hotels,
including 60,000 full color photographs of hotels, a series of travel guides
covering 186 destinations in electronic format and a multilingual customer call
center. Our proprietary technology and user-friendly interface enable customers
to easily and quickly access travel information seven days a week. We primarily
target our services to consumers outside of the United States; in particular in
Europe. We do so by offering our services to our customers in their own language
and by offering our users the opportunity to reserve hotel stays in independent
hotels such as owner operated hotels and inns rather than only hotels which
comprise a chain. We also offer users of our web sites in Europe a large volume
of airline fares that have been specially negotiated by our fulfillment partners
in Europe.
We operate our own multilingual web site at WWW.LEISUREPLANET.COM. In
addition, to broaden our online presence and to build brand recognition, we have
entered into various strategic relationships to provide a number of co-branded
web sites. In January 1999, we entered into a three-year agreement with Lycos
Bertelsmann GmbH, a European affiliate of Lycos. We serve as the exclusive
travel retailer within the Lycos Bertelsmann travel web guide in 14 major
European markets, including France, Germany, the United Kingdom, Italy, Sweden,
Norway, Denmark, Switzerland, Austria, Belgium, The Netherlands, Luxembourg,
Spain and Finland. Also, in February 1999, we entered into a two-year agreement
with a subsidiary of Yahoo! Inc., a leading search engine provider. We are
Yahoo!'s exclusive provider of airline flights, hotel reservations and car
rental bookings through a comprehensive list of airlines, hotels and car
rentals, to users in France and Germany of Yahoo!'s travel page and our
co-branded web site with Yahoo!. In addition, in June 1999, we entered into a
three-year agreement with InfoSpace.com, Inc., a leading aggregator of content
on the Internet. We serve as the exclusive integrated booking engine for hotel,
air travel, vacation and cruise packages, accessible through InfoSpace's web
sites.
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For fiscal year ended June 30, 1999, our online travel services
business had revenues of approximately $165,000 which accounted for
approximately 1% of our revenues. Our online travel services business had a loss
from operations of approximately $6.5 million for fiscal 1999.
INDUSTRY BACKGROUND
GROWTH OF THE INTERNET AND ONLINE COMMERCE. The Internet and commercial
online services are emerging as a significant global communications media
enabling millions of people to share information and conduct business
electronically. A number of factors have contributed to the growth of the
Internet and commercial online services usage. These factors include the large
and growing installed base of advanced personal computers in the home and
workplace; improvements in network infrastructure; easier, faster and cheaper
access to the Internet and commercial online services; the introduction of
alternative Internet access devices and increased awareness of the Internet; and
additional commercial online services among consumer and business users.
Computer Industry Almanac, Inc. estimates that the number of World Wide
Web users will grow from approximately 151 million in 1998 to approximately 319
million by 2000. The functionality and accessibility of the Internet and
commercial online services have made them an increasingly attractive commercial
medium by providing features that historically have been unavailable through
traditional channels. The Internet and commercial online services provide users
with convenient access to large volumes of dynamic data to support their
investment, purchase and other decisions. Online retailers are able to
communicate effectively with customers by providing frequent updates of featured
selections, content, pricing and visual presentations and provide tailored
services by capturing valuable data on customer tastes, preferences, shopping
and buying patterns. Online retailers are also able to utilize consumer buying
patterns to more effectively target their audience. Unlike most traditional
distribution channels, online retailers do not have the burden of managing and
maintaining numerous local sales facilities to provide their services on a
global scale. Because of these advantages, online retailers benefit from the
relatively low cost of reaching and electronically serving customers world wide
from a central location. As a result, an increasingly broad base of products and
services are being sold online, including books, brokerage services, computers
and music, as well as travel services. Boston Consulting Group estimates that
online retail revenues will grow from $14.9 billion in 1998 to $36 billion in
1999. Forrester Research estimates that online retail sales will reach $184
billion by 2004. Forrester Research also estimates that online travel revenues
will exceed $29 billion by 2003, representing 12% of total industry revenue.
Moreover, as the number of online content, commerce and service
providers has expanded, strong brand recognition and strategic alliances have
become critical to the success of such providers. Brand development is
especially important for online retailers due to the need to establish trust and
loyalty among consumers in the absence of face-to-face interaction.
THE TRADITIONAL TRAVEL INDUSTRY. The travel industry is large and
growing. Historically, airlines, hotels, rental car agencies, cruise lines and
vacation packagers have relied on internal sales departments and travel agencies
as their primary distribution channels. The traditional travel agency channel is
highly fragmented, with few nationally recognized brands. According to American
Society of Travel Agents, there are over 23,000 travel agencies operating in
more than 33,000 locations in the United States alone, with the average travel
agency generating less than $3 million in annual gross bookings per location.
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Travel agents are compensated primarily through commissions paid by
travel suppliers on services booked. Some travel agencies also charge service
fees to their customers. Traditionally, standard retail base commission rates
paid by travel suppliers to travel agents have been 7% - 10% for airline
tickets, 10% for hotel reservations and car rentals, and 10% to 15% for cruises
and vacation packages. In addition, travel agencies can earn significant
performance-based incentive compensation from travel suppliers that can
substantially impact financial performance. These commission rates and override
commissions are determined by travel suppliers and are subject to frequent
change. In recent years, commission capping has led to a reduction in average
commission rates.
Travel agencies typically book reservations by telephone and fax and
through electronic global distribution services, often referred to as GDS
systems. Two such GDS systems are Galileo International's Apollo system and
SABRE Group Holdings Inc.'s SABRE system. The GDS systems provide real-time
access to voluminous data on fares, availability and other travel information.
The GDS data is constantly changing, with as many as one million airfare changes
being made daily. Customers traditionally have relied on travel agents to access
and interpret such rapidly changing information via complex and proprietary
interfaces to GDS systems. As a result, the ability of customers to obtain the
most favorable schedules and fares has been subject to the skill and experience
of individual travel agents, whose availability may be limited, as well as the
commission offered to travel agents.
THE ONLINE TRAVEL OPPORTUNITY. The online travel opportunity is created
by the trends to drive distribution costs lower in the traditional travel
industry combined with a need for a more effective and efficient means of
purchasing and distributing travel services to address the needs of consumers.
The online market benefits from this drive to lower costs. In addition, at a
time when many traditional travel agencies may be experiencing pressure to
reduce levels of service as a result of recent reductions in commission rates,
many customers are demanding greater convenience and flexibility in how, where
and when they shop for travel services. Customers are also demanding more
control over their travel decisions, including the opportunity to compare prices
and products and review availability. In an effort to reduce their distribution
costs and develop more direct relationships with their customers, travel
suppliers seek ways to distribute their services outside of the traditional
travel agency channel. The Internet provides this and, as a result of these
trends, the Internet and commercial online services have emerged as an
attractive medium through which travel services can be purchased.
According to Jupiter Communications, online travel bookings will grow
from $4.2 billion in 1999 to over $16.6 billion in 2003. The Travel Industry
Association of America estimates that online travel revenues will grow from $827
million in 1997 to $9 billion in 2002. The interactive nature of the online
medium enables consumers to use reservation engines which automate the
processing and confirmation of travel reservations. We believe that this has
increased the consumers' control over the process by providing them with
additional choices, resulting in better service.
The online medium also provides travel suppliers with an effective
advertising and promotional vehicle. Forrester Research estimates that online
advertising will grow to $33 billion by 2004, with approximately $22 billion
spent in the United States and $5.5 billion spent in Europe. According to the
Travel Industry Association of America, online advertising on travel web sites
will grow from $2 million in 1996 to $282 million in 2002.
THE EUROPEAN TRAVEL OPPORTUNITY. The Internet and commercial online
services, including travel services, are emerging rapidly in Europe. According
to IDC Research, there were an estimated 44 million Internet users in Europe in
September 1999. IDC Research also predicts that the online population of Europe
will overtake that of the United States for the first time in 2003. In addition,
according to Computer Industry
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Almanac, there will be 102 million Internet users in Europe by 2000. Also,
according to Datamonitor, online travel spending in Europe is expected to grow
from $7.7 million in 1997 to $1.7 billion by 2002.
Our unique hotel inventory includes a database of over 13,000
independent hotels outside of the GDS systems. We believe that European leisure
travelers prefer independent hotels over chain hotels since, according to
Worldspan, approximately 30% of all hotels in the GDS system are European based
hotels, while over 50% of all hotels in the GDS systems are hotels based in the
United States. In addition, according to Worldspan, approximately 10% of the
hotels in Spain, and approximately 27% of the hotels in France, two of the
largest inbound destination markets in Europe, are included in the GDS systems.
LEISUREPLANET SOLUTION
As consumer spending on online travel services grows in the coming
years, we believe that we are uniquely positioned to satisfy an international
market of consumers who desire a wide selection of travel destinations and
services combined with informative travel content. We intend to include in our
travel service offerings a comprehensive mix of travel products, associated
merchandise, services and content, all brought to our customers in their own
language in a personalized travel community web environment. For example, we
offer our customers the opportunity to reserve hotel stays in independent
hotels, owner operated hotels and inns with an average of 50 beds rather than
only hotels which comprise a chain. Both online and offline travel services
typically book hotel reservations through GDS systems, which typically offer
hotel stays in chain hotels rather than independent hotels. We have established
an inventory of over 10,000 independent hotels where our customers can book
reservations. Also, unlike other online travel service providers, we offer a
large number of airline fares, particularly fares outside North America, that
cannot be found in GDS systems.
BENEFITS TO CUSTOMERS.
EXPANSIVE INVENTORY. As with other travel services, we have complete
access to air, hotel and auto rental information published on the GDS systems.
We distinguish ourselves from other online and offline travel services by adding
a huge selection of inventory outside of the GDS systems, including air, hotel
and cruise information. Our hotel inventory is our most extensive non-GDS
inventory. It currently includes over 10,000 independent hotels with whom we
have contractual relationships to sell reservations and display their content on
our web sites. We also intend to add non-GDS package vacations in the future.
The package vacations will be targeted to the travel needs of the consumers in
each of the markets in which we operate.
EXTENSIVE PHOTO LIBRARY. Most of the over 10,000 independent hotels who
provide us with inventory also provide us with a series of full color photos of
their premises, including their rooms, which are available for viewing on our
web sites. We also display photos of over 3,000 of our GDS hotels. Our full
color photo library currently contains over 60,000 images of our various hotels.
MULTILINGUAL SERVICES. European customers will benefit from our travel
services since our travel services are offered on a variety of web sites in
local languages. For example, our travel services are currently deployed through
Lycos in local languages in France, Germany and the United Kingdom, and will be
similarly deployed in the future in local languages in Sweden, Norway, Denmark,
Switzerland, Austria, Belgium, The Netherlands, Luxembourg, Spain and Finland.
Our travel services are also deployed through Yahoo! in local languages in
France and Germany and our own web site at LEISUREPLANET.COM in English, French
and German.
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CUSTOMER CALL CENTER. Our customer call center assists our customers in
using our web sites and accessing our travel services 7 days a week. Our call
center is staffed by multilingual customer service agents. In addition, our call
center offers an alternative for completing transactions for customers who
prefer to purchase travel services over the telephone.
FULFILLMENT PARTNERS. We currently have relationships with fulfillment
partners in the United States with Uniglobe Travel Online, Australia with
Concorde International, South Africa with Experts in Travel, France with
Reductour, Germany with Aeroworld GmbH, the United Kingdom with Major Travel,
and Italy with Travel United. As we expand our customer base into additional
markets, we plan to establish relationships with fulfillment partners in these
markets as well. By establishing relationships in all of the markets we serve,
we believe we will be able to obtain lower rates as a result of the size and
negotiating position that each of our fulfillment partners has in each of their
respective markets.
EXTENSIVE TRAVEL GUIDES. We offer our guests an extensive travel guide
resource covering 186 international travel destinations, including 125
countries, and all states of the United States and Canada. Eighty of our travel
guides have been translated in English, French, German, Italian, Spanish and
Dutch, and the English, French and German guides are currently available through
our web sites. We intend to offer our travel guides in local languages in all of
the markets we serve. In addition to maps, history and a variety of other travel
information, our guests are also offered a unique slide show for many of the
destinations in our travel guides.
BENEFITS TO HOTELS.
ACCESS TO CUSTOMERS. We offer our independent hotels an opportunity to
market their business to a large, global customer base at no cost. These hotels
have, in the past, missed out on a large part of the leisure travel market
because of their non-affiliation with a GDS system.
BRAND RECOGNITION. Due to the high cost associated with traditional
advertising and their non-affiliation with a GDS system, most of our independent
hotels have struggled with brand recognition and customer awareness in the past.
Our web sites allow our independent hotels to market their facilities and make
full color photos of their facilities available to leisure travelers 24 hours a
day, 7 days a week at the click of a button, all at no cost to the hotel.
RESERVATION PROCESSING SYSTEM. Through our web sites and customer call
center we offer a full service reservation processing system to our independent
hotels.
BENEFITS TO AIRLINES AND AUTO RENTALS
ACCESS TO CUSTOMERS. We offer airlines and auto rentals an additional
platform to access customers. Our access to an international audience makes us a
valuable partner for these suppliers.
LEISUREPLANET STRATEGY
Our objective is to become the leading international online leisure
travel service provider by offering our customers a unique combination of travel
services. The principal elements of our business strategy are to:
EXPAND STRATEGIC RELATIONSHIPS TO ATTRACT NEW CUSTOMERS. We intend to
continue to leverage our strategic relationships with Yahoo!, Lycos and
InfoSpace and seek other strategic relationships with other major
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multinational Internet portals to attract additional customers to our web sites.
We also intend to seek other strategic relationships with national Internet
portals in selected markets.
AGGRESSIVELY DEVELOP BRAND. Our strategy is to promote the value of our
brand through high quality customer service, active marketing and promotional
programs. We intend to broaden our online visibility and expand our customer
base by purchasing inexpensive online banner advertisements on high traffic web
sites and offline advertising in a variety of mediums. We believe that strong
brand recognition is increasingly important in online commerce to attract
customers and promote consumer trust and loyalty in the absence of face to face
relationships.
EXPAND INDEPENDENT HOTEL RELATIONSHIPS AND OTHER OFFERINGS. We plan to
strengthen and expand the number of hotels in our independent hotel database and
to broaden our online travel offerings to include more destinations, cruises and
other travel packages, including last minute travel packages. We also intend to
add to our library of over 60,000 full color photo images of hotels displayed on
our web sites and add to our extensive travel guide resource by adding other
travel related content such as licensed city guides.
INVEST IN LEADING TECHNOLOGY. We intend to continue to invest in the
implementation of technology driven enhancements to our web sites, with the goal
of making our customer's visit easy, intuitive and as pleasant as possible. We
also intend to invest in enhancing our transaction processing systems and our
customer call center.
PURSUE INCREMENTAL REVENUE OPPORTUNITIES. We plan to offer additional
travel services and products to meet our customers' needs at each stage of the
leisure travel process, such as travel insurance, travel financing services and
travel-related merchandise. We also plan to aggressively pursue media sales to
targeted advertisers based on increased traffic to our web sites.
LEISUREPLANET ONLINE SERVICE
Visitors to our web sites can access our vast inventory of travel
services, including airlines, hotels, car rentals and cruises. To access our
inventory of travel services, each customer registers by providing basic
information such as name, street address, e-mail address and telephone number.
This information is stored in our database and is used solely by us to
complement and facilitate our travel services. By registering with us, our
customers can quickly access our reservation system on subsequent visits. Our
registered visitors then enter their travel itinerary or other travel
information, including their profile which holds information such as preferred
seat class for air travel and frequent flyer number. Our search engine will then
display a range of options for the visitor to compare. Through our travel
guides, visitors can review detailed information about desired destination
markets, including maps, historical and sight-seeing information and other
travel related information. Through our customer call center, we answer customer
questions and assist in finding the best travel value for our customers' needs.
Customers can either complete travel purchases in a few easy steps online
through one of our web sites, or call our customer call center for assistance
and information in completing a travel purchase offline.
THE LEISUREPLANET BOOKING PROCESS. Our travel inventory includes our
own inventory of over 10,000 independent hotels and access to a the Worldspan
global distribution service, or GDS system. Access to Worldspan through our web
sites provides our users with access to 650 major international airlines, 30,000
major hotels and all major rental car companies. Once a visitor initiates a
search for a flight reservation, our search engine reviews our GDS and, at our
European web sites, our private fares inventory to locate the best prices
possible for the desired travel. User friendly presentation of available options
that meet the customer's requests
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allow easy comparison shopping. To complete a purchase, customers select the air
reservation of their choice and supply credit card information. Once the order
is submitted, the customer receives instant online confirmation that travel has
been booked and a subsequent e-mail to verify the transaction. Fulfillment is
completed with printed tickets sent to the customer according to the customer's
fulfillment needs, which may include overnight delivery. The process for
purchasing hotel and car rental reservations is similar, although it currently
does not have the capability to search for low fares. When a customer makes a
request for a reservation at one of our independent hotels, the request is sent
automatically by facsimile or e-mail to the hotel to determine availability.
Once the hotel confirms availability, the customer is informed by e-mail and is
offered the opportunity to return to our site and complete the transaction by
submitting credit card details. After we receive the customer's credit card
information, the transaction is confirmed to the customer on-line and by e-mail.
In addition to accessing our inventory of travel services, our
customers can use the following travel services to make better informed travel
purchase decisions:
o HOTEL CONTENT. In addition to rates and availability,
we provide in-depth content on the hotels featured on
our web sites, including over 60,000 full color
pictures of properties and rooms covering our
database of over 10,000 independent hotels and 3,000
GDS hotels, offering our users the chance to look
before they buy.
o TRAVEL GUIDES. We provide our users the opportunity
to review our value-added travel guides. Our travel
guides cover 186 international travel destinations,
including 125 countries and all the states of the
United States and Canada. In addition to maps,
history and a variety of other travel information,
our guests are also offered a unique slide show for
many of the destinations in our travel guides.
o WORLD EVENTS CALENDAR. Our world events calendar
informs our visitors of major leisure events in
various destinations throughout the world and offers
our customers quick access to hotel reservations in
those destinations and our travel guide for those
destinations.
o CURRENCY CONVERTER. Ourcurrency converter covers most
major currencies in the world and informs our
visitors of what to expect when exchanging their
local currency for that of their destination.
o VACATION IDEAS. We are currently developing a library
of vacation ideas which we intend to make available
through our web sites.
o TRAVEL PRODUCT REVIEWS. We are currently developing
a system of rating of destinations and travel
products. We intend to make this system, which will
be based on our customers' experiences, available
through our web sites.
STRATEGIC RELATIONSHIPS
We pursue strategic relationships to increase our access to online
customers, to build brand recognition and to expand our online presence. To
date, we have established the following alliances, among others, for
distribution and product enhancement:
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LYCOS-BERTELSMANN. In January 1999, we entered into an agreement with
Lycos-Bertelsmann, a leading search engine provider in Europe. The agreement is
for a three year term and provides that Lycos and LPI Limited will form a
co-branded version of the LEISUREPLANET.COM web site accessible to users of
various Lycos web sites in Europe. The co-branded site will be promoted
throughout the Lycos web sites. The co-branded site will be deployed on local
Lycos services in the following countries in the languages specified: France
(French), Germany (German), United Kingdom (English), Italy (Italian), Sweden
(Swedish), Norway (Norwegian), Denmark (Danish), Switzerland (German), Austria
(German), Belgium (Dutch and French), The Netherlands (Dutch), Luxembourg
(German and French), Spain (Spanish) and Finland (Finnish). Lycos has agreed to
deliver a minimum number of impressions and banners to promote the co-branded
site.
YAHOO! (DEUTSCHLAND) GMBH AND YAHOO! FRANCE SARL. In February 1999, we
entered into an agreement with Yahoo! (Deutschland) GmbH and Yahoo! France SARL,
leading search engine providers in Germany and France, respectively. The
agreement is for a two year term and provides that Yahoo! and LPI Limited will
form a co-branded version of the LEISUREPLANET.COM web site accessible to users
of the Yahoo! web sites in Germany and France, respectively. The co-branded site
will be promoted through the Yahoo! web sites. The co-branded site will be
deployed on local Yahoo! services in France (in French) and Germany (in German).
Under the agreement, we obtained the right to bid for similar services in
selected European countries, including Spain and Italy. Yahoo! has agreed to
deliver a minimum number of page views and banner advertisements to promote the
co-branded site.
INFOSPACE. In June 1999, we entered into an agreement with
InfoSpace.com, an aggregator of content, including yellow pages, white pages,
maps and classified advertisements, on the Internet. The agreement is for a
three year term and provides that InfoSpace can post promotional banners on its
web site INFOSPACE.COM with links to LEISUREPLANET.COM. InfoSpace agreed to
deliver a minimum number of click-throughs to LEISUREPLANET.COM for each year.
InfoSpace has also agreed to launch a travel service on its home page
incorporating LEISUREPLANET.COM travel content and travel engines, as well as
integrate our travel engine into various aspects of InfoSpace's content.
NOMADE. In June 1999, we entered into an agreement with Nomade, a
leading French portal. The agreement is for a one year term and provides that
Nomade will provide a minimum number of LEISUREPLANET.COM promotional buttons
and banners on its web site and will provide a minimum number of click throughs
to LEISUREPLANET.COM.
M-WEB HOLDINGS LIMITED. In June 1998, we entered into an agreement with
M-Web Holdings Limited, an entity which operates a leading web site in South
Africa. Pursuant to the agreement, we granted M-Web a conditionally exclusive
license to link a co-branded travel services web site incorporating
LEISUREPLANET.COM content to M-Web's web site. For as long as the co-branded
site enjoys certain agreed upon page views and user sessions per month and M-Web
operates the premier family of web sites in South Africa, we agreed not to grant
a similar license to any other South African based web site operator that
targets primarily South African users.
FULFILLMENT PARTNERS. We have entered into agreements with fulfillment
partners in the United States, Australia, South Africa, France, Germany, the
United Kingdom and Italy. Our agreements with our fulfillment partners afford us
with favorable airline fares and holiday packages, as well as fulfillment
services to our customers. Fulfillment services include the processing and
issuance of tickets and other travel documents, handling of customer phone calls
and other correspondence, and collection of commissions.
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There can be no assurance that we will achieve sufficient online
traffic, travel bookings or commissions to realize economies of scale that
justify our significant fixed financial obligations to Yahoo!, Lycos, InfoSpace
and Nomade. There also can be no assurance that we will be able to satisfy the
minimum level of travel service bookings required to maintain certain of our
fulfillment partner agreements. Failure of any of the foregoing will have a
material adverse effect on our business, operating results and financial
condition.
We are aggressively pursuing other strategic relationships for both
distribution, marketing and content that could generate additional significant
financial obligations over the next several years. There can be no assurance
that we will be successful in establishing such additional strategic
relationships.
MARKETING AND SALES
Our marketing strategy is to attract new customers, develop our brand
name and develop loyalty programs to better serve and satisfy our customers. Our
sales strategy is focused in part on generating other revenues from sales of
travel related products and services to our independent hotels and customers and
on generating advertising and promotional revenue from sponsors who seek a
cost-effective way to reach a travel- oriented audience online.
We also employ a variety of traditional media programs and promotional
activities to enhance the effectiveness of our marketing initiatives:
o STRATEGIC RELATIONSHIPS. To broaden our online presence and
build brand recognition, we have entered into strategic
relationships to provide co-branded web sites with leading
Internet portals Yahoo!, Lycos, and Nomade, and with leading
Internet content aggregator, InfoSpace.
o ADVERTISING. We intend to supplement our strategic
relationships with Yahoo!, Lycos, InfoSpace and Nomade by
entering into additional relationship with other Internet
portals as well as investing in online advertising to drive
traffic to our web sites. By purchasing low cost
advertisements on high traffic sites, we will seek to
cost-effectively generate traffic to our web sites. We may
also advertise from time to time in traditional media such as
television, print and broadcast to increase the awareness of
our travel services.
o CO-MARKETING/PROMOTIONS. We intend to establish a number of
co-marketing relationships to promote our travel services and
to sponsor contests that offer travel related prizes,
including online auctions and other sponsored events. These
programs will necessarily involve participation with airlines,
hotels, car rental agencies and other online service
providers.
o LOYALTY AWARDS. We intend to offer various incentives and
awards to our customer base. These incentives are designed to
increase customer loyalty and brand awareness.
o ONLINE TRAVEL RELATED AND ADVERTISING SALES. As the number of
independent hotels on our web sites increases, we intend to
offer our independent hotels a variety of options, including
the ability to upgrade their content and advertise for a fee.
We also intend to offer our customers an assortment of travel
related products and services such as travel insurance, travel
financing and travel supplies. We also believe that the sale
of online advertising will become an increasingly important
source of revenue. Accordingly, we intend to increase our
investment
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<PAGE>
in advertising sales that target key advertisers who seek to
reach a travel oriented online audience. Client advertisements
can be incorporated into our online sites in the form of
banners, links and buttons that encourage viewers to click
through for additional information. In addition, we can
develop extensive editorial and marketing content to support
the various marketing initiatives of sponsors.
COMPETITION
The online travel services market is new, rapidly evolving and
intensely competitive, and we expect such competition to intensify in the
future. We currently compete primarily with traditional travel agencies and
online travel reservation services. In the online travel services market, we
compete with other entities that maintain online travel web sites, such as
Expedia, which is operated by Microsoft Corporation, Travelocity, which is
operated by SABRE Group Holdings Inc., a majority owned subsidiary of American
Airlines, PreviewTravel, TravelWeb, which is operated by Pegasus, and Internet
Travel Network.
In the United States, over 75% of online travel commerce is represented
by Expedia, Travelocity, Preview Travel and Internet Travel Network. This
consolidation presents a significant barrier to entry. In the United Kingdom,
Expedia, Travelocity and LASTMINUTE.COM represent our major competitors. In
Germany, Expedia represents our major competitor. Except for the foregoing, our
competition for online travel commerce in Europe is currently limited. However,
many of our other competitors in the United States may increase their efforts in
the international markets. In addition, the leading traditional travel agencies,
such as American Express Travel Related Services Co. Inc., Uniglobe Travel and
Carlson Wagonlit Travel, may in the future establish commercial web sites
offering online travel services. Some of these existing and potential
competitors have significantly greater financial, technical and marketing
resources than we do. We cannot assure you that we will be able to compete
effectively.
In addition to the traditional travel agency, most travel suppliers
also sell their services directly to customers, including by telephone and their
own web sites. Selling their services directly eliminates the need of the travel
suppliers to pay commissions to third parties. As the market for online travel
services grows, we believe that the range of companies involved in the online
travel services industry, including travel suppliers, traditional travel
agencies and travel industry information providers, will increase; with each
offering services that compete with our services.
We believe that the success of companies entering the online travel
services business will be based on the following competitive factors: broad
distribution, quality and exclusivity of content, technological sophistication
and brand awareness. If we fail to establish these competitive factors quickly,
competitors may prevent us from obtaining a leading market share, which would
adversely affect our business. Therefore, we intend to deploy significant
resources and pursue an aggressive implementation of these factors. However, we
cannot assure that we will be able to capture or maintain sufficient market
share in the face of increasing competition.
TECHNOLOGY
Our operations include a multilingual call center facility, a customer
service unit, two electronic publishing units, an information system support
unit, a web site development unit, a hotel recruitment center, and a local
travel agency partner network providing fulfillment services. These operations
utilize a sophisticated infrastructure, including a scalable high capacity web
server infrastructure.
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<PAGE>
We provide 24 hour continuous access to our online travel services.
Continuous access is maintained through constant automated server polling and by
ensuring that users are routed to optimal services. We maintain back-up ISDN
lines should parts of the network fail.
We seek to ensure server security, as well as protect user information,
other vital information resources and server infrastructure through the location
of web server farms in secure server rooms and the deployment of sophisticated
firewall software.
PROPRIETARY RIGHTS
We regard our copyrights, service marks, trademarks, trade dress, trade
secrets and similar intellectual property as critical to our success, and rely
on trademark and copyright law, trade secret protection and confidentiality
and/or license agreements with our employees, customers, partners and others to
protect our proprietary rights. We pursue the registration of certain of our key
trademarks and service marks in the United States and internationally. Effective
trademark, service mark, copyright and trade secret protection may not be
available in every country in which our products and services are made available
online. We have licensed in the past, and expect that we may license in the
future, certain of our proprietary rights, such as trademarks or copyrighted
material, to third parties. While we attempt to ensure that the quality of our
brand is maintained by such licensees, there can be no assurance that such
licensees will not take actions that might materially adversely affect the value
of our proprietary rights or reputation, which could have a material adverse
effect on our business, operating results and financial condition. There can be
no assurance that the steps taken by us to protect our proprietary rights will
be adequate or that third parties will not infringe or misappropriate our
copyrights, trademarks, or similar proprietary rights. In addition, there can be
no assurance that other parties will not assert infringement claims against us.
We may be subject to legal proceedings and claims from time to time in the
ordinary course of our business, including claims of alleged infringement of the
trademarks and other intellectual property rights of third parties by us and our
licensees. Such claims, even if not meritorious, could result in the expenditure
of significant financial and managerial resources.
We also intend to continue to strategically license certain content for
our online sites from third parties, including content which is integrated with
internally developed content and used on the online sites to provide key
services. There can be no assurance that these third party content licenses will
be available to us on commercially reasonable terms or that we will be able to
successfully integrate such third party content. Such content licenses may
expose us to increased risks, including risks associated with the assimilation
of new content, the diversion of resources from the development of our content,
the inability to generate revenues from new content sufficient to offset
associated acquisition costs and the maintenance of uniform, appealing content.
The inability to obtain any of these licenses could result in delays in site
development or services until equivalent content can be identified, licensed and
integrated. Any such delays in site development or services could have a
material adverse effect on our business, operating results and financial
condition.
GOVERNMENT REGULATION
We are subject to various United States and foreign laws and
regulations relating to our online travel services business, including United
States Department of Transportation regulations prohibiting unfair and deceptive
practices. Few laws or regulations are currently, direct applicable to access to
the Internet. However, because of the Internet's popularity and increasing use,
new laws and regulations may be adopted. Such laws and regulations may be issued
such as:
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o user privacy;
o pricing;
o content;
o copyrights;
o distribution; and
o characteristics and quality of products and services.
In addition, the growth of the Internet and electronic commerce,
coupled with publicity regarding Internet fraud, may lead to the enactment of
more stringent consumer protection laws. These laws may impose additional
burdens on our online travel services business. The enactment of any additional
laws or regulations may impede the growth of the Internet, which could decrease
our potential revenues from electronic commerce or otherwise adversely affect
our business, financial condition and operating results.
OUR SOUTH AFRICAN LIFESTYLE PRODUCTS OPERATIONS
Our lifestyle products operations consists of nine companies which
operate as wholly owned subsidiaries of First Lifestyle Holdings, a publicly
traded company on the Johannesburg, South Africa Stock Exchange. We own
approximately 51.5% of First Lifestyle Holdings. Of our nine lifestyle products
companies, five are engaged in the manufacture of specialty foods, and four are
engaged in the manufacture and distribution of a wide variety of indoor and
outdoor consumer products.
Piemans Pantry, Gull Foods, Seemanns Meat Products, Astoria Bakery and
Fifers Bakery are engaged in the manufacture of a variety of specialty foods.
Each of our specialty foods companies is characterized by a focus on providing
food products to the upper end of the market, with a significant emphasis on
quality. We sell to South Africa's leading supermarkets and retail chains, a
number of fast food franchises as well as independent bakeries and convenience
stores. Piemans Pantry manufactures, sells and distributes quality meat,
vegetarian and fruit pies, both in the baked and frozen, unbaked form. Gull
Foods manufactures and sells a wide range of prepared food products. Gull's
product line includes over 150 products ranging from hamburger patties, prepared
sandwiches, salads, prepared pastas, pizzas, and flavored breads. Seemanns
manufactures, sells, and distributes a wide range of processed meat products
including products typically found in retail butcheries, as well as high margin
processed and smoked meat products. Astoria Bakery manufactures, sells and
distributes high margin specialty breads such as special rye breads from its
bakery in Randburg, South Africa. In addition, Astoria Bakery Lesotho
manufactures, sells and distributes staple bread to the Lesotho market, from its
bakers in Maseru, the capital of Lesotho. Fifers Bakery manufactures and
distributes high quality long life baked confectionary products and filo pastry.
SA Leisure, Republic Umbrella, Galactex and Tradewinds Parasol are
engaged in the manufacture and distribution of a variety of indoor and outdoor
consumer products. Each of our indoor and outdoor consumer products companies is
characterized by a focus on providing a broad spectrum of products to the South
African retail market, with an increasing emphasis on exports as well. We sell
to South Africa's leading retail chains. SA Leisure manufactures a wide range of
injection molded consumer items. SA Leisure's product line includes over 100
products ranging from injection molded household products such as containers,
waste and laundry baskets, garden chairs and tables, do-it-yourself tool kits
and luggage, as well as a range of office shelving and filing systems. Republic
Umbrella specializes in the assembly and distribution of a wide variety of
umbrellas and other related outdoor products. Republic Umbrella is the largest
distributor of SA Leisure products. Galactex Outdoor is the largest broad range
distributor of barbecues and barbecue accessories in South Africa, and is the
exclusive Southern Africa distributor of Weber-Stephen barbeque products. The
distribution agreement with
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Weber was entered into in 1984 and has been renewed until December 1999.
Tradewinds Parasol is South Africa's leading manufacturer of large outdoor
wooden parasols. Tradewinds Parasol is an export oriented producer and has
established an international reputation as a leading manufacturer of
high-quality canvas and wooden parasols.
We source our raw materials and products for all of our lifestyle
products businesses from both local and foreign suppliers. We have adequate
alternative suppliers and to date have had no difficulty obtaining adequate
supplies of all our requirements. Our specialty foods business is slightly
stronger in the months of July through October as well as December. However,
these increases are not significant enough to make it a seasonal business. Our
indoor and outdoor consumer products business is seasonal, with business
increasing significantly from September to January paralleling the South African
summer.
During fiscal year ended June 30, 1999, the following customers
accounted for approximately the following percentage of our sales revenue:
Woolworths, 15%; Pick n Pay, 11.5%; and Massmart, 10%. Our lifestyle products
businesses had revenues of approximately $84.9 million which accounted for
approximately 99% of our revenues for fiscal year ended June 30, 1999. Our
lifestyle products business had income from operations of approximately $7.7
million for fiscal 1999.
During fiscal year ended June 30, 1999, we decided to focus our
operations on our newly acquired online travel services business and our
lifestyle products businesses. In order to accomplish the foregoing, we have
disposed of or closed our operations in our industrial products and packaging
businesses, including L.S. Pressings, Europair and First Strut in the industrial
products business, and Starpak, Pacmatic and Pacforce in the packaging business.
GOVERNMENT REGULATION
Our South African specialty food and lifestyle product business
operations are subject to a number of laws and regulations governing the use and
disposition of hazardous substances, air and water pollution and other
activities that effect the environment. Our management believes that each of our
subsidiaries is in substantial compliance with applicable South African law and
regulations and that no violation of any such law or regulation has occurred
which would have a material adverse effect on our financial condition.
EMPLOYEES
In addition to our President, Clive Kabatznik, who devotes
substantially all of his business time to our various businesses, Leisureplanet
Holdings, Ltd. has only one full-time salaried employee. Our subsidiary, First
South African Holdings (Pty.) Ltd. has only three full-time salaried employees.
Our operating subsidiaries currently employ approximately 2,300 people. We
intend to add employees as necessary to meet management and other requirements
from time to time.
Our success will depend on our ability to attract and retain highly
qualified employees. We provide performance based and equity based compensation
programs to reward and motivate significant contributors among our employees.
Competition for qualified personnel in the industry is intense. There can be no
assurance that our current and planned staffing will be adequate to support our
future operations or that management will be able to hire, train, retain,
motivate, and manage required personnel. Although none of our employees is
represented by a labor union, there can be no assurance that our employees will
not join or form a labor union. We have not experienced any work stoppages and
consider our relations with our employees to be good.
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ITEM 2. PROPERTIES
Our principal executive offices are located at Clarendon House, Church
Street, Hamilton, HM CX, Bermuda, which space is made available to us pursuant
to a corporate services agreement entered into with a corporate services company
in Bermuda. The principal executive offices of First South African Holdings
(Pty.) Ltd. are located in the facilities of Galactex in South Africa.
LPI Limited, our online travel services subsidiary, has two offices,
one in Cape Town, South Africa and one in Hassrode, Belgium. Our web servers are
located in Atlanta, Georgia and Hassrode, Belgium. Our lease in Cape Town covers
10,000 square feet, costs approximately $120,000 annually and expires in October
2004. Our lease in Hassrode, Belgium covers approximately 17,750 square feet,
costs approximately $230,000 annually and expires in April 2009.
Piemans Pantry operates from premises and facilities that it owns in
Krugersdorp, South Africa. The facility has two floors with a total size of
38,000 square feet.
Astoria Bakery leases approximately 20,000 square feet of space in
Randburg, South Africa for which it pays an annual rent of approximately
$100,000 pursuant to a lease expiring in 2006.
Seemanns Meat Products operates from premises and facilities that it
owns in Randburg, South Africa. These premises include a retail outlet and
comprise approximately 44,000 square feet.
Gull Foods operates from premises and facilities that it rents in
Bronkhorstspruit, South Africa. Such premises include approximately 52,000
square feet of space. Rental cost is approximately $62,000 per annum with a
lease term of five years expiring in June 2003.
Fifers Bakery leases approximately 18,840 square feet in Isando, South
Africa for which it pays an annual rent of approximately $288,000 pursuant to a
lease expiring in June 2006.
Republic Umbrella leases approximately 16,000 square feet in
Springfield Park, Kwa Zulu-Natal, South Africa for which it pays an annual rent
of approximately $322,000 pursuant to a lease expiring in November 2003.
Galactex Outdoor leases approximately 10,000 square feet in Route 24,
Meadowdale, Gauteng, South Africa for which it pays an annual rent of
approximately $131,000 pursuant to a lease expiring in September 2008.
SA Leisure operates out of an administration building in Gardens,
Gauteng, South Africa which it owns and which includes approximately 2,100
square feet of space. S.A. Leisure also operates out of a 30,000 square foot
leased facility in Isithebe, Kwa Zulu-Natal, South Africa for which it pays an
annual rent of approximately $361,000 pursuant to a lease expiring in October
2000.
Our United States subsidiary, First South Africa Management Corp., a
Delaware corporation incorporated in 1995, has its principal executive offices
at 1348 Washington Avenue, Suite 155, Miami, Florida 33139. The lease is on a
month to month basis and costs us approximately $2,500 per year.
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ITEM 3. LEGAL PROCEEDINGS
Neither we nor any of our subsidiaries is subject to any material legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On April 29, 1999, we held our annual meeting of shareholders. At the
annual meeting, our shareholders elected four directors to serve until the next
annual meeting and until their respective successors are elected and qualified.
At the annual meeting, our shareholders also approved a change in our corporate
name from First South Africa Corp., Ltd. to Leisureplanet Holdings, Ltd and
approved the appointment of PricewaterhouseCoopers Inc as our independent public
accountants. The votes for directors were as follows:
Votes
-------------------------------------
For Withheld
--------- --------
Michael Levy 8,341,711 7,600
Clive Kabatznik 8,341,711 7,600
Cornelius Roodt 8,341,711 7,600
George Garrick 8,341,711 7,600
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The votes with respect to our name change were as follows:
For Against Abstain
- --------------- -------------- --------------
8,336,511 12,800 -0-
The votes with respect to the appointment of our independent public accountants
were as follows:
For Against Abstain
- --------------- -------------- --------------
8,338,843 8,468 2,000
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock is listed for quotation on the National Market on the
Nasdaq System under the symbol LPHL. Our units, redeemable Class A warrants and
redeemable Class B warrants are listed for quotation on the Nasdaq SmallCap
Market under the symbols LPHLU, LPHLW and LPHLZ, respectively. The following
table sets forth, for the periods indicated the high and low closing sales
prices for our common stock, units, redeemable Class A warrants and redeemable
Class B warrants as reported by Nasdaq.
High Low
---- ---
Common Stock
Fiscal 1998
1st Quarter.........................................$8.875 $7.125
2nd Quarter.........................................$9.00 $6.00
3rd Quarter.........................................$7.6875 $5.50
4th Quarter.........................................$8.55 $4.00
Fiscal 1999
1st Quarter.........................................$4.75 $.75
2nd Quarter.........................................$1.6875 $.75
3rd Quarter.........................................$3.25 $1.3125
4th Quarter.........................................$11.875 $1.1875
Fiscal 2000
1st Quarter (through September 17, 1999)............$7.9375 $3.625
Units
Fiscal 1998
1st Quarter.........................................$14.625 $10.00
2nd Quarter.........................................$14.75 $8.625
3rd Quarter.........................................$14.50 $8.25
4th Quarter.........................................$14.00 $6.50
Fiscal 1999
1st Quarter.........................................$8.75 $1.25
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High Low
---- ---
2nd Quarter.........................................$2.625 $.75
3rd Quarter.........................................$5.25 $1.00
4th Quarter.........................................$23.5 $2.50
Fiscal 2000
1st Quarter (through September 17, 1999)............$15.00 $7.00
Class A Warrants
Fiscal 1998
1st Quarter.........................................$4.00 $2.00
2nd Quarter.........................................$4.0625 $1.9375
3rd Quarter.........................................$3.40625 $1.75
4th Quarter.........................................$3.6875 $1.03125
Fiscal 1999
1st Quarter.........................................$1.375 $.375
2nd Quarter.........................................$0.625 $0.0625
3rd Quarter.........................................$0.75 $0.0625
4th Quarter.........................................$9.00 $0.4375
Fiscal 2000
1st Quarter (through September 17, 1999)............$4.75 $2.00
Class B Warrants
Fiscal 1998
1st Quarter.........................................$1.9375 $1.00
2nd Quarter.........................................$1.9375 $1.25
3rd Quarter.........................................$1.625 $1.25
4th Quarter.........................................$1.8125 $.9375
Fiscal 1999
1st Quarter.........................................$1.125 $0.625
2nd Quarter.........................................$0.625 $0.125
3rd Quarter.........................................$0.625 $0.125
4th Quarter.........................................$0.3125 $0.125
Fiscal 2000
1st Quarter (through September 17, 1999)............$2.00 $.75
As of September 17, 1999, there were approximately 29 holders of our
common stock, exclusive of holders whose shares were held by brokerage firms,
depositaries and other institutional firms in "street name" for their customers.
As of September 17, 1999, there were approximately 8 holders of our Class A
warrants and 5 holders of our Class B warrants.
We have never declared or paid any cash dividends on our common stock
or our Class B common stock. We do not intend to declare or pay any dividends on
our common stock or our Class B common stock in the foreseeable future. We
currently intend to retain future earnings, if any, to finance the expansion of
our business.
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In connection with our agreement with InfoSpace.com, Inc., on June 30,
1999, we issued a warrant to purchase 720,000 shares of our common stock at an
exercise price of $.01 which warrant will vest in six consecutive quarters.
ITEM 6. SELECTED FINANCIAL DATA
SELECTED CONDENSED COMBINED FINANCIAL DATA
The results of our predecessor set forth below represent the combined
results of Starpak and L.S. Pressings, which are deemed to be our predecessor
due to the common ownership and control of such entities. The data presented for
Starpak and L.S. Pressings was derived from the combined audited financial
statements of such entities. We disposed of each of Starpak and L.S. Pressings
during fiscal year ended June 30, 1999.
The results from March 1, 1995 to June 30, 1995 represent unaudited
financial data, which data, in the opinion of management, contains all
adjustments, consisting only of normal and recurring adjustments, necessary for
a fair presentation. The results of such interim period are not necessarily
indicative of the results of a full year.
Our net income after tax for the fiscal year ended June 30, 1997
includes a net gain of $3,327,478 on the sale of our investment in First SA Food
Holdings, Ltd., as well as a minority interest of $135,224.
Our net income after tax for the fiscal year ended June 30, 1998
includes a net gain of $2,608,834 on the sale of our investment in First SA Food
Holdings, Ltd., as well as a minority interest of $2,016,791.
Our net loss after tax for the fiscal year ended June 30, 1999 includes
a net gain of $701,913 on the sale of our investment in First Lifestyle Holdings
Limited, formerly known as First SA Food Holdings Limited, and a net loss on
disposal of First SA Lifestyle Holdings Limited of $409,040. First SA Lifestyle
Holdings Limited was sold to First Lifestyle Holdings Limited during the fiscal
year ended June 30, 1999. The minority shareholders' interest for such fiscal
year amounted to $3,292,802.
All of the financial data set forth below should be read in conjunction
with the information appearing under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
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<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS DATA PREDECESSOR LEISUREPLANET HOLDINGS, LTD.
YEARS ENDED MARCH 1 TO YEARS ENDED JUNE 30,
FEBRUARY 28, JUNE 30,
1995 1995 1996 1997 1998 1999
$ $ $ $ $ $
<S> <C> <C> <C> <C> <C> <C>
Revenues - - 1,570,888 41,885,913 82,759,698 85,108,795
Total operating expenses - - (8,198,079) (38,559,968) (75,328,804) (86,806,538)
Operating (loss)/income - - (6,627,191) 3,325,945 7,430,894 (1,697,743)
Interest (expense)/income - - (351,793) 26,016 98,458 (1,298,438)
Net (loss)/income before tax and
minority interests from
continuing operations - - (6,965,556) 7,149,970 10,609,251 (1,302,630)
Net (loss)/income from
continuing operations (222,558) (145,216) (6,743,363) 5,832,922 6,022,885 (7,298,238)
(Loss)/gain from discontinued
operations 536,440 359,045 1,005,803 850,243 (2,178,473) (2,433,939)
Net (loss)/income after tax 313,882 213,829 (5,737,560) 6,683,165 3,844,412 (9,732,177)
(Loss)/income per share (Basic)
- - from continuing operations ($0.40) ($0.26) ($3.56) $1.13 $0.94 ($1.11)
(Loss)/income per share
(Diluted)-from continuing ($0.40) ($0.26) ($3.56) $1.07 $0.80 ($1.11)
operations
</TABLE>
<TABLE>
<CAPTION>
PREDECESSOR LEISUREPLANET HOLDINGS, LTD.
BALANCE SHEET DATA FEBRUARY 28, JUNE 30,
1995 1996 1997 1998 1999
$ $ $ $ $
<S> <C> <C> <C> <C> <C>
Total assets 5,161,709 23,604,994 64,197,149 89,561,459 102,903,830
Long term liabilities 1,123,665 2,361,372 13,341,758 29,507,926 33,598,244
Net working capital 1,366,602 4,624,417 25,357,584 25,648,684 28,278,287
Stockholders'equity 1,828,656 12,792,376 23,220,014 17,299,673 5,254,902
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
BACKGROUND AND HISTORY
Leisureplanet Holdings, Ltd. (formerly known as First South Africa
Corp., Ltd.) was incorporated in September 1995 with the intention of actively
pursuing acquisitions fitting a pre-defined investment strategy. Prior to our
acquisition of LPI Limited, an online travel services company, in February 1999,
the broad strategy followed by us in all of our investment decisions was as
follows:
o Turnover must be within the range of $5 million - $50 million;
o Net income must yield a sustainable above average return on investment;
o Growth in turnover must be above average and must be sustainable over the
medium term; and
o The target must operate in one of the pre-defined industry sectors identified
by management.
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We currently hold, through our South African subsidiary, First South
African Holdings (Pty.) Ltd., nine South African subsidiaries which met the
acquisition criteria identified above. In addition, in February 1999, we
acquired an 81% stake in LPI Limited, an online travel services company. Also,
during fiscal 1999, we disposed of our interests in the industrial products and
packaging industry segments. Our remaining subsidiaries are listed below and are
engaged in the following industry segments:
INTERNET AND E-COMMERCE RELATED BUSINESSES
o LPI Limited
LIFESTYLE PRODUCTS
FOOD DIVISION
o Piemans Pantry
o Astoria Bakery
o Seemanns Meat Products
o Gull Foods
o Fifers Bakery
LEISURE DIVISION
o SA Leisure
o Galactex
o Republic Umbrella
o Tradewinds Parasol
SOUTH AFRICAN OPERATIONS
As our results are reported in US Dollars, but our revenues are
primarily generated in South African Rand, the South African inflation rate and
the depreciation of the South African Rand against the US Dollar are important
to an understanding of our results. In broad terms, if the depreciation of the
South African Rand against the US Dollar is in excess of the South African
inflation rate, then we would need to generate South African revenue in excess
of the South African inflation rate to maintain U.S. Dollar parity. The average
rate for the South African Rand against the US Dollar for the periods presented
in this report are as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, 1999 JUNE 30, 1998 JUNE 30, 1997
<S> <C> <C> <C>
Rate of exchange vs $1 6.05 4.97 4.53
Depreciation 21.7% 9.7% 17.7%
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, 1999 JUNE 30, 1998 JUNE 30, 1997
South African Rand annual rate of inflation 4.9% 7.2% 8.8%
RESULTS OF OPERATIONS
</TABLE>
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FISCAL 1999 COMPARED TO FISCAL 1998
REVENUES. Revenues increased by $2.3 million, or 2.8%, from $82.8
million in fiscal 1998 to $85.1 million in fiscal 1999. Our revenues for fiscal
1999 are disclosed net of rebates, discounts and allowances of $4.7 million,
which amounts were not accounted for in the previous years due to the lack of
adequate information. Our increase in revenues resulted primarily from growth in
revenues in our lifestyle business segment, which grew by 2.4% in U.S. Dollar
terms, representing a growth in South African Rand of 24%, which is
significantly better than inflation. The increase is also attributable to the
fact that our fiscal 1998 revenues only include the leisure division of our
lifestyle products business for a nine month period. Finally, fiscal 1999 has
also seen an increase in exports of South African manufactured products to
European and American destinations.
COST OF GOODS SOLD. Cost of goods sold increased as a percentage of
revenues from 54% to 69%. This increase primarily resulted from the
reclassification of certain manufacturing overhead costs to cost of goods sold
during fiscal 1999. Two of our lifestyle products subsidiaries, one in the
leisure division and one in the food division, experienced difficulties arising
from poor inventory control during fiscal 1999, resulting in a significant
charge to cost of goods sold. The percentage of cost of goods sold to revenues
for fiscal 1999 was increased by the reduction of revenues for rebates,
discounts and allowances of $4.7 million, discussed above. Cost of goods sold as
a percentage of revenues for fiscal 1999 excluding this reduction amounts to
66%.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased by $3.6 million, or 13%, from $27.6 million
during fiscal 1998 to $24.0 million during fiscal 1999. This decrease takes into
account the selling, general and administrative expenses of our online travel
services business. This decrease is primarily attributable to the set off of
rebates, discounts and allowances against revenues, discussed above.
AMORTIZATION OF INTANGIBLES. Amortization of intangibles increased from
$1.0 million in fiscal 1998 to $1.5 million in fiscal 1999. This increase is due
primarily to the fact that the additional purchase price payments incurred under
various of our acquisition agreements have been allocated to intangibles and
therefore have been amortized.
DEPRECIATION. Depreciation increased from $1.7 million in fiscal 1998
to $2.1 million in fiscal 1999. This increase is due primarily to the fact that
we made various additions to property, plant and equipment in our lifestyle
products business to promote our growth. In addition, our fiscal 1999 numbers
include the leisure division of our lifestyle products business for 12 months,
while our fiscal 1998 numbers only include our leisure division for 9 months.
FOREIGN CURRENCY LOSS. Foreign currency loss decreased from $415,000 in
fiscal 1998 to $282,000 in fiscal 1999. This decrease is due primarily to a
lower depreciation of the South African Rand against the U.S.
Dollar during fiscal 1999 than during fiscal 1998.
GAIN ON DISPOSAL OF SUBSIDIARY STOCK. Gain on disposal of subsidiary
stock decreased from $2.6 million in fiscal 1998 to $702,000 in fiscal 1999.
This decrease is due primarily to the fact that we realized lower proceeds from
the sale of shares in our subsidiaries due to the depressed state of the South
African market
-23-
<PAGE>
in fiscal 1999, and the fact that the shares of our subsidiary which we sold
during fiscal 1999 had a higher carrying cost than those sold during fiscal
1998.
OTHER INCOME. Other income increased from $471,000 in fiscal 1998 to
$992,000 in fiscal 1999. This increase is due primarily to the fact that our
fiscal 1999 numbers include the leisure division of our lifestyle products
business for 12 months, while our fiscal 1998 numbers only include our leisure
division for 9 months.
INTEREST EXPENSE. Interest expense increased from net interest income
of $98,000 in fiscal 1998 to net interest expense of $1.3 million in fiscal
1999. This increase was primarily due to the establishment of a capital
redemption reserve fund during the fiscal 1999 for our outstanding increasing
rate debentures, combined with the redemption of various debentures during
fiscal 1999, each of which utilized a substantial portion of our surplus
reserves and caused a reduction in interest income earned on our reserves. The
reserve fund was established because the increasing rate debentures are required
to be redeemed at a premium if certain specified share prices are not attained.
In addition, we accrued interest expense on our increasing rate debentures for a
full year during fiscal 1999, compared to eight months in fiscal 1998.
PROVISION FOR TAXES ON INCOME. Our income tax provision decreased from
$2.6 million in fiscal 1998 to $2.2 million in fiscal 1999. This decrease was
primarily due to a decrease in the South African tax rate from 35% to 30% during
fiscal 1999.
LOSS FROM DISCONTINUED OPERATIONS. Our loss from discontinued
operations increased from $2.2 million in fiscal 1998 to $2.4 million in fiscal
1999. Our loss in fiscal 1999 resulted from the discontinuance of our industrial
products and packaging business segments. We decided to discontinue these
segments since their performance was below average.
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY COMPANIES. The minority
interest in our subsidiaries increased from $2.0 million in fiscal 1998 to $3.3
million in fiscal 1999. This increase was primarily due to a decrease in our
share holdings of First Lifestyle Holdings Limited during fiscal 1999 from 67%
to approximately 51.5%.
PREFERENCE DIVIDEND DECLARED. During fiscal 1999, our South African
subsidiary, First South African Holdings (Pty.) Ltd., declared a preferred
dividend of $496,000. No such dividend was declared or paid during fiscal 1998.
This dividend was declared for the benefit of the holders of preferred stock of
First South African Holdings (Pty.) Ltd. The preferred stock was issued during
fiscal 1999 to fund our acquisition of LPI Limited.
NET (LOSS)/ INCOME. As a result of the above, we achieved a loss of
$9.7 million as compared to a profit of $3.8 in fiscal 1998.
FISCAL 1998 COMPARED TO FISCAL 1997
REVENUES. Revenues for the fiscal 1998 increased $40.9 million, or 98%,
from $41.9 million to $82.8 million. This increase is primarily attributable to
the acquisition of various companies making up the leisure division, and the
acquisition of two companies in the food division. The sales from these
companies for fiscal 1998 total $30.8 million.
-24-
<PAGE>
COST OF SALES. Cost of goods sold for fiscal 1998 increased to 53.8% of
revenues from 53.6% of revenues for the comparative period in the prior year.
SELLING, GENERAL AND ADMINISTRATIVE COSTS. Selling, general and
administrative costs of $27.6 million for fiscal 1998 has increased from $14.7
million for the comparative period in fiscal 1997. This increase is due to the
addition of the leisure division companies and two additional food subsidiaries
during the 1998 fiscal year.
GAIN ON DISPOSAL OF SUBSIDIARY STOCK ON DISPOSAL OF SUBSIDIARY STOCK.
The gain on disposal of subsidiary stock decreased to $2.6 million from $3.3
million. During fiscal 1998, 3.2% of our investment in First SA Food Holdings
Limited shares was sold to minorities, realizing a profit of $2.6 million. In
fiscal 1997, the profit was realized on the disposal of an effective 30%
interest in First SA Food Holdings Limited.
INTEREST EXPENSE. Interest income of $98,000 has increased from $26,000
for the comparative period in fiscal 1997. Interest for fiscal 1998 consists
primarily of interest income earned on cash balances and surplus funds in the
processed foods business.
PROVISION FOR TAXES ON INCOME. Our income tax provision increased from
$1.2 million in fiscal 1997 to $2.6 million in fiscal 1998. This increase was
due primarily to an increase in the effective corporate tax rate from 16.5% to
24.2%, combined with an increase in taxable income while maintaining a relative
constant base of non-taxable income in US Dollar terms.
LOSS FROM DISCONTINUED OPERATIONS. The discontinued industry segments
contributed income of $850,000 during fiscal 1997, compared to a loss of $2.2
million in fiscal 1998. The loss in fiscal 1998 was primarily due to the
acquisition of a loss generating subsidiary which we were unable to make
profitable.
NET INCOME. Net income of $3.9 million has decreased from $6.7 million,
a decrease of 42.5% over the comparative period in fiscal 1997. The decrease is
primarily attributable to the factors set forth above combined with a general
depreciation of the South African Rand against the US Dollar during fiscal 1998.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Our cash increased $2.9 million to $20.8 million at June 30, 1999, from
$17.9 million at June 30, 1998. This increase was due primarily to funds raised
on the issuance of preferred shares of our South African subsidiary, First South
African Holdings (Pty.) Ltd., and the discontinuance of the industrial products
and packaging businesses, which were largely cash negative.
Our working capital increased $2.6 million to $28.3 million at June 30,
1999 from $25.7 million at June 30, 1998. The working capital increase was due
primarily to an increase in other current assets and a decrease in trade
accounts payable and other payables.
At June 30, 1999, we had $36.7 million in borrowings, an increase from
$31.8 million at June 30, 1998. Our borrowings at June 30, 1999 include $10
million owed to the minority shareholder of our on-line travel services
subsidiary, LPI Limited. Excluding the amount owing to the minority shareholder
of LPI Limited, we reduced our borrowings by $5.1 million during fiscal 1999. We
did so by redeeming approximately 55% of our 9% convertible debentures and
through the normal repayment of other loan funds.
-25-
<PAGE>
Our operations for fiscal 1999, excluding non-cash charges, resulted in
the net utilization of cash of $4.6 million. That cash was used primarily to
fund our online travel services business. Investing activities resulted in the
net utilization of an additional $5.9 million of cash during fiscal 1999,
including the acquisition of property, plant and equipment of $6.0 million,
additional purchase price payments of $3.6 million and the acquisition of LPI
Limited for $2.4 million. Our investing activities were financed primarily by
the disposal of an additional 8.9% of our ownership of First Lifestyle Holdings
Limited for $5.7 million and the issuance of mandatory redeemable preferred
shares of our South African subsidiary, First South African Holdings (Pty.)
Ltd., for $9.9 million. Net cash provided from financing activities amounted to
$9.8 million in fiscal 1999, which was primarily raised by the issuance of
preferred shares in our South African subsidiary, First South African Holdings
(Pty.) Ltd. for $9.9 million.
FUTURE COMMITMENTS
Under the various acquisition agreements we entered into acquiring
certain of our businesses, we anticipate spending approximately $750,000 in cash
on contingent payments over the next 12 months, as well as approximately
$600,000 in stock. We anticipate that our cash on hand at June 30, 1999 and our
operating cash flows will be sufficient to fully fund these payments. We also
anticipate that any longer term contingent acquisition payments will be funded
out of operating cash flows of our acquired entities.
Our operating subsidiaries generally collect their receivable within
65-90 days and reserve approximately 5% for doubtful accounts. Historically, our
operating and capital needs have been met by internal cash flow and outside bank
borrowing. We anticipate that capital expenditures for the foreseeable future
can continue to be met by internal cash flow and bank borrowing. Our operating
subsidiaries engage in certain foreign exchange contracts with respect to
certain overseas purchases in order to lock in a specified exchange rate.
Due to the nature and stage of growth of our online travel services
business, our online travel services subsidiary, LPI Limited, incurs operational
losses of approximately $1.0 million per month with minimal revenues. These
costs are expected to increase over the coming months. For example, under
certain of our strategic agreements such as Lycos, Yahoo!, InfoSpace and Nomade,
we are required to make payments aggregating approximately $6 million over the
next 12 months. We anticipate paying for these expenses, as well as the
anticipated operating losses of our online travel services business, through
equity financing and/or additional indebtedness. However, there is no assurance
that we will be able to raise any additional equity financing or incur
additional indebtedness.
We intend to continue to pursue an aggressive acquisition strategy of
Internet related businesses and in South Africa. We anticipate utilizing a
substantial portion of our excess cash balances and operating cash flows to fund
this strategy to the extent that suitable acquisition candidates can be
identified. In addition, we may be required to incur additional indebtedness or
raise equity financing in connection with future acquisitions. There is no
assurance that we will be able to incur additional indebtedness or raise
additional equity to finance future acquisitions on acceptable terms, if at all.
RECENTLY ISSUED FINANCIAL STANDARDS
We believe that recently issued financial standards will not have a
significant impact on our results of operations, financial position or cash
flows.
-26-
<PAGE>
YEAR 2000
Many currently installed computer systems and software products are
coded to accept or recognize only two digit entries in the date code field.
These systems and software products will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. As a result, computer
systems and/or software used by many companies and governmental agencies may
need to be upgraded to comply with such Year 2000 requirements or risk system
failure or miscalculations causing disruptions of normal business activities.
We made a preliminary assessment of the Year 2000 readiness of our
operating, financial and administrative systems, including the hardware and
software that comprise our systems. Based on our preliminary assessment, we
believe that the significant risk that faces us regarding the Year 2000
readiness of our systems relates to the Year 2000 compliance of our utility
suppliers, major suppliers, customers, and bankers. We are currently confirming
the Year 2000 compliance of each of the foregoing. Based on the responses we
have received, we believe that our risks have been adequately addressed. In
addition, where possible, we have identified alternative sources of supply where
available. However, certain of our existing suppliers are sole suppliers. In
addition, there can be no assurance that such third party systems will be Year
2000 compliant. A failure to be Year 2000 compliant could result in lost
revenues, increased costs or loss of customers and other business interruptions,
all of which could have a material adverse effect on our business, financial
condition and results of operations.
The costs incurred by us to date on Year 2000 readiness have typically
been to replace aging hardware and to upgrade existing purchased software. In
each case where upgraded software was required, the upgrade was available from
software suppliers and those suppliers certified Year 2000 compliance of such
software. Our costs incurred to date have not been material. However, there can
be no guarantee that the costs to be incurred will not be material should a
significant Year 2000 compliance problem be subsequently discovered.
We are developing a contingency plan which will ensure that the
production and distribution and the recording of transactions will continue
should we have a significant Year 2000 compliance problem. For example, we are
able to temporarily support a manual recording keeping system should our IT
system fail. However, we cannot guarantee that our contingency plans will be
sufficient to prevent significant disruption.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We do not ordinarily hold market risk sensitive instruments for trading
purposes. We do however recognize market risk from interest rate, foreign
currency exchange and commodity price exposure.
INTEREST RATE RISK
At June 30, 1999, approximately $4.3 million of our long term debt,
specifically the borrowings in First Lifestyle Holdings Limited, was subject to
interest at variable rates. Similarly, our cash resources earn interest at
variable rates. Accordingly, our net income and after tax cash flows are
affected by fluctuations in interest rates. Assuming the current level of cash
resources and borrowings at variable interest rates and assuming a two
percentage point decrease in the average interest rate under these borrowings
and cash resources, it is estimated that the net effect on interest would be a
reduction in interest earned of $330,000, resulting in a reduction in our net
income and after tax cash flow of $231,000. Any adverse changes in interest
rates would likely result in our taking action to mitigate our exposure.
However, due to the uncertainty of the actions that we would take and
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<PAGE>
their possible effects, this analysis assumes no action is taken. There can be
no assurance that decreases or increases in interest rates will not exceed
possible projections.
FOREIGN CURRENCY RISK
Our primary operations are based in South Africa and most of our
economic activity is denominated in South African Rands. This exposes us to
market risk with respect to fluctuations in the relative value of the South
African Rand against the US Dollar. Certain of this risk is covered through our
purchase of foreign exchange contracts.
COMMODITY PRICE RISK
The lifestyle products segment of our business makes use of several
commodity products.
PROCESSED FOODS
The main ingredient in many of our processed food products includes raw
produce such as meat, potatoes, vegetables and other staple products. These food
groups are commodities whose prices are largely dependent on supply and demand.
The supply of these products is also dependent on environmental factors such as
weather conditions and rainfall patterns. While these price fluctuations will
impact on the input cost of the products produced, these are not expected to
have a material impact on our profitability due to the pass through of commodity
price increases to customers.
LEISURE PRODUCTS
The leisure products side of our business make use of processed raw
materials such as polypropylene, as well as natural resources such as timber.
The price of polypropylene is determined on an import parity basis in South
Africa, which means that worldwide surpluses and shortages are factored into the
product pricing. This results in fluctuations of the price of this material from
time to time. These price fluctuations impact on the per unit input cost of the
products produced. We, therefore, mitigate this risk by entering into pricing
agreements with suppliers to limit the effects of any adverse movements in the
commodity price.
Timber as a natural resource is subject to sustainability requirements
and is also dependent on environmental factors such as weather conditions and
rainfall patterns. The price of timber may fluctuate depending on supply and
demand which has an impact on the input price of our products produced. In order
to mitigate this risk we enter into supply arrangements with suppliers wherever
possible, including arrangements covering pricing terms. In addition, raw
material input prices may be passed onto customers where the factors governing
such price fluctuations are outside of our control.
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<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
LEISURE PLANET HOLDINGS LIMITED
Report of the Independent Auditors
Consolidated Balance Sheets at June 30, 1999 and 1998
Consolidated Statements of (Loss)/Income and Comprehensive
(Loss)/Income for the years ended June 30, 1999, 1998 and 1997
Consolidated Statements of Cash Flows for the years ended June
30, 1999, 1998 and 1997
Consolidated Statement of Changes in Stockholders' Investment for
the period June 30, 1996 to June 30, 1999
Notes to the Consolidated Financial Statements for the years
ended June 30, 1999, 1998 and 1997
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<PAGE>
LEISUREPLANET HOLDINGS, LIMITED
REPORT OF THE INDEPENDENT AUDITORS
To the Board of Directors
of Leisure Planet Holdings Limited
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of (loss)/income and comprehensive (loss)/income, of
cash flows and of changes in stockholders' investment after the restatement
described in note 12, present fairly, in all material respects, the financial
position of Leisure Planet Holdings Limited and its subsidiaries at June 30,
1999 and 1998, and the results of their operations and their cash flows for each
of the three years in the period ended June 30, 1999 in conformity with
generally accepted accounting principles in the United States. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards in the United States which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
/s/ PricewaterhouseCoopers Inc
- ------------------------------------
PricewaterhouseCoopers Inc
Registered Accountants and Auditors
Chartered Accountants (SA)
Sandton, South Africa
October 12, 1999
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<PAGE>
LEISURE PLANET HOLDINGS LIMITED
CONSOLIDATED BALANCE SHEETS
ASSETS
JUNE 30, JUNE 30,
1999 1998
RESTATED
$ $
CURRENT ASSETS
Cash on hand 20,813,301 17,948,991
Trade accounts receivable 13,388,561 16,871,292
Less: Allowances for bad debts (443,172) (833,785)
----------- -----------
12,945,389 16,037,507
Inventories (net) 9,152,575 11,742,613
Prepaid expenses and other current assets 5,236,587 1,711,428
Deferred income taxes 539,884 377,738
----------- -----------
TOTAL CURRENT ASSETS 48,687,736 47,818,277
Property, plant and equipment 30,777,399 31,410,837
Less: Accumulated depreciation (11,488,982) (11,423,572)
----------- -----------
19,288,417 19,987,265
Intangible assets (net) 34,024,745 20,045,983
Deferred charges (net) 868,944 1,448,199
Other assets 33,988 261,735
----------- -----------
102,903,830 89,561,459
=========== ==========
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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<PAGE>
LEISURE PLANET HOLDINGS LIMITED
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' INVESTMENT
<TABLE>
<CAPTION>
JUNE 30,
JUNE 30, 1998
1999 RESTATED
$ $
<S> <C> <C>
CURRENT LIABILITIES
Bank overdraft payable - 2,787,965
Current portion of long term debt 3,088,435 2,256,275
Trade accounts payable 9,058,811 9,205,092
Other provisions and accruals 4,618,283 4,506,770
Dividends payable 1,870,959 558,185
Other taxes payable 558,669 1,064,432
Income taxes payable 1,214,292 1,790,874
----------- ---------
TOTAL CURRENT LIABILITIES 20,409,449 22,169,593
Long term debt 33,598,244 29,507,926
Deferred income taxes 1,551,724 907,143
---------- ------------
55,559,417 52,584,662
---------- ----------
Minority stockholders' investment 32,198,314 19,677,124
FSAH mandatory redeemable preferred stock 9,891,197 -
STOCKHOLDERS' INVESTMENT
Capital stock:
A class common stock, $0.01 par value - authorized 23,000,000 shares,
issued
and outstanding 5,383,142 shares (1998: 5,649,224 shares) 53,832 56,492
B class common stock, $0.01 par value - authorized 2,000,000 shares, issued
and
outstanding 946,589 shares (1998: 1,822,500 shares) 9,466 18,225
FSAH B class common stock, R0,001 par value - authorized 10,000,000 shares,
issued and outstanding 2,550,466 shares (1998: 2,307,782 shares) 580 537
Preferred stock, $0.01 par value - authorized 5,000,000 shares, issued and
outstanding nil shares - -
Capital in excess of par 22,971,261 28,288,404
Retained (loss)/earnings (3,084,700) 6,647,477
---------- -----------
19,950,439 35,011,135
Foreign currency translation adjustments (14,695,537) (17,711,462)
------------ -----------
5,254,902 17,299,673
----------- ----------
102,903,830 89,561,459
=========== ==========
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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<PAGE>
LEISUREPLANET HOLDINGS, LTD.
CONSOLIDATED STATEMENTS OF (LOSS)/INCOME AND
COMPREHENSIVE (LOSS)/INCOME
<TABLE>
<CAPTION>
YEAR ENDED
YEAR ENDED JUNE 30, YEAR ENDED
JUNE 30, 1998 JUNE 30,
1999 RESTATED 1997
$ $ $
<S> <C> <C> <C>
Revenues 85,108,795 82,759,698 41,885,913
---------- ---------- ----------
Operating expenses
Cost of sales 58,874,284 44,525,217 22,438,793
Selling, general and administrative costs 24,038,714 27,606,151 14,651,996
Amortization of intangibles 1,515,773 1,042,263 371,635
Depreciation 2,095,416 1,739,952 1,097,544
Foreign currency loss 282,351 415,221 -
---------- ---------- ----------
86,806,538 75,328,804 38,559,968
---------- ---------- ----------
Operating (loss)/income (1,697,743) 7,430,894 3,325,945
Gain on disposal of subsidiary stock 701,913 2,608,834 3,327,478
Other income 991,638 471,065 468,531
Interest (expense)/income (1,298,438) 98,458 26,016
---------- ---------- ----------
(Loss)/income from consolidated companies before income taxes
and minority interests (1,302,630) 10,609,251 7,149,970
Provision for taxes on income (2,206,815) (2,570,111) (1,181,602)
---------- ---------- ----------
(Loss)/income from continuing operations before minority
interests and preference dividends (3,509,445) 8,039,140 5,966,368
Minority interest in consolidated subsidiary companies (3,292,802) (2,016,255) (133,446)
Preference dividend (495,991) - -
---------- ---------- ----------
(Loss)/income from continuing operations (7,298,238) 6,022,885 5,832,922
(Loss)/gain from discontinued operations (2,433,939) (2,178,473) 850,243
---------- ---------- ----------
Net (loss)/income (9,732,177) 3,844,412 6,683,165
Other comprehensive income/(loss):
Foreign currency translation adjustments 3,015,925 (15,183,266) (639,985)
----------- ------------ ----------
Comprehensive (loss)/income (6,716,252) (11,338,854) 6,043,180
=========== ============ =========
Basic (loss)/earnings per share from continuing operations ($1.11) $0.94 $1.13
Basic (loss)/earnings per share from discontinued operations ($0.37) ($0.34) $0.17
------- ------- -----
Total basic (loss)/earnings per share ($1.48) $0.60 $1.30
------- ----- -----
Diluted (loss)/earnings per share from continuing operations ($1.11)* $0.80 $1.07
Diluted (loss)/earnings per share from discontinued operations ($0.37)* ($0.23) $0.15
-------- ------- -----
Total diluted (loss)/earnings per share ($1.48)* $0.57 $1.22
-------- ----- -----
* Additional shares were not considered as the result would be anti-dilutive
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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<PAGE>
LEISURE PLANET HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30,
1999 1998 1997
RESTATED
$ $ $
<S> <C> <C> <C>>
Cash flows from operating activities:
Net (loss)/income (9,732,177) 3,844,412 6,683,165
Loss/(income) from discontinued operations 2,433,939 2,178,473 (850,243)
----------- --------- ----------
(Loss)/income from continuing operations (7,298,238) 6,022,885 5,832,922
Adjustments to reconcile (loss)/income to net cash
(utilized)/generated by operating activities:
Depreciation and amortization 3,611,189 2,782,215 1,469,179
Deferred income taxes 506,679 255,637 349,543
Net loss/(gain) on sale of assets 303,752 (200,408) (198,473)
Net gain on sale of investment in subsidiaries (701,913) (2,608,834) (3,327,478)
Net loss/(gain) on minority shares issued in First
Lifestyle Holdings Limited 409,040 (557) -
Vendor earnout settlement (4,527,209) - -
Effect of changes in current assets and current 421,084
liabilities 1,855,235 (2,922,764)
Minority interest in consolidated subsidiary companies 3,292,802 2,016,255 133,446
FSAH preference dividends declared 495,991 - -
Change in minorities on capitalization dividend (1,076,804) - -
Creation of debenture redemption reserve fund 843,750 562,500 -
Loss on other assets 362,090 - -
----------- ---------------- -----------------
Net cash (utilized)/generated by continuing operating activities (1,923,636) 9,250,777 1,336,375
Net cash (utilized)/generated by discontinued operations (2,686,810) (1,321,483) 1,394,196
-----------
Net cash (utilized)/generated by operating activities (4,610,446) 7,929,294 2,730,571
----------- --------- ---------
Cash flows from investing activities:
Proceeds on disposal of investment in First Lifestyle
Holdings Limited 5,712,671 4,358,027 16,479,827
Proceeds on disposal of discontinued operations 91,718 - -
Proceeds on minority shares issued in First SA Food
Holdings Limited - 6,054 -
Additional shares in First Lifestyle Holdings Limited
acquired (143,025) - -
Additional intangibles acquired (177,398) - -
Additions to property, plant and equipment (5,968,074) (5,346,671) (3,325,153)
Proceeds on disposal of property, plant and equipment 740,482 1,226,083 1,182,199
Additional purchase price payments (3,585,065) (5,410,628) (2,023,835)
Other assets acquired (171,322) (229,857) (42,676)
Decrease in loans to related companies - - 80,969
Acquisitions of subsidiaries (net of cash of $430,556, 1998:
$347,052, 1997: $985,410) (2,438,376) (17,881,676) (7,073,641)
----------- ------------ -----------
Net cash (used in)/realized by investing activities (5,938,389) (23,278,668) 5,277,690
----------- ------------ ---------
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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<PAGE>
LEISURE PLANET HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30,
1999 1998 1997
RESTATED
$ $ $
<S> <C> <C> <C>
Cash flows from financing activities:
Net (repayments)/borrowings in bank overdrafts
Borrowings in long term debt (21,690) 881,244 (1,155,094)
Redemption of debentures 1,116,733 12,559,148 10,601,298
Repayments of long term debt (2,630,134) - -
Increase in deferred debt issue costs - - (985,630)
Borrowings in short term debt - (875,910) (853,683)
Repayments of short term debt 863,246 1,065,271 689,682
Minority shareholders share of issue expenses - - (921,810)
FSAH preference dividends declared (34,689) (7,871) -
Proceeds on FSAH mandatory redeemable preferred (495,991) - -
stock issues
Proceeds on stock issues 9,891,197 - -
1,140,615 3,731,779 27,040
--------- --------- -----------
Net cash provided in financing activities 9,829,287 17,353,661 7,401,803
--------- ---------- ---------
Effect of exchange rate changes on cash 3,583,858 (3,944,407) (202,988)
--------- ----------- ------------
Cash generated/(utilized) by operations 2,864,310 (1,940,120) 15,207,076
Cash on hand at beginning of period 17,948,991 19,889,111 4,682,035
---------- ---------- -----------
Cash on hand at end of period 20,813,301 17,948,991 19,889,111
========== ========== ==========
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
-35-
<PAGE>
LEISURE PLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
Leisure Leisure
Planet Holdings Planet Holdings First South
Limited Limited African Holdings
A class common B class common B class Capital in
stock stock common excess of
stock par
$ $ $ $
<S> <C> <C> <C> <C>
Balance at June 30, 1996 22,000 19,425 276 18,518,986
Issuance of stock to FSAC escrow agent 11,915 - - -
Conversion of B class common stock to A class common stock 1,200 (1,200) -
Issuance of stock to acquire subsidiaries - - 190 4,357,228
Proceeds on warrants exercised 246 - - 159,879
Stock issue expenses written off - - - (145,000)
Net income for the year - - - -
Translation adjustment - - - -
Total comprehensive income - - - -
------------ ---------- ----- -----------------
Balance at June 30, 1997 35,361 18,225 466 22,891,093
Issuance of stock to FSAC escrow agent 3,863 - - -
Issuance of stock to acquire subsidiaries 1,429 - 19 1,685,282
Issuance of stock on additional purchase price payments - - 52 1,223,274
Proceeds on warrants exercised 2,339 - - 1,517,765
Proceeds on options exercised 350 - - 137,150
Warrant swap out at par value 11,738 - - (11,738)
Debenture conversion 1,412 - - 845,578
Net income for the year - - - -
Translation adjustment - - - -
Total comprehensive loss - - - -
------------- ------------- ----- -------------
Balance at June 30, 1998 56,492 18,225 537 28,288,404
Issuance of stock to FSAC escrow agent 2,434 - - (2,434)
Issuance on stock on additional purchase price payments - - 43 1,033,572
Conversion of 9% debentures to common stock 3,207 - - 1,732,895
Redemption and cancellation of stock from FSAC escrow agent (15,831) - - (7,117,517)
Redemption and cancellation of stock (1,429) - - (1,070,459)
Conversion of B class common stock to A class common stock 8,759 (8,759) - -
Options exercised 200 - - 106,800
Net loss for the year - - - -
Translation adjustment - - - -
Total comprehensive loss - - - -
--------- --------- ----- ---------------
Balance at June 30, 1999 53,832 9,466 580 22,971,261
====== ===== === ==========
</TABLE>
-36-
<PAGE>
<TABLE>
<CAPTION>
Other
comprehensive
(loss)
/income
(Foreign
currency
Retained translation
earnings adjustments) Total
$ $ $
<S> <C> <C> <C>
Balance at June 30, 1996 (3,880,100) (1,888,211) 12,792,376
Issuance of stock to FSAC escrow agent - - 11,915
Conversion of B class common stock
to A class common stock - - -
Issuance of stock to acquire subsidiaries - - 4,357,418
Proceeds on warrants exercised - - 160,125
Stock issue expenses written off - - (145,000)
Net income for the year 6,683,165
Translation adjustment (639,985)
Total comprehensive income 6,043,180
------------------ ---------------- ---------
Balance at June 30, 1997 2,803,065 (2,528,196) 23,220,014
Issuance of stock to FSAC escrow agent - - 3,863
Issuance of stock to acquire subsidiaries - - 1,686,730
Issuance of stock on additional purchase price payments - - 1,223,326
Proceeds on warrants exercised - - 1,520,104
Proceeds on options exercised - - 137,500
Warrant swap out at par value `- - -
Debenture conversion - - 846,990
Net income for the year 3,844,412
Translation adjustment (15,183,266)
Total comprehensive loss (11,338,854)
-------------------------------------- ------------
Balance at June 30, 1998 6,647,477 (17,711,462) 17,299,673
----------
Issuance of stock to FSAC escrow agent - - -
Issuance on stock on additional purchase price payments - - 1,033,615
Conversion of 9% debentures to common stock - - 1,736,102
Redemption and cancellation of stock from FSAC escrow agent ( - - (7,133,348)
Redemption and cancellation of stock - - (1,071,888)
Conversion of B class common stock to A class common stock - - -
Options exercised - - 107,000
Net loss for the year (9,732,177)
Translation adjustment 3,015,925
Total comprehensive loss (6,716,252)
---------------------------------- -----------
Balance at June 30, 1999 (3,084,700) (14,695,537) 5,254,902
=========== ============ =========
</TABLE>
-36A-
<PAGE>
LEISURE PLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
1. ORGANISATION AND PRINCIPAL ACTIVITIES OF THE GROUP
Leisure Planet Holdings Limited (formerly First South Africa Corp., Ltd.),
(the "Company") was founded on September 6, 1995. The purpose of the
Company is to acquire and operate South African companies.
The principal activities of the group include the following:
LIFESTYLE PRODUCTS
The manufacture, sale and distribution of lifestyle enhancing products,
which includes both consumable food products and semi durable outdoor and
indoor products.
INTERNET RELATED ACTIVITIES
The maintenance and provision of an Internet travel service to Internet
subscribers, providing the convenience of one stop travel planning with on
line booking and flexibility.
DISCONTINUED OPERATIONS
During the current year the Company disposed of its interests in the
packaging and industrial manufacturing sectors in an effort to concentrate
on its core competencies.
2. ACQUISITIONS AND DISPOSALS
The following subsidiaries/businesses acquired were accounted for using the
purchase method of accounting. The assets and liabilities were recorded at
fair market value as determined by management:
PURCHASE
PERCENTAGE PRICE
ACQUIRED CONSIDERATION
SUBSIDIARY/BUSINESS DATE ACQUIRED % $
Leisure Planet PLC January 1, 1999 81 2,868,932
-37-
<PAGE>
LEISURE PLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
2. ACQUISITIONS AND DISPOSALS (CONTINUED)
$
Acquisition costs
Cash consideration (net of cash acquired of $430,556) 2,438,376
Purchase price to be allocated
Summary allocation of purchase price
Current assets 224,907
Property, plant and equipment 307,168
Goodwill 11,416,020
----------
TOTAL ASSETS ACQUIRED 11,948,095
----------
Current liabilities (826,938)
Long term debt (8,682,781)
TOTAL LIABILITIES ASSUMED (9,509,719)
----------
2,438,37
-----------
The Company is required to make additional payments to the former
owners based on a multiple of pre tax earnings. These payments are to be made by
the issue of stock and cash over the next three years.
Additional purchase price payments made during the current year total
$3,585,065. This amount was allocated as follows:
$
Goodwill 673,623
Recipes 1,764,606
Trademarks 1,146,836
---------
3,585,065
---------
These additional purchase price payments were made and are to be made
as follows:
$
Cash 1,114,895
Shares issued in lieu of cash 977,233
Amount still to be settled 1,492,937
---------
3,585,065
---------
During the current year a decision was taken to discontinue the non-core
segments of the Company, resulting in the disposal of the packaging and
industrial manufacturing business segments. This will enable the Company to
concentrate on its core activities in the Lifestyle enhancing and Internet
travel related businesses.
-38-
<PAGE>
LEISURE PLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
2. ACQUISITIONS AND DISPOSALS (CONTINUED)
The following subsidiaries were disposed of by the Company:
<TABLE>
<CAPTION>
PROCEEDS
ON
SUBSIDIARY/BUSINESS DATE DISPOSED DISPOSAL
$
<S> <C> <C>
INDUSTRIAL MANUFACTURING SEGMENT
Humidair (Pty) Ltd July 1, 1998 58,824
First Strut (Pty) Ltd December 1, 1998 -
Europair Africa (Pty) Ltd March 1, 1999 -
LS Pressings (Pty) Ltd May 1, 1999 495,050
PACKAGING SEGMENT
Pakmatic Company (Pty) Ltd April 1, 1999 -
Starpak (Pty) Ltd April 1, 1999 -
Pacforce (Pty) Ltd - cessation of operations June 30, 1999 -
---------
TOTAL DISPOSAL CONSIDERATION 553,874
---------
</TABLE>
During the current year the Company disposed of its Leisure
interests housed in a separate subsidiary to a fellow subsidiary, First SA
Food Holdings Limited, which subsequently changed its name to First
Lifestyle Holdings Limited. The disposal was settled by the issue of
additional shares in First Lifestyle Holdings Limited at a determined value
of $10,342,000.
Where no disposal proceeds are recorded, the liabilities generally
exceeded the assets of the company concerned, with the exception of
Europair Africa and Pakmatic Company, where the vendors were required to
repay shareholders' loans back to the group.
$
Assets and liabilities disposed of:
Current assets (including cash of $462,156) 8,983,186
Property, plant and equipment 3,149,176
Goodwill 901,340
Other assets 124,057
------------
TOTAL ASSETS SOLD 13,157,759
Current liabilities (11,510,761)
Long term debt (1,839,722)
Deferred taxes (19,351)
Other liabilities (1,205)
------------
TOTAL LIABILITIES SOLD (13,371,039)
Net liabilities disposed (213,280)
------------
-39-
<PAGE>
LEISURE PLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
3. SUMMARY OF ACCOUNTING POLICIES
The consolidated financial statements have been prepared in accordance with
US generally accepted accounting principles and incorporate the following
significant accounting policies:
CONSOLIDATION
Leisure Planet Holdings Limited, consolidates its majority owned
subsidiaries. The consolidated financial statements include the accounts of
the Company and its subsidiaries. Minority interests have been taken into
account when determining the net income due to the Company. Intercompany
transactions have been eliminated on consolidation.
ACCOUNTING ESTIMATES
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 at the date of
the financial statements, disclosure of contingent liabilities at the
financial statement date and reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those
estimates.
(LOSS)/EARNINGS PER SHARE
(Loss)/earnings per share on common shares is based on net (loss)/income
and reflects dilutive effects of any stock options and warrants which exist
at year end.
INTANGIBLE ASSETS
Goodwill, recipes and other intellectual property, and trademarks are being
amortized on a straight line basis over a period of twenty to twenty five
years. If facts and circumstances were to indicate that the carrying amount
of goodwill, recipes and other intellectual property is impaired, the
carrying amount would be reduced to an amount representing the discounted
future cash flows to be generated by the operation.
Also included in intangible assets are non competition agreements which are
being amortized on a straight line basis over the six year term of the
agreements.
The company has adopted Statement of Financial Accounting Standards No. 121
("SFAS 121") "Accounting for the impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of". No impairments in long-lived assets
has taken place.
FOREIGN CURRENCY TRANSLATION
The functional currency of the underlying companies in the Lifestyle
enhancing segment is that of South African Rands. Accordingly, the
following rates of exchange have been used for translation purposes:
Assets and liabilities are translated into United States Dollars using the
exchange rates at the balance sheet date.
Common stock and capital in excess of par are translated into United States
Dollars using historical rates at date of issuance.
-40-
<PAGE>
LEISURE PLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
3. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
Revenue, expenses, gains and losses are translated into United States
Dollars using the weighted average exchange rates for each year.
The resultant translation adjustments are reported in the component of
stockholders' investment designated as "Foreign currency translation
adjustments".
FOREIGN ASSETS AND LIABILITIES
Transactions in foreign currencies arise as a result of inventory purchases
from foreign countries and intercompany funding transactions between the
subsidiaries and Leisure Planet Holdings Limited. Transactions in foreign
currencies are accounted for at the rates ruling on transaction dates.
Exchange gains and losses are charged to the income statement during the
period in which they are incurred. Foreign assets and liabilities of the
group which are not denominated in United States Dollars are converted into
United States Dollars at the exchange rates ruling at the financial year
end or at the rates of forward cover purchased. Forward cover is purchased
to cover the currency exposure on foreign liabilities.
INVENTORIES
Inventories are valued at the lower of cost and net realizable value, using
both the first-in, first-out and the weighted average methods. The value of
work-in-progress and finished goods includes an appropriate portion of
manufacturing overheads. A valuation reserve has been established to reduce
the values of certain identified inventories (determined to be obsolete or
otherwise impaired) to their estimated net realizable values (market or
selling price less costs to dispose).
PROPERTY, PLANT AND EQUIPMENT
Land is stated at cost and is not depreciated. Buildings are depreciated on
the straight line basis over estimated useful lives of 20 years.
Plant and equipment, and motor vehicles are written off over their
estimated useful lives of 5 to 10 years.
INCOME TAXES
Income tax expense is based on reported earnings before income taxes.
Deferred income taxes represent the impact of temporary differences between
the amounts of assets and liabilities recognized for financial reporting
purposes and such amounts recognized for tax purposes. Deferred taxes are
measured by applying currently enacted tax laws.
FAIR VALUE OF FINANCIAL INSTRUMENTS
As at June 30, 1999, the carrying value of accounts receivable, accounts
payable and investments approximate their fair value. The carrying value of
long term debt approximates fair value, as the debt, other than convertible
debentures, interest rates are keyed to the prime lending rate. The
convertible debentures are believed to approximate fair market.
REVENUES
Revenues comprise net invoiced sales of shipped Lifestyle enhancing
products and Internet travel related commissions. Combined revenues exclude
sales to group companies.
Revenues are stated net of allowances granted to customers and trade
discounts. Returns of defective product are offset against revenues.
-41-
<PAGE>
LEISURE PLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
GAIN ON DISPOSAL OF SUBSIDIARY STOCK
Subsidiary stock disposed of during the period is recognized as a gain in
the statement of income and is separately disclosed as a non operating
gain.
CASH FLOWS
For the purposes of the statements of cash flows, cash includes cash on
hand and deposits held on notice.
RECLASSIFICATION
Certain items in the prior year financial statements have been reclassified
to conform with the current period presentation.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the FASB adopted SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting
and reporting standards requiring that every derivative instrument
(including certain derivative instruments embedded in other contracts) be
recorded in the balance sheet as either an asset or liability measured at
its fair value and that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting criteria
are met. Special accounting for qualifying hedges allows derivatives gains
and losses to offset related results on the hedged item in the income
statement and requires that the company must formally document, designate
and assess the effectiveness of transactions that receive hedge accounting.
SFAS No. 133 is effective for fiscal years beginning after June 15, 2000.
The Company believes that the future adoption of this statement will not
have a significant impact on the results of operations or financial
position of the Company.
4. INVENTORIES
Inventories consist of the following:
JUNE 30, JUNE 30,
1999 1998
$ $
Finished goods 4,655,361 7,156,784
Work in progress 587,544 649,465
Raw materials and ingredients 2,983,298 3,220,748
Supplies 1,066,595 959,396
--------- ----------
Inventories (Gross) 9,292,798 11,986,393
Less: Valuation allowances (140,223) (243,780)
--------- ----------
Inventories (Net) 9,152,575 11,742,613
========= ==========
5. DEFERRED CHARGES
Represents the debt issue costs of the 9% convertible debentures and the
increasing rate debentures amounting to $1,378,705. This charge is being
amortized over the tenure of the debenture issue (Refer note 12). The
charge for the current year is $287,477.
-42-
<PAGE>
LEISURE PLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1999 1998
$ $
<S> <C> <C>
Land and buildings 2,028,094 2,408,367
Leasehold improvements 1,203,152 893,245
Plant and equipment 24,570,108 24,314,263
Vehicles 2,508,450 3,382,781
Capital work in progress 467,595 412,181
------------ ------------
Total cost 30,777,399 31,410,837
Accumulated depreciation (11,488,982) (11,423,572)
------------ ------------
Net book value 19,288,417 19,987,265
============ ============
Depreciation charge - Continuing operations 2,095,416 1,739,952
============ ============
Depreciation charge - Discontinued operations 415,537 745,886
============ ============
</TABLE>
Certain assets of the company are encumbered as security for the
liabilities of the group (Refer note 12).
-43-
<PAGE>
LEISURE PLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
7. INTANGIBLE ASSETS
Intangible assets consist of the following:
JUNE 30, JUNE 30,
1999 1998
$ $
Recipes and other intellectual property 12,405,069 10,223,662
Trademarks 5,978,928 5,442,802
Goodwill arising on acquisitions 16,143,171 5,072,082
Patents 104,135 102,379
Development costs 46,678 23,505
Non competition agreements 1,424,309 252,101
--------- -------
Total cost 36,102,290 21,116,531
Accumulated amortization (2,077,545) (1,070,548)
----------- -----------
Net book value 34,024,745 20,045,983
========== ==========
Amortization - Continuing operations 1,515,773 1,042,263
========= ==========
Amortization - Discontinued operations 98,754 110,568
====== =======
8. BANKING FACILITIES
The group has general short term banking facilities of $6,719,761 available
in its subsidiary First Lifestyle Holdings Limited. These facilities bear
interest at rates linked to the prime lending rate, which is currently
16.5%, and are repayable on demand. The terms of these facilities are
generally less than twelve months.
9. FORWARD EXCHANGE CONTRACTS
The functional currency of the Company's major subsidiary is South African
Rand. Due to the volatility of this currency against the currencies of the
South African operations' major trading partners, forward foreign currency
exchange contracts are entered into which effectively result in the
purchase of foreign currency at a set value for delivery at a future date.
-44-
<PAGE>
LEISURE PLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
The following table summarizes the forward foreign currency exchange
contracts in existence at year end:
<TABLE>
<CAPTION>
Foreign South African
currency Rand
Maturity dates amount Equivalent
<S> <C> <C> <C>
US Dollars July 7, 1999 to
October 20, 1999 666,000 4,149,000
</TABLE>
10. DIVIDENDS PAYABLE
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1999 1998
$ $
<S> <C> <C>
Dividends payable to minority shareholders 1,374,968 558,185
Dividends payable on mandatory redeemable
preference shares 495,991 -
---------- ------------
1,870,959 558,185
========= ============
</TABLE>
11. OTHER TAXES PAYABLE
JUNE 30, JUNE 30,
1999 1998
$ $
Value added taxation 370,652 752,804
Payroll taxes 171,052 297,114
Other taxes 16,965 14,514
--------- ----------
558,669 1,064,432
======= =========
-45-
<PAGE>
LEISURE PLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
12. SHORT AND LONG TERM DEBT
JUNE 30, JUNE 30,
1999 1998
$ $
LONG TERM DEBT
9% convertible debentures 4,495,000 9,153,010
Increasing rate convertible debentures 15,000,000 15,000,000
Debenture redemption reserve fund 1,406,250 562,500
Mortgage loans 489,503 1,009,204
Equipment notes 3,623,319 5,341,740
Accrued purchase consideration 1,672,607 385,434
Unsecured notes - 312,313
Interest free notes 10,000,000 -
---------- ------------
36,686,679 31,764,201
Less: Current portion (3,088,435) (2,256,275)
----------- ------------
TOTAL LONG TERM DEBT 33,598,244 29,507,926
========== ==========
SHORT TERM DEBT
Current portion of long term debt 3,088,435 2,256,275
========= =========
9% CONVERTIBLE DEBENTURES
10,000 9% convertible debentures of $1,000 were issued in June 1997. These
debentures are unsecured, senior and subordinated, bearing interest at 9%
per annum, payable quarterly. The debentures are convertible into shares of
common stock at any time prior to maturity at a price of $6.00 per share
(fair market value at debenture issue date). The debentures may be redeemed
at the option of the Company from June 15, 1999 through June 14, 2003 at a
redemption premium ranging from 109% to 102.5% of face value, depending on
the redemption date.
The debentures have mandatory sinking fund payments due in two equal
instalments totalling 67% of the outstanding fair value on June 15, 2002
and June 15, 2003, with the balance of the issue due at maturity on June
15, 2004.
The Company has filed an S - 1 Registration Statement for the shares
issuable upon conversion.
The following covenants are in existence:
A restriction has been placed on the ability of the Company to pay any
dividends and to repurchase stock, except in terms of stock issued under
escrow agreements to vendors of subsidiaries acquired.
A restriction has been placed on transactions with affiliates, whereby all
transactions must be no less favorable than those on normal commercial
terms.
The Company may not adopt any plan of liquidation (Bankruptcy).
-46-
<PAGE>
LEISURE PLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
12. SHORT AND LONG TERM DEBT (CONTINUED)
During the current financial year 1,924 9% convertible debentures of $1,000
were converted to shares of common stock and a further 2,734 9% convertible
debentures of $1,000 were repurchased and cancelled.
INCREASING RATE CONVERTIBLE DEBENTURES
15,000 increasing rate convertible debentures of $1,000 were issued on
October 31, 1997.
These debentures bear interest at the following rates which is payable
quarterly:
4% per annum for the year ending October 31,1998 4.5% per annum for the two
years ending October 31, 2000 5% per annum for the year ending October 31,
2001
The debentures are convertible into shares of common stock at any time
prior to maturity at a price of $9.50 per share. The debentures may be
redeemed at the option of the Company from October 31, 1998 if the
Company's common stock trades at more than $14.25 per share for 30
consecutive market days. Should the debentures not be converted into shares
of common stock prior to October 31, 2001, the maturity date, the
redemption value of the debentures will be 122.5% of the principal amount.
The following covenants are in existence:
A restriction has been placed on the ability of the Company to pay any
dividends and to repurchase stock, except in terms of stock issued under
escrow agreements to vendors of subsidiaries acquired.
A restriction has been placed on transactions with affiliates, whereby all
transactions must be no less favorable than those on normal commercial
terms.
The Company may not adopt any plan of liquidation (Bankruptcy).
DEBENTURE REDEMPTION RESERVE FUND
In terms of the tenure of the increasing rate convertible debentures a
redemption reserve fund has been created to cater for the premium required
on the redemption of those debentures on October 31, 2001. This debenture
redemption reserve fund is being created on the straight line basis over
the remaining period of the debenture tenure.
The Company originally believed that the debentures would be converted into
shares of common stock and did not record interest expense to accrete the
debentures up to their redemption value. In fiscal 1999, it was determined
that it is more appropriate to accrete the debentures up to their
redemption value. Accordingly, the financial statements for the year ended
June 30, 1998 have been restated to include accretion on the debentures.
The effect of the restatement was to increase interest expense in fiscal
1998 by $562,500, which reduced net income from continuing operations and
basic earnings per share from continuing operations to $6,022,885 and $0.94
respectively.
MORTGAGE LOANS
Mortgage loans are collateralized by first and second mortgage bonds over
property with a net book value of $1,818,683. These loans are repayable in
equal monthly instalments and equal annual instalments over periods ranging
from five to twenty years and bear interest at rates ranging from 14.5% to
17.5%. Generally these interest rates are linked to the prime lending rate
which is currently at 16.5%.
-47-
<PAGE>
LEISURE PLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
EQUIPMENT NOTES
Equipment notes are collateralized over movable assets with a net book
value of $16,010,390. These loans are generally repayable in equal monthly
instalments over a maximum period of five years. These loans bear interest
at rates ranging from 7% to 1.75% above the prime lending rate, which is
currently 16.5%.
ACCRUED PURCHASE CONSIDERATION
Represents guaranteed minimum payments to the previous vendors of Pakmatic
Company and Fifers Bakery which are only payable at fixed dates in terms of
the agreements entered into with those vendors and calculated additional
purchase price payments based on the attainment of certain profit
warranties in Astoria Bakery and Gull Foods.
INTEREST FREE NOTES
Represents loan funds due to the minority shareholders of Leisure Planet
PLC. This amount is interest free and is only repayable when and if Leisure
Planet PLC produces positive earnings.
-48-
<PAGE>
LEISURE PLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
12. SHORT AND LONG TERM DEBT (CONTINUED)
The following is a schedule of repayments of long term debt by year of
repayment:
YEAR ENDING JUNE 30, $
2000 3,088,435
2001 2,064,209
2002 17,931,599
2003 1,867,675
Thereafter 11,734,761
13. FSAH MANDATORY REDEEMABLE PREFERRED STOCK
June 30, June 30,
1999 1998
$ $
FSAH mandatory redeemable preferred stock 9,891,197 -
========= ========
Represents 60,000,000 authorized, issued and outstanding, mandatory
redeemable preferred stock of R0,001 each issued at a premium of R0,999 by
FSAH, the wholly owned South African subsidiary of Leisure Planet Holdings
Limited. This stock was issued on April 16, 1999 and is redeemable on April
17, 2002 at 100% of the issue price, including the share premium on
issuance, and earns a preference dividend of the greater of the dividend
declared by First Lifestyle Holdings Limited, a subsidiary of FSAH, which
is listed on the Johannesburg Stock Exchange, or R2,727,272, which
represents 10% of the number of shares ceded to the preference shareholders
as security for the preference share debt. The preference stock is secured
by a cession of shares in First Lifestyle Holdings Limited to the value of
R60,000,000.
14. OPERATING LEASES
The group has several operating leases over land and buildings. These
leases generally expire within the next five years. These leases generally
contain renewal options at the fair market value at the date of renewal.
In most cases, management expects that in the normal course of business,
leases will be renewed or replaced by other leases.
-49-
<PAGE>
LEISURE PLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
The following is a schedule of future minimum rental payments required
under operating leases that have initial or remaining non-cancellable lease
terms in excess of one year as of June 30, 1999:
YEAR ENDING JUNE 30, $
2000 1,227,294
2001 1,291,217
2002 1,383,904
2003 1,028,769
Thereafter 2,038,699
The following schedule shows the composition of total rental expense for
all operating leases except those with terms of a month or less:
YEAR ENDED Year ended Year ended
JUNE 30, June 30, June 30,
1999 1998 1997
$ $ $
Minimum rentals 1,070,224 1,615,875 614,450
========= ========= =======
15. GAIN ON DISPOSAL OF SUBSIDIARY STOCK
The Company sold an effective 8.9% of its interest in First Lifestyle
Holdings Limited during the current year.
The gain on disposal recognized in the consolidated statements of
(loss)/income and comprehensive (loss)/income is made up as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30,
1999 1998 1997
$ $ $
<S> <C> <C> <C>
Proceeds received 5,712,671 4,358,027 16,479,827
Less: Net carrying value of shares of First Lifestyle
Holdings Limited (5,010,758) (1,749,193) (13,152,349)
----------- ----------- ------------
Net gain on sale of investment in subsidiary company 701,913 2,608,834 3,327,478
=========== ========= ===========
</TABLE>
16. OTHER INCOME
Other income includes profit on disposal of assets, proceeds from insurance
claims and commissions received.
-50-
<PAGE>
LEISURE PLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30,
1999 1998 1997
$ $ $
<S> <C> <C> <C>
Profit on disposal of assets - 25,344 198,473
Profit on sale of foreign exchange contract - 81,000 -
Decentralization benefits 355,554 164,992 -
Discounts received 285,994 - -
Export rebates 202,156 - -
Other 147,934 199,729 270,058
------- ------- -------
991,638 471,065 468,531
======= ======= =======
</TABLE>
17. INCOME TAXES
Income taxes are accounted for under Statement of Financial Standards No.
109 "Accounting for Income Tax" ("SFAS 109"), an asset and liability
method. SFAS 109 requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of temporary
differences between the tax bases and financial reporting bases of the
company's assets and liabilities. In addition, SFAS 109 requires the
recognition of future tax benefits such as net operating loss
carryforwards, to the extent realization of such benefit is more likely
than not.
-51-
<PAGE>
LEISURE PLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
17. INCOME TAXES (CONTINUED)
The provision for income taxes charged to continuing operations was as
follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30,
1999 1998 1997
$ $ $
<S> <C> <C> <C>
Current:
South African normal taxation 1,574,099 2,267,212 923,713
Foreign normal taxation 81,939 - 62,345
---------- ----------- --------
TOTAL CURRENT TAXES 1,656,038 2,267,212 986,058
--------- --------- -------
Deferred:
South African normal taxation 497,045 277,759 195,544
---------- --------- ---------
TOTAL DEFERRED TAXES 497,045 277,759 195,544
---------- ------- ----------
Secondary tax on companies:
South African normal taxation 53,732 25,140 -
---------- ---------- ----------
TOTAL OTHER TAXES 53,732 25,140 -
---------- ---------- ----------
PROVISION FOR TAXES ON INCOME 2,206,815 2,570,111 1,181,602
========= ========= =========
</TABLE>
Deferred tax liability at June 30, is comprised of the following:
JUNE 30, JUNE 30,
1999 1998
$ $
Property, plant and equipment 1,551,724 907,143
Prepaid expenditure 42,125 52,390
----------- --------
Gross deferred tax liabilities 1,593,849 959,533
--------- -------
Accruals - (133,185)
Assessable losses (582,009) (296,943)
--------- ---------
Gross deferred tax assets (582,009) (430,128)
---------- ---------
NET DEFERRED TAX LIABILITY 1,011,840 529,405
========= =======
-52-
<PAGE>
LEISURE PLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
The net deferred tax liability is split into a current asset and a non
current liability as follows:
$ $
Non current liability 1,551,724 907,143
Current asset (539,884) (377,738)
----------
NET DEFERRED TAX LIABILITY 1,011,840 529,405
========= =======
17. INCOME TAXES (CONTINUED)
The principle activities of the Company are based in South Africa.
Accordingly a tax rate reconciliation for the South African operations is
prepared after excluding taxation payable at First South Africa Management
Corp., Ltd of $1,219 and taxation payable in Leisure Planet PLC of $26,988.
The Company is a Bermuda registered corporation where there are no tax laws
applicable; accordingly, the net loss of Leisure Planet PLC, First South
Africa Management Corp.,Ltd and Leisure Planet Holdings Limited of
$8,685,662 have been excluded from the tax rate reconciliation.
The provision for taxes on income differs from the amount of income tax
determined by applying the applicable South African statutory income tax
rate to pre-tax income from continuing operations as a result of the
following differences:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30,
1999 1998 1997
% % %
<S> <C> <C> <C>
South African statutory tax rate 30.0 35,0 35.0
Disallowable expenditure 20.5 2.6 1.3
Creation of assessable losses 6.5 1.7 3.2
Non taxable income - profit on sale of investment (20.8) (11.2) (12.9)
Non taxable income - (7.6) (1.1)
Foreign tax rate differential (0.8) (0.7) (0.9)
Capital allowances - - (7.7)
Unprovided timing differences (2.5) - -
Deferred tax rate change (0.3) - -
Secondary tax on companies 0.8 - -
Provision in respect of previous years (2.4) - -
Other - 0.5 (0.4)
------ ---- -----
31.0 20.3 16.5
==== ==== ====
</TABLE>
18. DISCONTINUED OPERATIONS
During the current fiscal year the Company discontinued its operations in
the Industrial manufacturing and Packaging business segments in order to
concentrate all of its efforts on its core operations of Lifestyle
enhancing products and Internet travel related businesses.
-53-
<PAGE>
LEISURE PLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
The businesses disposed of, or where the operations have ceased are as
follows:
INDUSTRIAL MANUFACTURING
Humidair (Pty) Ltd
First Strut (Pty) Ltd
Europair Africa (Pty) Ltd
LS Pressings (Pty) Ltd
PACKAGING
Starpak (Pty) Ltd
Pakmatic (Pty) Ltd
Pacforce (Pty) Ltd - cessation of operations
In addition, the Company ceased the development of the processed food pie
business in markets outside of South Africa. This resulted in the write off
of the cost of investment of $362,090, which is included below.
The following summarizes the results of the discontinued operations:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30,
1999 1998 1997
$ $ $
<S> <C> <C> <C>
Revenue 18,492,864 30,648,652 24,690,018
Cost of sales (13,805,507) (23,979,748) (15,430,962)
Selling, general and administrative (5,383,057) (8,040,783) (7,143,432)
------------ ----------- -----------
Operating (loss)/income (695,700) (1,371,879) 2,115,624
Other income 56,083 315,828 -
Interest expense (729,308) (1,125,123) (884,083)
----------- ----------- -----------
(Loss)/income before income taxes and minority (1,368,925) (2,181,174) 1,231,541
interests (90,066) (12,420) (390,447)
------------ -------------- -----------
Provision for taxes on income
(1,458,991) (2,193,594) 841,094
Minority shareholders' interest - (536) (1,778)
------------ -------------- -----------
Net (loss)/income before equity earnings (1,458,991) (2,194,130) 839,316
Equity in net earnings of affiliated companies - 15,657 10,927
----------------- ------------ ---------
Net (loss)/income from discontinued operations (1,458,991) (2,178,473) 850,243
Loss on disposal of discontinued operations (612,858) - -
Write off of development costs incurred on processed
food pie business (362,090) - -
--------- ----------------- --------------
Net (loss)/gain on discontinued operations (2,433,939) (2,178,473) 850,243
=========== =========== ==========
</TABLE>
Interest expense represents the actual interest costs incurred by the
discontinued operations.
-54-
<PAGE>
LEISURE PLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
19. (LOSS)/EARNINGS PER SHARE
(Loss)/earnings per share data is calculated as follows:
<TABLE>
<CAPTION>
BASIC LOSS PER SHARE FOR THE YEAR ENDED JUNE 30, $
1999
<S> <C> <C> <C>
Net loss available to common stockholders from (7,298,238)
continuing operations
Net loss available to common stockholders from (2,433,939)
------------
discontinued operations (9,732,177)
Total net loss
SHARES FRACTION OF WEIGHTED
DATES OUTSTANDING OUTSTANDING PERIOD AVERAGE
SHARES
July 1, 1998 7,472,324 1.00 7,472,324
JULY 1, 1998 TO JUNE 30, 1999
Additional purchase price payments 242,684 0.75 182,179
Escrow shares and ordinary shares repurchased
and cancelled during the year (1,725,977) 0.73 (1,259,251)
Options converted to shares during the year 20,000 0.25 4,932
Debentures converted into shares during the 320,700 0.46 148,307
--------- ----------
year
WEIGHTED AVERAGE SHARES 6,329,731 6,548,491
========= =========
</TABLE>
-55-
<PAGE>
LEISURE PLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
19. (LOSS)/EARNINGS PER SHARE (CONTINUED)
<S> <C> <C> <C>
BASIC EARNINGS PER SHARE FOR THE YEAR ENDED JUNE 30, $
1998
Net income available to common stockholders from 6,022,885
continuing operations
Net loss available to common stockholders from (2,178,473)
-----------
discontinued operations 3,844,412
Total net income
SHARES FRACTION OF WEIGHTED
DATES OUTSTANDING OUTSTANDING PERIOD AVERAGE
SHARES
July 1, 1997 5,359,615 1.00 5,359,615
JULY 1, 1997 TO JUNE 30, 1998
Additional purchase price payments 290,394 0.15 42,884
Acquisition of subsidiaries 238,848 0.46 109,220
Warrants converted to shares during the year 233,826 0.83 194,549
Options converted to shares during the year 35,000 0.39 13,616
Warrants swapped into shares during the year 1,173,476 0.59 697,608
Debentures converted into shares during the year 141,165 0.05 7,489
---------- -----------
WEIGHTED AVERAGE SHARES 7,472,324 6,424,981
========= =========
BASIC EARNINGS PER SHARE FOR THE YEAR ENDED JUNE 30, $
1997
Net income available to common stockholders from 5,832,922
continuing operations
Net income available to common stockholders from 850,243
----------
discontinued operations 6,683,165
Total net income
SHARES FRACTION OF WEIGHTED
DATES OUTSTANDING OUTSTANDING PERIOD AVERAGE
SHARES
July 1, 1996 4,475,079 1.00 4,475,079
JULY 1, 1996 TO JUNE 30, 1997
Acquisition of subsidiaries 702,006 0.71 496,653
Additional purchase price payments 157,895 0.25 39,474
Warrants not exercised at year end 124,544 1.00 124,544
Warrants converted to shares during the year 24,635 0.17 4,106
---------- -----------
WEIGHTED AVERAGE SHARES 5,484,159 5,139,856
=========
</TABLE>
-56-
<PAGE>
LEISURE PLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
19. (LOSS)/EARNINGS PER SHARE (CONTINUED)
DILUTED LOSS PER SHARE FOR THE YEAR ENDED JUNE 30, $
1999
Net loss available to common stockholders from (7,298,238)
continuing operations 2,258,044
-----------
Add impact of assumed conversions (5,040,194)
Net loss available to common stockholders from (2,433,939)
discontinued operations
ADJUSTED NET LOSS (7,474,133)
Weighted average shares 6,548,491
Warrants and options not yet exercised 41,252
9% convertible debentures 945,618
Increasing rate debentures 1,578,947
---------
ADJUSTED WEIGHTED AVERAGE SHARES 9,114,308
- -------------------------------------------------------------------
The adjusted weighted average number of shares and the adjusted net loss
available to common stockholders has not been taken into account as the
result achieved is anti-dilutive.
DILUTED EARNINGS PER SHARE FOR THE YEAR ENDED JUNE $
30, 1998
Net income available to common stockholders from
continuing operations 6,022,885
Add impact of assumed conversions 1,646,170
7,669,055
Net loss available to common stockholders from
discontinued operations (2,178,473)
ADJUSTED NET INCOME 5,490,582
Weighted average shares 6,424,981
Warrants and options not yet exercised 502,279
9% convertible debentures 1,659,178
Increasing rate debentures 1,046,865
----------
ADJUSTED WEIGHTED AVERAGE SHARES 9,633,303
----------
-57-
<PAGE>
LEISURE PLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
DILUTED EARNINGS PER SHARE FOR THE YEAR ENDED JUNE $
30, 1997
Net income available to common stockholders from
continuing operations 5,832,922
Add impact of assumed conversions 124,761
5,957,683
Net income available to common stockholders from
discontinued operations 850,243
ADJUSTED NET INCOME 6,807,926
Weighted average shares 5,139,856
Warrants and options not yet exercised 176,518
9% convertible debentures 278,539
---------
ADJUSTED WEIGHTED AVERAGE SHARES 5,594,913
---------
20. CASH FLOWS
The changes in assets and liabilities consist of the following:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30,
1999 1998 1997
$ $ $
<S> <C> <C> <C>
(Increase)/decrease in trade accounts receivable (1,609,848) 1,251,842 (2,788,051)
(Increase)/decrease in inventories (1,257,940) (956,318) (3,158,181)
Increase in prepaid expenses and other current assets (3,758,667) (169,887) (368,252)
Decrease/(increase) in income taxes prepaid - 17,037 (9,990)
Increase/(decrease) in trade accounts payable 2,139,821 (1,550,592) 1,872,035
Increase in other provisions and accruals 5,398,166 - -
Increase in dividends payable 1,315,222 656,147 1,096,189
Increase in other taxes payable 8,482 676,319 656,088
(Decrease)/increase in income taxes payable (380,001) 496,536 (222,602)
--------- ------- -----------
1,855,235 421,084 (2,922,764)
========= ======= ===========
</TABLE>
-58-
<PAGE>
LEISURE PLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
Year ended Year ended Year ended
June 30, June 30, June 30,
1999 1998 1997
$ $ $
<S> <C> <C> <C>
Supplemental disclosure of cash flow information:
Acquisition of subsidiaries is reconciled to the purchase consideration of the
subsidiaries/businesses as follow:
Purchase consideration of subsidiaries/businesses (2,868,932) (23,578,560) (11,722,044)
Add: Debts assumed - - (694,425)
Less: Minority shareholders interest in
companies acquired - 3,663,102 -
Less: Cash acquired 430,556 347,052 985,410
----------- ------------- ------------
(2,438,376) (19,568,406) (11,431,059)
Less: Stock issued in lieu of cash - 1,686,730 4,357,418
----------- ----------- ----------
(2,438,376) (17,881,676) (7,073,641)
=========== ============ ===========
Interest paid 1,298,438 464,165 858,067
========= ======= =======
Taxes paid 2,099,029 1,532,677 1,513,166
========= ========= =========
Non cash movement on debentures converted to
common stock during the year 1,924,200 846,990 -
========= ======= ===============
</TABLE>
21. EMPLOYMENT BENEFITS
The group participates in various retirement benefit funding plans and
health plans for the benefit of its employees.
All of the retirement benefit funds are defined contribution plans and by
nature of the funds there can be no unfunded obligations or responsibility
on the employer. The only obligation of the group is the contribution to
these plans which generally ranges from 6% to 9% of the employees' annual
earnings.
Amounts charged to pension costs and contributed by the Company to the
funds were as follows:
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30,
1999 1998 1997
$ $ $
Pension costs 389,141 629,216 497,788
======= ======= =======
The group and employees participate in various health plans which provide
medical cover for employees on an annual basis. Neither the health plan nor
the group are liable for post retirement medical costs. The
-59-
<PAGE>
LEISURE PLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
contributions to the health plan are borne equally by the employee and the
group except for a few salaried employees where the Company is responsible
for 100% of the contribution. The Company has no liability for employees'
medical costs in excess of the contributions to the health plan.
Amounts charged to health plan costs and contributed by the Company were as
follows:
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30,
1999 1998 1997
$ $ $
Health plan costs 355,655 391,460 336,706
======= ======= =======
22. BUSINESS SEGMENT INFORMATION
In June 1997, SFAS 131, "Disclosures about segments of an enterprise
and related information" was issued effective for fiscal years ending
after December 15, 1998. This statement allows and the company has
chosen the early adoption of this statement for the year ended June 30,
1998.
The Company's reportable segments are strategic business units that
offer different products and services. These business units are managed
separately as each unit is in a different technological and marketing
field. The Company has two reporting segments: Lifestyle enhancing
products and Internet related businesses. The company manufactures and
distributes lifestyle enhancing products, including food products and
semi durable outdoor and indoor products through its Lifestyle
enhancing products segment and provides Internet related travel
services through its Internet related business. The aggregation method
has been applied in determining the reported segments.
No geographical segmental analysis is presented as, with the exception
of Leisure Planet PLC, all revenue is derived from a South African
source.
-60-
<PAGE>
LEISURE PLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
Summarized financial information by business segment for the years
ended June 30, 1999, 1998 and 1997 is presented.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30,
1999 1998 1997
$ $ $
<S> <C> <C> <C>
Revenues:
Internet related businesses 164,486 - -
Lifestyle enhancing products 84,944,309 82,759,698 41,885,913
---------- ---------- ----------
85,108,795 82,759,698 41,885,913
---------- ---------- ----------
Operating (loss)/income:
Internet related businesses (6,389,016) - -
Lifestyle enhancing products 12,540,093 8,066,278 4,782,675
Corporate expenses (7,848,820) (635,384) (1,456,730)
----------- --------- -------------
(1,697,743) 7,430,894 3,325,945
----------- --------- ---------
Total assets:
Internet related businesses 13,826,446 - -
Lifestyle enhancing products 78,570,047 51,009,887 41,037,271
Discontinued operations - 8,019,414 11,866,956
Corporate 10,507,337 30,532,158 11,293,252
---------- ---------- ----------
102,903,830 89,561,459 64,197,479
----------- ---------- ----------
Depreciation and amortization:
Internet related businesses 333,038 - -
Lifestyle enhancing products 2,837,446 2,495,368 1,311,369
Corporate 440,705 286,847 157,810
--------- ---------- ----------
3,611,189 2,782,215 1,469,179
--------- --------- ---------
Capital expenditure:
Internet related businesses 360,243 - -
Lifestyle enhancing products 5,605,319 3,902,544 1,652,677
Discontinued operations - 1,427,382 1,654,766
Corporate 2,512 16,745 17,710
------------ ----------- ----------
5,968,074 5,346,671 3,325,153
--------- --------- ---------
</TABLE>
23. EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with two key employees.
In terms of the agreements the two employees will devote substantially all
of their business time to the group and receive salaries of $180,000 and
$150,000 per annum. The Company intends to pay the key employees an annual
incentive bonus based on pre-tax profits.
-61-
<PAGE>
LEISURE PLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
24. STOCK OPTION PLAN
The board of directors have adopted the Company's 1995 Stock Option Plan.
The Stock Option Plan provides for the grant of i) options that are
intended to qualify as incentive stock options ("Incentive Stock Options")
within the meaning of Section 422 of the code to key employees and ii)
options not so intended to qualify ("Nonqualified Stock Options") to key
employees (including directors and officers who are employees of the
Company, and to directors and consultants who are not employees).
The Stock Option Plan is to be administered by the Compensation Committee
of the board of directors. The committee shall determine the terms of the
options exercised, including the exercise price, the number of shares
subject to the option and the terms and conditions of exercise. No options
granted under the Stock Option Plan are transferable by the optionee other
than by the will or the laws of descent and distribution and each option is
exercisable during the lifetime of the optionee only by such optionee or
his legal representatives.
The exercise price of Incentive Stock Options granted under the plan must
be at least equal to the fair market value of such shares on the date of
the grant (110% of fair market value in the case of an optionee who owns or
is deemed to own more than 10% of the voting rights of the outstanding
capital stock of the Company or any of its subsidiaries). The maximum term
for each Incentive Stock Option granted is ten years (five years in the
case of an optionee who owns or is deemed to own more than 10% of the
voting rights of the outstanding capital stock of the Company or any of its
subsidiaries). Options shall be exercisable at such times and in such
instalments as the committee shall provide in the terms of each individual
option. The maximum number of shares for which options may be granted to
any individual in any fiscal year is 210,000.
The Stock Option Plan also contains an automatic option grant program for
the employee and non-employee directors. Each person who is an employee
director of the Company following an annual meeting of shareholders will
automatically be granted an option for an additional 5,000 shares of common
stock, non-employee directors will receive an option for an additional
10,000 shares of common stock. Each grant will have an exercise price per
share equal to the fair market value of the common stock on the grant date
and will have a term of five years measured from the grant date, subject to
earlier termination if an optionee's service as a board member is
terminated for cause.
The Company has granted options to purchase 590,000 shares of common stock
under the Plan, of which 30,000 options have been exercised. The options
issued under the stock option still outstanding are reflected in the table
below.
-62-
<PAGE>
LEISURE PLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
OPTIONS Per share
GRANTED exercise price EXPIRATION DATE EXERCISABLE
<S> <C> <C> <C> <C>
Stock options granted during 60,000 $5.00 January 24, 2001 Immediately
1996
150,000 $5.00 On the seventh
anniversary
subject to earlier
vesting.
150,000 $3.00
On the seventh
anniversary
subject to earlier
vesting.
Stock options granted during 15,000 $3.75 January 1, 2002 Immediately
1997
Stock options granted during 30,000 $6.00 January 1, 2003 Immediately
1998
Stock options granted during 70,000 $2.19 Various expiration
1999 dates Immediately
25,000 $1.00 Various expiration
dates Immediately
20,000 $1.03 Various expiration
dates Immediately
40,000 $4.81 Various expiration
------- dates January 1, 2001
560,000
-------
</TABLE>
Options exercisable at June 30, 1999 totalled 220,000.
-63-
<PAGE>
LEISURE PLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
24. STOCK OPTION PLAN (CONTINUED)
In addition to the stock options issued under the stock option plan, the
compensation committee has issued the following non plan options:
<TABLE>
<CAPTION>
OPTIONS Per share
GRANTED exercise price EXPIRATION EXERCISABLE
DATE
<S> <C> <C> <C> <C>
Stock options granted during 1997 500,000 $4.75 Immediately
-------
500,000
=======
</TABLE>
Subsequent to year end an additional 600,000 non plan options were awarded
by the compensation committee.
The Company measures compensation cost for its stock option plan using the
intrinsic value based method of accounting.
Had the Company used the fair value-based method of accounting to measure
compensation expense for it stock option plans beginning in 1997 and
charged compensation cost against income, over the vesting periods, based
on the fair value of options at the date of the grant, income from
continuing operations and the related diluted per common share amounts for
1999, 1998 and 1997 would have been reduced to the following proforma
amounts:
<TABLE>
<CAPTION>
1999 1998 1997
$ $ $
<S> <C> <C> <C>
(Loss)/income from continuing operations
As reported (7,298,238) 6,022,885 5,832,922
Proforma (8,983,151) 2,955,531 5,429,237
Diluted (loss)/income from continuing operations per
common share
As reported ($1.11) $0.80 $1.07
Proforma ($1.37) $0.48 $0.99
</TABLE>
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<PAGE>
LEISURE PLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
The weighted average grant date fair value of options granted in 1999, 1998 and
1997 and the significant assumptions used in determining the underlying fair
value of each option grant on the date of the grant utilizing the Black Scholes
option pricing model were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Weighted average grant-date fair value of options $4.51 $6.82 $4.97
granted
Assumptions
Risk free interest rate 14.6% 14.0% 15.9%
Expected life 5 Years 5 Years 5 Years
Expected volatility 108.6% 87.3% 104.3%
Expected dividend yield 0.0% 0.0% 0.0%
</TABLE>
25. WARRANTS OUTSTANDING
In connection with the initial public offering consummated in January
1996 the Company issued 2,300,000 units. Each unit issued consisted of
one share of common stock, one redeemable Class A warrant and one
redeemable Class B warrant. In addition, an additional 100,000 warrants
were issued to the underwriter pursuant to the underwriting agreement.
Concurrently with the initial public offering the selling security
holder offered 650,000 selling security holder warrants, 650,000
selling security holder Class B warrants issuable upon exercise of the
selling security holder warrants and 1,300,000 shares of common stock
issuable upon exercise of these selling security holder warrants and
selling security holder Class B warrants. These selling security holder
warrants are identical to the Class A warrants, except that there are
certain restrictions imposed upon the transferability of these
warrants.
In consideration for the 9% debenture offering in the prior year the
Company issued warrants over 135,000 shares of common stock at an
exercise price of $6.00 per share, the fair market price at date of
issuance.
Warrants outstanding at June 30, 1999 were as follows:
<TABLE>
<CAPTION>
WARRANT NUMBER OF EXERCISE
WARRANTS PRICE EXPIRY DATE ENTITLEMENT
<S> <C> <C> <C> <C>
Class A Redeemable
warrants 1,073,749 $6.50 January 24, 2001 One share of common stock and
one Class B warrant
Class B Redeemable
warrants 2,101,547 $8.75 January 24, 2001 One share of common stock
Debenture warrants 135,000 $6.00 July 31, 2007 One share of common stock
</TABLE>
The Class A warrants are redeemable beginning January 24, 1997, or
earlier at the option of the Company with the underwriters consent, at
a redemption price of $0.05 per Class A warrant, if the "closing price"
of the Company's common stock trades at an average price in excess of
$9.10 per share
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<PAGE>
LEISURE PLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
for any consecutive 30 trading day period, ending within 15 days of the
notice of redemption. All Class A warrants are to be redeemed if any
are to be redeemed.
The Class B warrants are redeemable beginning January 24, 1997, or
earlier at the option of the Company with the underwriters consent, at
a redemption price of $0.05 per Class A warrant, if the "closing price"
of the Company's common stock trades at an average price in excess of
$12.25 per share for any consecutive 30 trading day period, ending
within 15 days of the notice of redemption. All Class B warrants are to
be redeemed if any are to be redeemed.
26. FIRST SOUTH AFRICAN HOLDINGS ESCROW AGREEMENT
The FSAH Escrow Agreement was executed prior to the closing of the
offering and provided for the concurrent issuance and delivery of
729,979 shares of Class B common stock to the FSAH escrow agent. The
FSAH Escrow Agreement is intended to provide security for the holders
of FSAH Class B common stock, who are residents in South Africa and are
prohibited in terms of South African law from holding shares in a
foreign company. The FSAH Escrow Agreement provides that the parties to
this agreement that are holders of FSAH Class B common stock will not
sell such shares of stock, but may tender the shares to the FSAH escrow
agent against payment therefore by the escrow agent, which payment may
consist of the proceeds obtained from the sale of an equal number of
Class B common stock of the Company, provided that the proceeds of the
sale will be delivered to the holder of the Class B common stock in
exchange for the shares in FSAH. These shares will be tendered to the
Company and they will be immediately converted to FSAH Class A common
stock.
Since the consummation of the Company's initial public offering in
January 1996, the Company has entered into FSAC Escrow Agreements with
the FSAH escrow agent, FSAH and certain principal shareholders of the
Company's subsidiaries which were acquired since January 1996. The
terms of the FSAC Escrow Agreement are substantially similar to the
terms of the FSAH Escrow Agreement, except that only the FSAH Escrow
Agreement provided for the issue of shares of Class B common stock to
the FSAH escrow agent while the FSAC Escrow Agreements provide for the
issue of shares of common stock to the FSAH escrow agent which
correspond to the issuances of FSAH Class B common stock by FSAH.
In 1997 a further 1,192,480 shares of common stock were issued to the
FSAH escrow agent in terms of FSAC Escrow Agreements entered into
during the fiscal year in connection with the acquisitions of Piemans
Pantry, Astoria Bakery, Seemann's Quality Meat Products, Gull Foods and
First Strut.
In 1998 a further 386,324 shares of common stock were issued to the
FSAH escrow agent in terms of the FSAC Escrow agreements entered into
during the fiscal year in connection with the acquisitions of Piemans
Pantry, Pacforce, Seemann's Quality Meat Products and Fifers Bakery.
In 1999 a further 243,400 shares of common stock were issued to the
FSAH escrow agent in terms of the FSAC Escrow agreements entered into
during the fiscal year in connection with the acquisitions of Gull
Foods, Seemann's Quality Meat Products and Fifers Bakery.
In terms of the agreements entered into with the previous vendors of
Piemans Pantry, Seemann's Quality Meat Products, Gull Foods and Fifers
Bakery, the underlying value of the FSAC escrow stock was
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<PAGE>
LEISURE PLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
underpinned at certain minimum values. The previous vendors had the
option to put the shares to the Company at those values, who was
obligated to honour the minimum values placed on those shares. These
vendors exercised this option during the current fiscal year, which
resulted in the redemption and cancellation of 1,583,059 FSAC A class
common stock.
There are no further stock price warranties outstanding.
27. CONTINGENT LIABILITIES
South African Secondary Tax on Companies at 12.5 percent is payable on
all future dividends declared out of distributable reserves of South
African companies.
The Company is liable to pay to the previous vendors an estimated
$1,659,200 based on the attainment of profit warranties which form an
integral part of all acquisition agreements concluded with previous
vendors of acquired companies. The payment of this amount is dependent
upon the achievement of pre defined profit targets.
The company has guaranteed the banking facilities of certain of the
subsidiaries disposed of during the fiscal year. These guarantees
amount to $2,156,960. In addition, the Company has guaranteed the debt
of Pacforce (Pty) Ltd. This company has been placed into liquidation
and the company has provided $995,520 to cover the potential exposure
that it may have to the secured creditors of Pacforce (Pty) Ltd.
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<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS AND EXECUTIVE OFFICERS
Our directors and our executive officers and the executive officers of
our subsidiaries, their ages and present position are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITIONS
- ----------------------------------- ----------- -------------------------------------------------------------
<S> <C> <C>
Michael Levy....................... 53 Chairman of the Board
Clive Kabatznik.................... 42 Vice Chairman of the Board, Chief Executive Officer,
President and Chief Financial Officer
Cornelius J. Roodt................. 40 Director, Managing Director and Chief Financial Officer
of First South African Holdings (Pty.) Ltd.
Pierre Kleinhans................... 38 Chief Executive Officer of LPI Limited
Bart Goedseels..................... 31 Chief Operating Officer of LPI Limited
John Welch......................... 50 Managing Director of Piemans Pantry
Gerald S. Crosman.................. 55 Group Finance Director of First Lifestyle Holdings
Mark J. Korb....................... 31 Group Finance Director of First Lifestyle Holdings
George R. Garrick.................. 47 Director
</TABLE>
MICHAEL LEVY is our co-founder and has served as Chairman of our Board
of Directors since our inception. Since 1987, Mr. Levy has been the Chief
Executive Officer and Chairman of the Board of Arpac L.P., a Chicago-based
manufacturer of plastic packaging machinery.
CLIVE KABATZNIK is our co-founder and has served as a director and our
President since inception and as our Vice Chairman, Chief Executive Officer and
Chief Financial Officer since October 1995. Since June 1992, Mr. Kabatznik has
served as President of Colonial Capital, Inc. a Miami-based investment banking
company that specializes in advising middle market companies in areas concerning
mergers, acquisitions, private and public agency funding and debt placements.
CORNELIUS J. ROODT has served as a member of our Board of Directors
since December 1996 and was appointed Managing Director and Chief Financial
Officer of one of our subsidiaries, First South African Holdings (Pty.) Ltd., in
July 1996. Mr. Roodt is responsible for overseeing all of the South African
operations of First South African Holdings (Pty.) Ltd. From February 1994 to
June 1996, Mr. Roodt was a senior partner at Price Waterhouse Corporate Finance,
South Africa. From January 1991 to January 1994, he was an audit partner at
Price Waterhouse, South Africa.
PIERRE KLEINHANS is the founder of LPI Limited, our travel services
subsidiary, a business we acquired in February 1999. Mr. Kleinhans has served in
various capacities with the business, including Chief Executive Officer since
December 1997, Head of Business Development from January 1997 to December
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<PAGE>
1997, head of Corporate Strategy from March 1996 to December 1996 and Chief
Executive Officer from January 1992 to March 1996.
BART GOEDSEELS has been the Chief Operating Officer of LPI Limited, our
travel services subsidiary, since December 1997. Mr. Goedseels has also served
as Director of Hotel Sales and Marketing from January 1997 to December 1997 and
Head of International Hotel Recruitment from August 1993 to January 1997.
JOHN WELCH is the founder of Piemans Pantry, a company he established
in 1982, and Managing Director of Piemans Pantry since we acquired Piemans in
June 1996. His responsibilities include overall supervision of all aspects of
the Piemans Pantry business.
GERALD S. CROSSMAN is the Group Finance Director of First Lifestyle
Holdings, a position he has held since 1997. From 1983 to 1996, Mr. Grossman
served on the board and was responsible for group finance at Hunt Lechars and
Hepburn Holdings Limited.
MARK J. KORB has been the Group Finance Director of First Lifestyle
Holdings since April 1997. Prior to such time, from August 1993 to March 1997,
Mr. Korb was an employee of PricewaterhouseCoopers Inc, as a Senior Audit
Manager from July 1994 to March 1997 and a Manager from August 1993 to June
1994.
GEORGE R. GARRICK has served as a member of our Board of Directors
since April 1999. He has also served as Chief Executive Officer and President of
Flycast Communications Corporation since joining that company in May 1998. He
also has been a member of the Board of Directors of Flycast since June 1998 and
has been Chairman of the Board of Flycast since January 1999. Flycast is a
provider of Internet advertising solutions. From September 1997 until May 1998,
Mr. Garrick owned and operated his own private venture and consulting company,
G2 Ventures, Inc. From April 1997 until September 1997, Mr. Garrick served as
Chief Marketing Officer for PowerAgent, Inc., an Internet media and marketing
company. From March 1996 until April 1997, Mr. Garrick founded and operated
NetROI LLC, an audience measurement software company. From November 1993 until
March 1996, Mr. Garrick served as the President and Chief Executive Officer of
Information Resources, Inc.-North America, a marketing measurement company.
Other than the period from July through October 1993, when Mr. Garrick served as
President and Chief Executive Officer of Nielsen Marketing Research U.S.A., a
unit of A.C. Nielsen Co., Mr. Garrick served Information Resources, Inc. in
various capacities from 1981 until his departure in March 1996.
All of our directors hold office until their respective successors are
elected, or until death, resignation or removal. Officers hold office until the
meeting of the Board of Directors following each Annual Meeting of Stockholders
and until their successors have been chosen and qualified.
COMMITTEES OF THE BOARD OF DIRECTORS
Our Board of Directors has an audit committee and a compensation
committee. The audit committee is composed of Cornelius Roodt and Michael Levy.
The audit committee is responsible for recommending annually to the Board of
Directors the independent auditors to be retained, reviewing with the
independent auditors the scope and results of the audit engagement and
establishing and monitoring our financial policies and control procedures.
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<PAGE>
The compensation committee is currently composed of Michael Levy and
George Garrick. Both Mr. Levy and Mr. Garrick are intended to be non-employee
directors within the meaning of Rule 16b-3(b)(3)(i) promulgated under the
Securities Exchange Act of 1934. The compensation committee has power and
authority with respect to all matters pertaining to compensation and the
administration of employee benefits, deferred compensation and our stock option
plans.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
The following persons have failed to file on a timely basis certain
reports required by Section 16(a) of the Securities Exchange Act of 1934 as
follows: each of Messrs. Levy and Kabatznik has failed to file a Form 5
disclosing option grants and certain changes in the right to vote shares of our
Class B common stock.
During the fiscal year ended June 30, 1999, other than as listed above,
we are not aware of any late filings, or failure to file, any reports required
by Section 16(a) of the Exchange Act.
ITEM 11. EXECUTIVE COMPENSATION
The following summary compensation table sets forth the aggregate
compensation we paid or accrued to our Chief Executive Officer and to the
Managing Director and Chief Financial Officer of our subsidiary, First South
African Holdings (Pty.) Ltd., during the fiscal years ended June 30, 1997, June
30, 1998 and June 30, 1999. Apart from Mr. Kabatznik, whose annual salary is
$180,000, and Mr. Roodt, whose annual salary is $150,000, none of our executive
officers or any of our subsidiaries received compensation in excess of $100,000.
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<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
-------------------------- ----------------------------------
FISCAL SECURITIES
YEAR RESTRICTED UNDERLYING
NAME AND ENDED OTHER ANNUAL STOCK STOCK
PRINCIPAL POSITION JUNE 30, SALARY BONUS COMPENSATION AWARDS OPTIONS
- ---------------------- ----------- ---------- ------------- ---------------- -------------- --------------
$ $
<S> <C> <C> <C> <C> <C> <C>
Clive Kabatznik, 1999 180,000 0 --- --- 5,000
President and Chief 1998 180,000 170,509 255,000
Executive Officer 1997 135,000 195,142 210,000
Cornelius J. Roodt, 1999 150,000 0 --- --- 5,000
Managing Director and 1998 150,000 170,509 --- --- 255,000
Chief Financial Officer of 1997 150,000 195,142 --- --- 155,000
First South African
Holdings (Pty.) Ltd.
</TABLE>
The options granted to Mr. Kabatznik and Mr. Roodt during fiscal year
ended June 30, 1999 were granted under our 1995 Stock Option Plan and represent,
in each case, an option to purchase 5,000 shares of our common stock which is
currently exercisable at an exercise price of $2.19 per share.
The options granted to Mr. Kabatznik and Mr. Roodt during fiscal year
ended June 30, 1998 represent, in each case:
o an option granted under our 1995 Stock Option Plan to purchase
5,000 shares of our common stock which is currently
exercisable at an exercise price of $6.00 per share; and
o a non-plan option granted by our Board of Directors to
purchase 250,000 shares of our common stock which is currently
exercisable at an exercise price of $4.75 per share.
The options granted to Mr. Kabatznik during fiscal year ended June 30,
1997 represent:
o an option granted under our 1995 Stock Option Plan to purchase
5,000 shares of our common stock which is currently
exercisable at an exercise price of $3.75 per share; and
o an option granted under our 1995 Stock Option Plan to purchase
205,000 shares of common stock at an exercise price of 5.00
per share, which option is currently exercisable with respect
to 155,000 shares of our common stock.
The options granted to Mr. Roodt during fiscal year ended June 30, 1997
represent:
o an option granted under our 1995 Stock Option Plan to purchase
5,000 shares of our common stock which is currently
exercisable at an exercise price of $3.75 per share; and
o an option granted under our 1995 Stock Option Plan to purchase
150,000 shares of our common stock at an exercise price of
$2.00 per share, which option is currently exercisable with
respect to 80,000 shares of our common stock.
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<PAGE>
OPTIONS GRANTED IN FISCAL 1999
The following table sets forth the details of options to purchase
common stock we granted to our executive officers during fiscal year ended June
30, 1999, including the potential realized value over the 5 year term of the
option based on assumed rates of stock appreciation of 5% and 10%, compounded
annually. These assumed rates of appreciation comply with the rules of the
Securities and Exchange Commission and do not represent our estimate of future
stock price. Actual gains, if any, on stock option exercises will be dependent
on the future performance of our common stock. Each option is immediately
exercisable.
<TABLE>
<CAPTION>
OPTIONS GRANTED
POTENTIAL REALIZABLE
NUMBER OF PERCENT OF TOTAL PER VALUE AT ASSUMED ANNUAL
SECURITIES TO SHARE RATE OF STOCK PRICE
UNDERLYING EMPLOYEES IN EXERCISE EXPIRATION APPRECIATION
NAME OPTIONS FISCAL YEAR PRICE DATE FOR OPTION TERM
- -------------------------- -------------- ------------------- ----------- -------------- -----------------------
5% 10%
----------- -------
<S> <C> <C> <C> <C> <C> <C>
Clive Kabatznik........... 5,000 50.00% $2.19 April 29, 2004 $3,025 $6,685
Cornelius J. Roodt........ 5,000 50.00% $2.19 April 29, 2004 $3,025 $6,685
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
No options were exercised by any of the above during fiscal year ended
June 30, 1999. The following table sets forth the number of shares of our common
stock underlying unexercised stock by us to our executive officers and the value
of those options at June 30, 1999. The value of each option is based on the
positive difference, if any, of the closing bid price for our common stock on
the Nasdaq National Market on June 30, 1999, or $4.8125, over the exercise price
of the option.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING
UNEXERCISED OPTIONS AT VALUE OF UNEXERCISED IN THE MONEY
FISCAL YEAR-END OPTIONS AT FISCAL YEAR-END
--------------------------------- -------------------------------------
NAME OF EXECUTIVE OFFICER EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------ ---------------- --------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Clive Kabatznik 420,000 50,000 $34,050 0
Cornelius J. Roodt 345,000 70,000 $259,050 $196,875
</TABLE>
DIRECTOR COMPENSATION
Except for Mr. Levy, our directors do not receive fixed compensation
for their services as directors other than options to purchase 10,000 shares of
our common stock granted to each non-employee director and options to purchase
5,000 shares of our common stock granted to each director who is an employee, in
each case under our 1995 Stock Option Plan. Mr. Levy receives an annual
consulting fee of $60,000 and options to purchase 10,000 shares of our common
stock for every year of service as a member of our Board of Directors. However,
directors will be reimbursed for their reasonable out-of-pocket expenses
incurred in connection with their duties.
In February 1999, Mr. Garrick received options to purchase 25,000
shares of our common stock, which options were immediately exercisable and had
an exercise price of $1.00, as compensation for
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<PAGE>
consulting services in connection with our Internet-related activities and
opportunities and in exchange for his agreement to be a nominee for our Board of
Directors.
EMPLOYMENT AGREEMENTS
First South Africa Management, our management subsidiary, entered into
an employment agreement with Clive Kabatznik, our Vice Chairman, President and
Chief Executive Officer. The agreement provides for a term commencing on October
1, 1995 and terminating on October 1, 2000. The agreement also provides that Mr.
Kabatznik will devote substantially all of his business time, energies and
abilities to our business and will receive an annual salary of $180,000. Mr.
Kabatznik also received a one time immediately exercisable option to purchase
55,000 shares of our common stock at an exercise price of $5.00 per share. In
addition, Mr. Kabatznik was granted an additional option to purchase 150,000
shares of our common stock at an exercise price of $5.00 per share, exercisable
after the seventh anniversary following the grant date. However, the vesting of
such option will be accelerated as follows:
o the option will be exercisable with respect to 50,000 shares
on such earlier date that we realize earnings per share of
$.75 or more on a fiscal year basis;
o the option will be exercisable with respect to an additional
50,000 shares on such earlier date that we realize earnings
per share of $1.00 or more on a fiscal year basis; and
o the option will be exercisable with respect to an additional
50,000 shares on such earlier date that we realize earnings
per share of $1.50 or more on a fiscal year basis.
The option has vested with respect to 100,000 shares as a result of our
realization of the applicable earnings per share requirements. We intend, during
the term of Mr. Kabatznik's employment agreement, to pay Mr. Kabatznik an annual
incentive bonus of five percent of the Minimum Pretax Income, as defined in Mr.
Kabatznik's employment agreement, above $4,000,000, as is reported in our
audited financial statements for each fiscal year in which Mr. Kabatznik is
employed, exclusive of certain extraordinary earnings or charges. In November
1998, Mr. Kabatznik agreed to a non-competition agreement with First South
African Holdings (Pty.) Ltd. In exchange for his agreement, Mr. Kabatznik
received 2,000,000 shares of First Lifestyle Holdings.
First South African Holdings (Pty.) Ltd. has entered into an employment
agreement with its Managing Director and Chief Financial Officer, Cornelius J.
Roodt. The agreement provides for a term commencing on July 1, 1996 and
terminating in June 2001. The agreement provides that Mr. Roodt will devote
substantially all of his business time, energies and abilities to our business
and will receive an annual salary of $150,000. Mr. Roodt also received a one
time option to purchase 150,000 shares of our common stock at an exercise price
of $2.00 per share. The option to purchase 150,000 shares of our common stock is
exercisable after the fifth anniversary following the grant date. However, the
vesting of such option will be accelerated as follows:
o the option will be exercisable with respect to 30,000 shares
on such earlier date that we realize earnings per share of
$.75 or more on a fiscal year basis;
o the option will be exercisable with respect to an additional
50,000 shares on such earlier date that we realize earnings
per share of $1.00 or more on a fiscal year basis; and
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<PAGE>
o the option will be exercisable with respect to an additional
70,000 shares on such earlier date that we realize earnings
per share of $1.50 or more on a fiscal year basis.
The option has vested with respect to 80,000 shares as a result of our
realization of the applicable earnings per share requirements. We intend, during
the term of Mr. Roodt's employment agreement, to pay Mr. Roodt an annual
incentive bonus of four percent of the Minimum Pretax Income, as defined in Mr.
Roodt's employment agreement, above $5,000,000, as is reported in our audited
financial statements for each fiscal year in which Mr. Roodt is employed,
exclusive of certain extraordinary earnings or charges. In November 1998, Mr.
Roodt entered into a non-competition agreement with First South African Holdings
(Pty.) Ltd. In exchange for his agreement, Mr. Roodt received 2,000,000 shares
of First Lifestyle Holdings.
LPI Limited, our online travel services subsidiary, entered into an
employment agreement with Pierre Kleinhans, the Chief Executive Officer of LPI
Limited. The agreement provides for a term commencing on June 1, 1999 and
terminating on December 31, 2003, subject to certain extension terms. The
agreement provides that Mr. Kleinhans will devote all of his time during normal
business hours to our online travel service business and will receive an annual
salary of $150,000. Mr. Kleinhans also received a one time immediately
exercisable option to purchase 250,000 shares of LPI Limited at an exercise
price of the lower of $2.43 per share or 20% of the price at which shares of LPI
Limited are offered to third parties during any initial public offering.
STOCK OPTION PLAN
Our Board of Directors has adopted and our shareholders, prior to our
initial public offering, approved our 1995 Stock Option Plan. Our 1995 Stock
Option Plan provides for the grant of:
o options that are intended to qualify as incentive stock
options within the meaning of Section 422 of the Internal
Revenue Code of 1986 to key employees; and
o options not intended to so qualify to key employees, including
our directors and officers, and to directors and consultants
who are not employees.
The total number of shares of our common stock for which options may be granted
under our 1995 Stock Option Plan is 850,000 shares.
Our 1995 Stock Option Plan is administered by the compensation
committee of our Board of Directors. The compensation committee will determine
the terms of options exercised, including the exercise price, the number of
shares subject to the option and the terms and conditions of exercise. No option
granted under our 1995 Stock Option Plan is transferable by the optionee other
than by will or the laws of descent and distribution and each option is
exercisable during the lifetime of the optionee only by such optionee or his
legal representatives.
The exercise price of incentive stock under our 1995 Stock Option Plan
must be at least equal to 100% of the fair market value of such shares on the
date of grant, or 110% of fair market value in the case of an optionee who owns
or is deemed to own stock possessing more than 10% of the voting rights of our
outstanding capital stock. The term of each option will be established by the
compensation committee, in its sole discretion. However, the maximum term for
each incentive stock option granted under our 1995 Stock Option Plan is ten
years, or five years in the case of an optionee who owns or is deemed to own
stock
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<PAGE>
possessing more than 10% of the total combined voting power of our outstanding
capital stock. Options will become exercisable at such times and in such
installments as the compensation committee will provide in the terms of each
individual option. The maximum number of shares for which options may be granted
to any individual in any fiscal year is 210,000.
Our 1995 Stock Option Plan also contains an automatic option grant
program for our directors. Each of our non-employee directors is automatically
granted an option for 10,000 shares of our common stock. In addition, each of
our non-employee directors is automatically granted an option to purchase 10,000
shares of our common stock following each annual meeting of shareholders. Each
employee director is automatically granted an option for 5,000 shares of our
common stock. In addition, each of our employee directors is automatically
granted an option to purchase 5,000 shares of our common stock following each
annual meeting of shareholders. Each grant has an exercise price per share equal
to the fair market value of the our common stock on the grant date, is
immediately exercisable and has a term of five years measured from the grant
date, subject to earlier termination if an optionee's service as a Board member
is terminated for cause.
We have granted options to purchase 590,000 shares of our common stock
under our 1995 Stock Option Plan, 110,000 of which have been exercised.
NON-PLAN STOCK OPTIONS
We have granted non-plan stock options to purchase 1,100,000 shares of
our common stock, 500,000 of which were granted at an exercise price of $4.75
per share and 600,000 of which were granted at $4.06 per share.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of our compensation committee of our Board of
Directors is now or ever has been one of our officers or employees. None of our
executive officers serves as a member of the board of directors or compensation
committee of any entity that has one or more executive officers serving on our
Board of Directors or our compensation committee.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of September 17, 1999, certain
information as to the beneficial ownership of the our common stock by:
o each person known by us to own more than five percent (5%) of
our outstanding shares;
o each of our directors;
o each of our executive officers named in the Summary
Compensation Table under "Executive Compensation"; and
o all of our directors and executive officers as a group.
<TABLE>
<CAPTION>
Amount and Nature of Beneficial
Ownership (1)
Percentage Percentage of
Class B of Voting
Name and Address of Common Common Ownership Power
Beneficial Shareholder Stock Stock (2) (1)(3) (1)(3)
<S> <C> <C> <C> <C>>
Michael Levy................ 158,143(4) 606,589(5) 11.80% 31.10%
9511 West River Street
Shiller Park, IL 60176
Clive Kabatznik............. 519,999(6) 190,000 10.24% 13.71%
1348 Washington Ave.
Suite 155
Miami, FL 33139
FSA Stock Trust............. 383,523(7) 0 6.0% 3.76%
1850 Shelley Court
Highland Park, IL 60035
Cornelius J. Roodt.......... 288,333(8) 0 4.3% 2.75%
P.O. Box 4001
Kempton Park
South Africa
BT Global Credit Limited . . . 1,626,754(9) 0 20.23% 13.75%
c/o Bankers Trust
Luxembourg S.A.
P.O. Box 807
14 Boulevard F.D. Roosevelt
L-2540 Luxembourg
Luxembourg
All executive officers and 1,049,808(10) 796,589 25.05% 45.11%
directors as a group (4
persons)
</TABLE>
-76-
<PAGE>
(1) Beneficial ownership is calculated in accordance with Rule 13d-3 under
the Securities Exchange Act of 1934. Shares subject to stock options,
for purposes of this table, are considered beneficially owned only to
the extent currently exercisable or exercisable within 60 days after
September 17, 1999.
(2) Except as otherwise indicated, each of the parties listed has sole
voting and investment power with respect to all shares of Class B
common stock indicated below.
(3) For the purposes of this calculation, our common stock and our Class B
common stock are treated as a single class of common stock. The Class B
common stock is entitled to five votes per share, whereas the common
stock is entitled to one vote per share.
(4) Includes (i) 63,333 shares of our common stock issuable upon exercise
of options that are immediately exercisable and (ii) 94,810 shares of
our common stock issued to the American Stock Transfer & Trust Company
pursuant to the terms of an escrow agreement for which Mr. Levy has
been granted a voting proxy.
(5) Includes (i) 570,137 shares of our Class B common stock and (ii) 36,452
shares of our Class B common stock issued to the American Stock
Transfer & Trust Company pursuant to the terms of an escrow agreement,
which shares correspond to a like number of shares of First South
African Holdings (Pty.) Ltd. Class B stock purchased by Mr. Levy upon
the closing of the Europair acquisition.
(6) Includes 519,999 shares of our common stock issuable upon exercise of
options that are immediately exercisable.
(7) Includes 383,523 shares of our common stock.
(8) Includes 288,333 shares of our common stock issuable upon exercise of
options that are immediately exercisable.
(9) Includes (i) 1,368,421 shares of our common stock issuable upon
conversion of certain Increasing Rate Senior Subordinated Convertible
Debentures and (ii) 258,333 shares of our common stock issuable upon
conversion of certain 9% Senior Subordinated Convertible Debentures.
(10) Represents 954,998 shares issuable upon exercise of options that are
immediately exercisable.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
-77-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A)
1. FINANCIAL STATEMENTS
The following financial statements are included as required to be filed
by Item 8:
LEISUREPLANET HOLDINGS, LTD.
Report of the independent auditors
Consolidated Balance Sheets at June 30, 1999 and 1998
Consolidated Statements of Income for the years ended June 30, 1999,
1998 and 1997 Consolidated Statements of Cash Flows for the years ended
June 30, 1999, 1998 and 1997 Consolidated Statement of Changes in
Stockholders' Investment for the period June 30, 1996 to June 30, 1999
Notes to the Consolidated Financial Statements for the years ended June
30, 1999, 1998 and 1997
2. FINANCIAL STATEMENT SCHEDULES:
All schedules have been omitted since the required information is
included in the consolidated financial statements or notes thereto.
3. EXHIBITS:
(B) REPORTS ON FORM 8-K
Not applicable.
EXHIBIT NUMBER Description
3.1 Memorandum of Association of the Registrant(7)
3.2 Bye-Laws of the Registrant(7)
4.1 Form of Warrant Agreement(7)
4.2 Form of Unit Purchase Option(7)
4.3 Indenture dated April 25, 1997 between the Registrant and
American Stock Transfer & Trust Company(1)
4.4 Form of Debenture(8)
4.5 Form of Placement Warrant(8)
4.6 Stock Option Agreement(8)
4.7 Indenture dated October 29, 1997, between the Registrant and
American Stock Transfer & Trust Company(3)
4.8 Loan Note dated May 27, 1999 granted by LPI Limited in
favor of Twin Media (Proprietary) Limited(9)
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<PAGE>
EXHIBIT NUMBER Description
10.1 Form of Escrow Agreement regarding the Earnout Escrow
Shares(7)
10.2 Form of FSAH Escrow Agreement(7)
10.3 Form of Employment Agreement of Clive Kabatznik(7)
10.4 Form of FSAM Management Agreement(7)
10.5 Form of Consulting Agreement with Michael Levy(7)
10.6 1995 Stock Option Plan(7)
10.7 Pieman's Pantry Acquisition Agreement(4)
10.8 Form of Astoria Acquisition Agreement(5)
10.9 Form of Gull Foods Acquisition Agreement(6)
10.10 Form of Employment Agreement of Cornelius Roodt(2)
10.11 Agreement dated February 12, 1999 between Twine Media
(Proprietary) Limited, First South Africa Corp., Ltd. and
LPI Limited(9)
10.12 Form of Employment Agreement of Pierre Kleinhans(9)
21.1 Subsidiaries of the Registrant(9)
27.1 Financial Data Schedule (9)
- -----------
(1) Incorporated by reference is the Registrant's Current Report on Form 8-K,
Exhibit 4.1 (filed on September 10, 1997).
(2) Incorporated by reference is the Registrant's Annual Report on Form 10-K
for the fiscal year ended June 30, 1997 (filed on September 29, 1997).
(3) Incorporated by reference is the Registrant's Current Report on Form 8-K,
Exhibit 4.1 (filed on October 31, 1997).
(4) Incorporated by reference is the Registrant's Current Report on Form 8-K,
Exhibit 1 (filed on June 14, 1996) as amended on Form 8-K/A (filed on
August 16, 1996) and as amended on Form 8-K/A (filed on January 22, 1998).
(5) Incorporated by reference is the Registrant's Current Report on Form 8-K,
Exhibit 1 (filed on November 7, 1996) as amended on Form 8-K/A (filed on
March 14, 1997).
(6) Incorporated by reference is the Registrant's Current Report on Form 8-K,
Exhibit 1 (filed on May 8, 1997) as amended on Form 8-K/A (filed on July 3,
1997).
(7) Incorporated by reference is the Registrant's Registration Statement on
Form S-1 (No. 33-99180) (filed on November 9, 1995), as amended on Form
S-1/A No. 1, Form S-1/A No. 2 and Form S-1/A No. 3 (filed on December 27,
1995, January 16, 1996 and January 24, 1996, respectively).
(8) Incorporated by reference is the Registrant's Registration Statement on
Form S-1 (No. 333-33561) (filed on August 13, 1997), as amended on Form
S-1/A No. 1, Form S-1/A No. 2 and For S-1/A No. 3 (filed on December 9,
1997, January 22, 1998 and February 11, 1998, respectively).
(9) Filed herewith.
(B) REPORTS ON FORM 8-K
Not applicable.
-79-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized in the City of London,
State of England, on the27th day of September, 1999.
LEISUREPLANET HOLDINGS, LTD.
BY: /s/ Clive Kabatznik
---------------------------------------
Clive Kabatznik
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant in
the capacities and on the date indicated.
Signature Title Date
/s/ Michael Levy Chairman of the Board of September 27, 1999
- --------------------
Michael Levy Directors
/s/ Clive Kabatznik President, Vice Chairman, September 27, 1999
- ----------------------
Clive Kabatznik Chief Executive Officer, Chief
Financial Officer, Director and
Controller
/s/ Cornelius Roodt Director September 28, 1999
- ----------------------
Cornelius Roodt
/s/ George R. Garrick Director September 28, 1999
- ------------------------
George R. Garrick
-80-
<PAGE>
EXHIBIT 4.8
LOAN NOTE
granted by
LPI LIMITED
(UK Reg no 3092714)
of
2nd Floor, Corporate Place, 13 Mispel Street, Belville South Africa
(Telefax 27 - 21 - 948 7354)
("LPI")
IN FAVOUR OF
TWINE MEDIA (PROPRIETARY) LIMITED
(SA REG NO 94/00158/07)
OF
COETZIER STREET / PO BOX 456, STELLENBOSCH 7600, SOUTH AFRICA
(TELEFAX 27-21-887 1645)
("Twine")
BEING AN ACKNOWLEDGMENT OF DEBT
1. LPI hereby acknowledges that it unconditionally owes Twine, and is
therefore bound to Twine for the due and proper payment to Twine of the
amount of US$10,000,000 (ten million US dollars) ("Twine Loan"),
representing the aggregate of amounts contributed by Twine to LPI on
loan account as working capital and other amounts for which LPI is
indebted to Twine. LPI furthermore acknowledges that it is bound to
Twine in respect of the further terms and conditions set out in this
loan note.
2. The parties agree, and or as the case may be, acknowledge that the
Twine Loan shall:
(a) not bear interest unless it becomes due and payable and
remains unpaid in which event it shall bear interest at the
LIBOR USD one month rate plus one percentage (i.e if the LIBOR
rate is 4.5%, the interest to be charged will be 4.5% + 1% or
5.5%). Such interest shall be paid monthly in arrears and any
unpaid interest will be capitalized monthly;
<PAGE>
(b) rank in preference above any other shareholder's claim,
present and future, of LPI and shall always be paid off first
before the claim of any other shareholder is met, it being
understood and agreed that LPI shall at all times and before
accepting any further amounts on loan account from any
shareholder not dealt with in the agreement of 18 February
1999 between the parties hereto and First South Africa Corp.,
Ltd, ("FSAC") procure that such shareholder agrees in writing
that his claims against LPI will be so subordinated;
(c) not be repayable on demand other than, unless otherwise waived
by Twine, as a first claim against the sale proceeds in the
event that LPI sells its business or any material part thereof
or from the proceeds of the first round (after signature
hereof) of funding of LPI or the sale and / or subscription
proceeds in the event of any public offer of shares in LPI;
(d) at Twine's option, be available for Twine to participate in
the further funding of LPI; and
(e) in addition to what is recorded in clauses 2(c) above and 4
below, become payable immediately in the event of: (i) the
liquidation of LPI, including the launching of any application
for the liquidation of LPI, or for the placement of LPI under
judicial management; or (ii) any attempt by LPI to compromise
with its creditors in any way; or (iii) LPI in any way
breaches any term or condition of this Loan Note and fails to
remedy such breach within 14 days of receipt of a writtien
notice from Twine requiring that the breach be remedied.
3. LPI undertakes to Twine that until the Twine Loan is repaid, LPI shall
not:
(a) pay any dividend on any LPI ordinary share;
(b) pay any shareholder interest on any claim against LPI;
(c) create, issue, service or redeem any preference share,
debenture or other loan stock; or
2
<PAGE>
(d) do anything that will adversely affect the Twine Loan,
including LPI's ability to repay such loan at any time;
without the prior written consent of Twine provided, however, that LPI
may at any time borrow from FSAC on a non-interest bearing basis only
to repay the Twine Loan.
4. LPI undertakes that should any further shares in LPI be issued, the
subscription proceeds shall, unless otherwise waived by Twine, first be
applied in repayment of the Twine Loan.
5. LPI hereby expressly renounces the benefits of NON CAUSA DEBITI, the
ERRORI CALCULI, the revision of accounts, and no value recorded.
6. Twine may cede or pledge its interest in and to the Twine Loan with
LPI's prior consent.
7. No alteration, cancellation, variation of, or addition to this Loan
Note shall be of any force or effect unless reduced to writing and
signed by the parties hereto or their duly authorised representatives.
8. Subject to the agreement of 18 February 1999 referred to in clause 2(b)
above, this document contains the entire agreement between the parties
in relation to its subject matter and no party shall be bound by any
undertakings, representations, warranties, promises or the like not
recorded in the former and / or this agreement.
9. No indulgence, leniency or extension of time which any party
("grantor") may grant or show to any other party shall in any way
prejudice the grantor or preclude the grantor from exercising any of
its rights in the future.
10. This agreement shall be governed by the laws of the Republic of South
Africa. The parties similarly submit themselves to the jurisdiction of
the Cape Provincial Division of the High Court of South Africa.
11. LPI shall bear the cost of the drafting and finalization of this
agreement.
12. Each of the parties chooses the addresses and facsimile number on the
first page of this agreement as respectively its DOMICILIUM CITANDI ET
EXECUTANDI ("DOMICILIUM"), postal address
3
<PAGE>
and facsimile number for the purposes of giving any notice, the serving
of any process and for any other purposes arising from this agreement.
13. A party may, at any time, by written notice to the others, change its
DOMICILIUM, postal address or facsimile number to another, provided
that it must always at least provide a physical street address as
domicilium.
Thus done and signed:
Dated at Leuven on 27 May 1999
------ ---------------
As witnesses
1. __________________________ /s/ P. Tredoux
--------------------------------------
for and on behalf of LPI, the
signatory warranting his authority
Name: P Tredoux
2. ____________________________
Dated at Stellenbosch on 1 June 1999
------------ ---------------
As witnesses
1. _____________________________ /s/ H. Carse
--------------------------------------
for and on behalf of Twine, the
signatory warranting his authority
2. ______________________________ Name: H Carse
-83-
<PAGE>
EXHIBIT 10.11
AGREEMENT
between
Twine Media (Proprietary) Limited
(SA Reg no 94/00158/07)
of
Coetzier Street / PO Box 456, Stellenbosch 7600, South Africa
(Telefax 27-21-887 1645)
("Twine")
AND
FIRST SOUTH AFRICA CORP., LTD
(BERMUDA CO FILE NO 0-27494)
OF
c/o First South Africa Holdings (Pty) Ltd,EUROPAIR BUILDING, GRADER RD,
SPARTAN EXT 3 / PO
BOX 4001 KEMPTON PARK 1620
(Telefax 27-11-392 7009)
("FSAC")
AND
LPI LIMITED
(UK REG NO 3092714)
OF
2ND FLOOR, CORPORATE PLACE, 13 MISPEL STREET, BELVILLE SOUTH AFRICA
(TELEFAX 27 - 21 - 948 7354)
("LPI")
WHEREAS:
A Twine holds 100% of the issued share capital of LPI (trading as
"Leisure Planet"), an Internet based travel services provider;
B FSAC, a Nasdaq listed USA corporation wishes to invest US$9,891,196
million in LPI as share capital and initially loan capital;
THEREFORE THE PARTIES NOW AGREE:
<PAGE>
1. INTERPRETATION
In this agreement, unless the context indicates otherwise:
1.1 "Capital Contribution Schedule" means the schedule annexed hereto
marked "A", setting out the dates on, and amounts which FSAC will
contribute funds to LPI as either share or, initially only, loan
capital;
1.2 "Company" means LPI Limited, a party to this agreement;
1.3 "FSAH Investment" means the South African Rand 60 million that
Rembrandt Group Limited has agreed, subject to certain conditions, to
invest in FSAC's wholly owned subsidiary, First South African Holdings
(Pty) Ltd and which amount has, on behalf of FSAC, been converted to
US$9,891,196;
1.4 "LPI Ordinary Share" means an ordinary share, ranking PARI PASSU, with
every other ordinary share, issued in the capital of LPI;
1.5 "Subscription Date" means 15 February 1999, being the latest date upon
which FSAC will subscribe for and be issued with 2,173 LPI Ordinary
Shares;
1.6 words in the singular, shall include the plural, and vice versa, words
in the masculine gender shall include the feminine and neuter genders,
and vice versa and any reference to a person shall include partnerships
and bodies corporate and vice versa;
1.7 paragraph headings shall not be used to determine the meaning of any
provision; and
1.8 should the preamble to this agreement or this clause 1 confer rights
and obligations on any party, these shall be effective and binding.
2. SUSPENSIVE CONDITIONS
This agreement is subject to and conditional upon fulfilment of the
following suspensive conditions by not later than the Subscription
Date, namely :
2.1 the approval of the Twine Board;
-2-
<PAGE>
2.2 the approval of the FSAC Board;
2.3 the closing of the Yahoo! and Lycos portal deals in respect of the
European internet travel market by LPI; and
2.4 completion of the pre-subscription actions set out in clause 3 below.
The suspensive conditions set out in clauses 2.2 and 2.3 are for the
benefit of FSAC, who may in its sole discretion, by written notice to
the other parties, at any time before the Subscription Date, waive the
need for the fulfilment of some or all of such conditions. It is
further recorded that, although not a suspensive condition, FSAC will
seek to procure that, by not later than the Subscription Date, Pierre
Kleinhans and Bart Goedseels as employees of LPI, enter into heads of
agreement with LPI setting out their future employment by LPI, on terms
acceptable to FSAC. FSAC may delay subscribing for shares in LPI until
this has been done, provided that under no circumstances may such
subscription be delayed beyond the Subscription Date on account of this
provision.
3. PRE-SUBSCRIPTION ACTIONS
3.1 It is recorded that:
(a) the authorised share capital of LPI is 1,000,000 ordinary shares of
GB(pound)1.00 (one Pound sterling) each; and
(b) the issued share capital of LPI is 510 ordinary shares, all issued
to Twine.
3.2 Immediately after the signature of this agreement Twine shall procure that
LPI resolves to:
(a) allot and issue 2,173 LPI Ordinary Shares of GB(pound)1.00
each at par (total subscription price GB(pound)2,173) to FSAC;
and
(b) by not later than 15 October 1999 (the last day for the
contribution of funds to LPI by FSAC in terms of the capital
Contribution Schedule), allot and issue one further LPI
Ordinary Share of GB(pound)1.00 to FSAC at a premium equal to
the difference between US$9,891,196 (the FSAH Investment) and
the USA dollar value of the total
-3-
<PAGE>
subscription price of 2,174 LPI Ordinary Shares at par, as set
out in clause 4.4 below;
(c) issue a loan note to Twine for the amount of US$10 million,
representing Twine's accumulated claims on loan account
against LPI, on terms substantially in accordance with what
are set out in clause 7 below and otherwise acceptable to
Twine. It is recorded that Twine's accumulated claims on loan
account against LPI includes a further amount to be disbursed
by Twine in favour of LPI to settle all LPI's trade creditors
as at 31 December 1998 so that debtors and cash at hand on
such date less trade creditors will equal nil. Should the
recovery of debtors for the period ended 31 December 1998
exceed or fall short of what is provided for in LPI's
management accounts drawn to 31 December 1998, Twine shall be
reimbursed by LPI in the event of the better than provided for
recovery of debtors and Twine shall indemnify LPI in the event
of a short fall, in either case by means of a cash payment
("adjustment") by not later than 30 June 1999. The amount of
the adjustment will be determined by LPI's auditors.
4. SUBSCRIPTION FOR SHARES
4.1 Immediately upon receipt of written confirmation by the auditors of LPI
that all the matters referred to in clause 3 have been completed, but
not later than the Subscription Date, and provided that: (i) the
suspensive conditions set out in clause 2 have been fulfilled or
waived, as the case may be, and (ii) FSAC has received the FSAH
Investment, FSAC shall subscribe for, and LPI shall, subject to clause
4.2 below, issue to it, 2,173 LPI Ordinary Shares of GB(pound)1.00 for
a total subscription price of GB(pound)2,173.
4.2 LPI shall deliver FSAC's share certificate for 2,173 LPI Ordinary
Shares, on behalf of FSAC to Mourant du Feu & Jeune, of 22 Grenville
Street, St Helier, Jersey JE4 8PX, Channel Islands (marked for the
attention of Mr I C James) to hold in escrow (subject to suitable
written instructions signed jointly by the parties hereto, to Mourant
du Feu & Jeune) until the Loan Capital (as defined below) has been
disbursed in full to LPI and capitalized as envisaged in clause 4.5(d)
below.
4.3 It is recorded that upon completion of the FSAC subscription for LPI
Ordinary Shares as per clause 4.1 above and clause 4.5(d) below, FSAC
will hold 2,174 LPI Ordinary Shares amounting to 81% of LPI's issued
share capital and Twine will hold 510 LPI Ordinary Shares amounting to
19% of LPI's issued share capital.
-4-
<PAGE>
4.4 FSAC shall further, pending its subscription for a further LPI Ordinary
Share as envisaged in clause 3.2(b) above, immediately lend to LPI, who
shall borrow from FSAC, an amount in US Dollars equal to the difference
between US$9,891,196 (the FSAH Investment) and the USA dollar
equivalent of the total subscription price of 2,173 LPI Ordinary Shares
as at the Subscription Date ("Interim Loan Capital").
4.5 The Interim Loan Capital, which is an interim accommodation to
facilitate the contribution of funds to LPI in accordance with the
Capital Contribution Schedule, shall, unless all three parties to this
agreement agree otherwise in writing:
(a) be disbursed to LPI in accordance with the Capital
Contribution Schedule;
(b) always be regarded as capital earmarked for the subscription
by and issue to FSAC of one further LPI Ordinary Share as
envisaged in clause 3.2(b) above;
(c) not bear interest;
(d) as soon as the Loan Capital has been disbursed in full to LPI,
or in the event that such capital is not disbursed to LPI in
full for any reason whatsoever, as soon as such disbursement
ends or on the last day set in the Capital Contribution
Schedule for the contribution of such capital by FSAC to LPI,
whichever is earlier, be capitalized through the issue of one
further LPI Ordinary Share at par and a premium equal to the
balance of the Loan Capital and for which purpose FSAC hereby
irrevocably authorize any director of LPI to do all things
necessary to effect such issue;
(e) at all times be subordinated to the Twine Loan and therefore
rank behind the Twine Loan and not be repaid until and unless
the Twine Loan has been repaid in full. For the sake of
clarity, the Interim Loan Capital will not be repayable on
demand; and
(f) not be used to in any way dilute the shareholding of any other
shareholder in LPI.
4.6 In the event that the Loan Capital is not disbursed to or on behalf of
LPI in full for any reason whatsoever, in accordance with the Capital
Contribution Schedule for such disbursement, Twine shall immediately
have the option to call for and hence buy from FSAC, so many LPI
Ordinary Shares as bear the same ratio to the total FSAC holding of
2,173 or 2,174, as the
-5-
<PAGE>
case may be, shares that the amount of the Loan Capital not
yet disbursed to or on behalf of LPI bears to the total amount
of the Loan Capital ("Call Option"). (As an example: if the
Loan Capital amounts to US$9,8 million and US$2,94 million or
30% has not yet been disbursed to or on behalf of LPI by the
date concerned, Twine shall be entitled to call 30% or 652 of
the 2,174 LPI Ordinary Shares being held by FSAC.)
The Call Option shall:
(a) be exercised in writing, at any time after after the Loan
Capital has not been disbursed to LPI for any reason
whatsoever, but not later than 21 days after the last date set
in the Capital Contribution Schedule for the disbursement in
full of the Loan Capital, or;
(b) be exercised at the par value of the shares concerned, i.e.
GB(pound)1.00 per share;
(c) upon being exercised as aforesaid, result in Twine having
bought, and FSAC having sold the appropriate number of LPI
Ordinary Shares; and
(d) upon being exercised, be settled through Twine paying the
purchase price on behalf of FSAC to Mourant du Feu & Jeune, of
22 Grenville Street, St Helier, Jersey JE4 8PX, Channel
Islands (marked for the attention of Mr I C James) and the
latter procuring that the number of LPI Ordinary Shares so
bought by Twine is delivered to Twine or its nominee. For this
purpose, FSAC hereby irrevocably appoints and authorizes
Mourant du Feu & Jeune to do all things necessary on its part,
including to sign any transfer documentation required, to
effect transfer of the shares so bought to Twine.
5. MANAGEMENT CONTROL & DIRECTORS
5.1 With effect from the Subscription Date, FSAC shall:
(a) subject to clause 5.2 below, have management control of LPI;
and
(b) be entitled to appoint a majority of the board of directors of
LPI:
provided, however, that Twine will at all times, for as long as it
remains a shareholder, by written notice to FSAC and LPI, have the
right to appoint at least two directors of LPI, including to remove,
replace and fill any vacancy in any such appointment from time to time.
-6-
<PAGE>
5.2 At any meeting of the board of directors of LPI, a quorum shall exist
only if prior written notice of such meeting has been given and at
least one director appointed by FSAC and at least one director
appointed by Twine are present.
5.3 For as long as Twine holds at least 5% of the issued share capital of
LPI, LPI may not, without the prior written consent of Twine, which
consent shall not be withheld unreasonably:
(a) appoint, remove or replace its auditors;
(b) make any material acquisition of which the value exceeds 5% of
of shareholders' funds;
(c) other than in the ordinary course of business and in
accordance with budgets submitting to and approved by the
board of directors, incur any interest bearing debt, or if not
interest bearing, debt that will rank ahead of the Twine Loan;
(d) enter into any transaction with a related party at values that
do not represent at arm's length market values. Should there
be a dispute between the parties as to whether a proposed
transaction is proper on this basis, the values concerned
shall be referred to a merchant bank, jointly appointed by the
parties, for determination. Failing agreement on the identity
of the merchant bank, each party may appoint its own merchant
bank whereupon the average of the values determined by both
banks, shall be taken as the market values. For purposes of
this clause a "related party" shall include any holding
company, subsidiary, including of such holding company,
shareholder or director of LPI, or any entity in which such
shareholder or director has, directly or indirectly, a
material interest ;
(e) merge its business of Internet travel services provider with
that of any third party;
(f) dispose of its business of Internet travel services provider;
(g) discontinue or abandon its business of Internet travel
services provider;
(h) engage in any activity or incur any debt that is not in the
ordinary course of its business.
-7-
<PAGE>
6. WARRANTIES & UNDERTAKINGS
It is recorded and agreed that other than for the warranties and
undertakings expressly set out in this agreement, Twine and LPI have
not made or given any representations, warranties, indemnities or
undertakings to FSAC and that FSAC has been afforded every opportunity
to investigate and satisfy itself with the financial soundness or
otherwise of LPI and of the nature and extent its business operations
and ongoing commitments. Notwithstanding the aforegoing, and for the
sake of clarity, it is recorded that the business of LPI shall include
all South African operation currently being conducted in Belville under
the name of "Leisure Planet" being all the South African operations of
LPI, present and former.
7. THE TWINE LOAN
7.1 The Twine Loan of US$10 million referred to in clause 3.2(b) above
will:
(a) not bear interest;
(b) rank in preference above any other shareholder's claim,
present and future, of LPI and shall always be paid off first
before the claim of any other shareholder is met;
(c) not be repayable on demand other than as a first claim against
the sale proceeds in the event that LPI sells its business or
any material part thereof or from the proceeds of the next
round of funding of LPI or the sale and / or subscription
proceeds in the event of any public offer of shares in LPI;
and
(d) at Twine's option, be available for Twine to participate in
the further funding of LPI.
7.2 FSAC and LPI undertake to Twine that until the Twine Loan is repaid,
LPI shall not:
(a) pay any dividend on any LPI ordinary share;
(b) pay any shareholder interest on any claim against LPI;
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<PAGE>
(c) create, issue, service or redeem any preference share,
debenture or other loan stock; or
(d) do anything that will adversely affect the Twine Loan,
including LPI's ability to repay such loan at any time;
without the prior written consent of Twine provided, however, that LPI
may at any time borrow from FSAC on a non-interest bearing basis only
to repay the Twine Loan.
7.3 Should any further shares in LPI be issued, the subscription proceeds
shall first be applied in repayment of the Twine Loan. Similarly, in
the event that both Twine and FSAC jointly sell any of their interest
in LPI to any third party, such sale shall be deemed to include the
Twine Loan so that the aggregate sale consideration for the entire
transaction shall, unless Twine agrees otherwise, first be allocated in
payment of the Twine Loan and the balance, if any, to the sale of the
shares of both parties.
8. THE TWINE OPTION
8.1 Twine may at any time up to, and including, an initial public offer by
LPI, subscribe for and be issued with a further so many LPI Ordinary
Shares as would, after issue of the additional shares to be acquired or
issued by LPI, constitute 6% of the issued share capital of LPI. This
option (the "Twine Option"):
(a) shall be exercised in writing not less than 30 (thirty) days
before any initial public offer of LPI shares;
(b) may be exercised for a smaller number of shares or in tranches
(for not less than 10% of the total and in a round number to
the nearest 100), i.e Twine may in its sole discretion, elect
to acquire only some of the additional option shares or to
acquire such shares over a period of time, provided that when
it exercises the option for a smaller number of shares, it
need not state whether this is the only shares that it elects
to acquire.
(c) shall be exercised at a total subscription price of US$100,000
(one hundred US Dollars) for all the option shares, pro rated
if for a smaller number of shares.
9. GOOD FAITH AND COOPERATION
9.1 With effect from the first subscription date in their relationship as
shareholders of LPI, Twine and FSAC undertake to: (i) observe the
utmost good faith to each other and not to do
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<PAGE>
anything or refrain from doing anything, which might prejudice or
detract from their respective rights or interests; and (ii) to use
their best endeavours to promote the business of LPI .
9.2 Each of the parties undertake to:
(a) do and to procure the doing by others, and to refrain and to
procure that others will refrain from doing, all things;
(b) pass, and to procure the passing of such resolutions of the
directors or shareholders of LPI or of any other company
relevant;
to the extent that it may lie within such party's powers and may be
required to give effect to this agreement.
9.3 In the event that FSAC's shareholding in LPI falls below 50%, Twine and
LPI shall negotiate in good faith with a view to the establishment of a
voting pool to ensure continuing joint control of LPI.
9.4 Nothing contained in this agreement shall create a relationship of
partnership or agency between any of the parties.
10. DISPOSAL OF SHARES AND PRE-EMPTIVE RIGHTS
10.1 Until such time as LPI has successfully made an initial public offer of
its shares and has its shares listed on a recognized stock exchange, a
shareholder may only sell or otherwise dispose of its shares in LPI
and, if that be so, an equivalent portion of its shareholders' loan
claims against LPI,:
(a) with the prior written consent of the other shareholder; or
(b) in the manner set out in clause 10.2 and further.
10.2 A shareholder that wishes to sell or otherwise dispose of its shares or
any of its shares, and, if that be so, an equivalent portion of its
shareholders' loan claims against LPI, to a bona fide third party
purchaser, shall first offer such shares and loan claims ("the sale
shares") to the other shareholder by means of a written notice ("the
sale notice").
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<PAGE>
10.3 The sale notice shall set out:
(a) the number of sale shares;
(b) the purchase price of the sale shares which shall sound either
in South African Rand or US Dollars;
(c) any other terms or conditions that are material to the offer
for sale of the sale shares; and
(d) the identity and such other details as the recipient of the
sale notice may reasonably require, of the bona fide third
party to whom the offeror proposes to sell the sale shares.
10.4 Upon receipt of the sale notice, the shareholder to whom the sale
shares are being offered, ("the offeree") shall have 30 (thirty) days
within which to accept such offer in writing. If it does so, and only
then, the offeror shall have sold, and the offeree have bought the sale
shares on the terms set out in the sale notice.
10.5 Should the offeree not accept the offer of the sale shares in full as
set out in the sale notice, the offeror shall be entitled to sell or
otherwise dispose of the sale shares only to the bona fide third party
of whom the offeree had been notified, provided that such sale or
disposal shall not be on terms, including price, more favourable than
those set out in the sale notice, at any time within two months of
expiry of the offer of the sale shares to the offeree.
10.6 Should there be more than one offeree shareholder, the offer of the
sale shares shall be deemed to have been made to them pro rata to their
then shareholding, provided that an offeree may, without being obliged,
accept the offer in respect of all the sale shares.
10.7 This clause 10 shall not preclude a party from at any time,
transferring its shareholding in LPI to a subsidiary, co-subsidiary or
to its holding company, provided that: (i) the transferee acknowledges
in writing to the other parties that it shall be bound by the
provisions of this agreement; and (ii) should the relationship of
holding company, subsidiary or co-subsidiary ceases, the shares are
transferred back to the original transferor, being a party to this
agreement.
-11-
<PAGE>
10.8 In the event that the immediate parent company of a party to this
agreement, being a shareholder of LPI, sells and transfers its control
in such party to a third party who does not fall within the
relationship set out in clause 10.7, the party concerned shall be
deemed to have irrevocably offered its shares in and claims on loan
account against LPI to the other shareholders of LPI for a period of 21
days at a price to be agreed between the parties, and failing such
agreement within a reasonable period, to be determined by a merchant
bank jointly appointed and paid for by the parties. If the parties
cannot agree on such appointment within a further reasonable period,
each shall appoint and pay its own merchant bank and the price shall be
the average of the prices respectively determined by such banks.
10.9 In the event of FSAC selling all or some of its shares in and, if that
be so, claims on loan account against LPI, whether in terms of this
clause 10 or in any other manner, to a third party purchaser, Twine may
require that FSAC procures that the purchaser also purchases all or a
pro rata share of Twine's shares, in and claims on loan account against
LPI at the same price and on the same terms, or should such purchaser
not want to purchase more shares, that the shares and claims on loan
account to be sold to him are drawn equally from both FSAC and Twine in
proportion to their then shareholding in LPI.
10.10 For as long as Twine is to remain a shareholder following to the sale
of any shares pursuant to this clause, FSAC, if the seller, shall
procure that the purchaser undertakes in writing to be bound by the
provisions of this agreement.
11. ADDRESSES AND NOTICES
11.1 Each of the parties chooses the addresses and facsimile number on the
first page of this agreement as respectively its DOMICILIUM CITANDI ET
EXECUTANDI ("DOMICILIUM"), postal address and facsimile number for the
purposes of giving any notice, the serving of any process and for any
other purposes arising from this agreement.
11.2 A party may, at any time, by written notice to the others, change its
DOMICILIUM, postal address or facsimile number to another, provided
that it must always at least provide a physical street address as
DOMICILIUM.
11.3 Any notice given and any payment made by a party to any of the others
("the addressee") which:
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<PAGE>
(a) is delivered by hand during the normal business hours of the
addressee at the addressee's domicilium for the time being,
shall be presumed, until the contrary is proved by the
addressee, to have been received by the addressee at the time
of delivery;
(b) is posted by prepaid registered first class / air mail to the
addressee at the addressee's chosen postal address for the
time being, shall be presumed, until the contrary is proved by
the addressee, to have been received by the addressee on the
14th day after the date of posting; or
(c) in the case of a notice only, is sent by facsimile to the
addressee's chosen facsimile number during the normal business
hours of the addressee, shall be presumed, until the contrary
is proved by the addressee, to have been received at the time
it was so transmitted.
12. GENERAL
12.1 No alteration, cancellation, variation of, or addition to this
agreement shall be of any force or effect unless reduced to writing and
signed by the parties to this agreement or their duly authorised
representatives.
12.2 This document contains the entire agreement between the parties in
relation to its subject matter and no party shall be bound by any
undertakings, representations, warranties, promises or the like not
recorded in this agreement.
12.3 No indulgence, leniency or extension of time which any party ("the
grantor") may grant or show to any other party shall in any way
prejudice the grantor or preclude the grantor from exercising any of
its rights in the future.
12.4 This agreement shall be governed by the laws of the Republic of South
Africa. The parties similarly submit themselves to the jurisdiction of
the Cape Provincial Division of the High Court of South Africa.
12.5 To the extent that memorandum and articles of association of LPI
conflict with or fail to record the provisions of this agreement, the
provisions of this agreement shall take precedence and be given effect
to. Any party hereto may nevertheless at any time require that the
memorandum and articles of association of LPI be amended to give effect
to this agreement.
12.6 LPI shall bear the cost of the drafting and finalization of this
agreement.
12.7 This agreement will be effectively signed and be binding through each
or some of the parties signing a separate but identical copy
(originally e-mailed to such party) thereof and then faxing the copy
signed by it to the other parties, which in the case of FSAC shall be
the fax
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<PAGE>
number appearing on page one, and in the case of Twine and LPI, 021 -
887 3639. As soon as is practically possible thereafter, the parties
shall, for record purposes, nevertheless all sign and exchange a single
copy of this agreement.
Thus done and signed:
(d) Dated at Stellebosch on 12 February 1999
(d) AS WITNESSES
1. _____________________________ /s/ JG Swiegers
---------------------------------------
for and on behalf of Twine, the
signatory warranting his authority
2. ______________________________ Name: J G Swiegers (Director)
Dated at Kempton Park on 19 February 1999
As witnesses
1. ____________________________ /s/ Clive Kabatznik
----------------------------------------
for and on behalf of FSAC, the
signatory warranting his authority
2. ____________________________ Name: C Kabatznik (Director)
Dated at _________________ on ______________________ 1999
As witnesses
1. ____________________________ /s/ H. Carse
---------------------------------------
for and on behalf of LPI, the signatory
warranting his authority
2. ____________________________ Name: H Carse (Director)
-14-
<PAGE>
"A"
The Capital Contribution Schedule
Date of payment Amount (US$) Receiving bank account
Upon receipt of the FSAH 3,250,000 LPI Ltd's bank account at:
Investment in the Jersey Midland Bank Plc
Account PO Box 181
27-32 Poultry
London
EC2P 2BX UK
A/c no: 37315168
Serial no: 000146
Type: Call Deposit no 1
Currency: US$
15 April 1999 1,000,000 As above
14 May 1999 1,000,000 As above
15 June 1999 1,000,000 As above
15 July 1999 1,000,000 As above
16 August 1999 1,000,000 As above
15 September 1999 1,000,000 As above
15 October 1999 641,196 As above
- ------------------------------------------------ ------------------------------
9,891,196
Note: First South African Corp., may accelerate any of the above payments by
written notice to Mourant du Feu & Jeune (with a copy to Rembrandt Group Ltd)
-15-
<PAGE>
EXHIBIT 10.12
EMPLOYMENT AGREEMENT
between
PETRUS FREDERICK KLEINHANS
("the Employee")
and
LPI LIMITED
("the Company")
1. INTRODUCTION
The parties wish to enter into an employment agreement on the terms
and conditions set out below.
2. SUSPENSIVE CONDITION
2.1 The rights and obligations of the parties under this agreement are
subject to and conditional upon the conclusion, contemporaneously
with the conclusion of this agreement of an option agreement,
substantially in the form of schedule 1 ("the suspensive condition")
2.2 If the suspensive condition is not fulfilled, this agreement shall
lapse and be of no further force or effect, unless the parties agree,
in writing, to waive fulfillment of the suspensive condition.
3. POSITION
The Employee will be employed by the Company in the position of Chief
Executive Officer.
4. PERIOD OF EMPLOYMENT
4.1 The Employee's employment will commence on 1 June 1999 and, subject
to the provisions of clauses 4.2 and 5 below and to any earlier
agreed termination, will continue for a fixed period of 5 years
terminating on 31 December 2003, ("the initial period").
<PAGE>
4.2 The Employee's employment will continue after the expiry of the
initial period unless either party gives the other written notice not
later than 3 months prior to expiry of the initial period that that
party wishes to terminate such employment. If the initial period is
so extended the Employee's employment may be terminated by either
party giving to the other not less than 3 months written notice of
termination, or in the circumstances contemplated in clause 5.
5. TERMINATION OF EMPLOYMENT
Notwithstanding the provisions of this contract, the Company will be
entitled to terminate the Employee's employment, with or without
notice, at any time during his employment, if he:
5.1 is guilty of any serious misconduct, breach of trust or deliberate
neglect in the discharge of his duties under this contract;
5.2 knowingly or negligently places himself in a position where his
personal interests conflict with those of the Company;
5.3 discloses the Company's confidential information to any person not
authorized by the Company to receive such information;
5.4 becomes of unsound mind;
5.5 is convicted of any criminal offense involving fraud or dishonesty;
or
5.6 is guilty of any conduct which will justify summary dismissal at
common law.
6. EMPLOYMENT DUTIES
6.1 The Employee undertakes to:
6.1.1 carry out, conscientiously and to the best of his abilities, all such
functions and duties, and exercise judiciously all the discretions,
as the Company from time to time may assign to him and as are
reasonable or lawful;
2
<PAGE>
6.1.2 obey and comply with all lawful and reasonable instructions given to
him by the board of directors or its delegates;
6.1.3 be loyal to the Company in all dealings and transactions relating to
the business and interests of the Company and to use his best
endeavours to protect and promote the business, reputation and
goodwill of the Company; and
6.1.4 devote the whole of his time and attention during normal business
hours, and such reasonable additional time as the exigencies of the
Company's business may reasonably require, to the business affairs of
the Company and to his duties in terms of his employment with the
Company.
6.2 It is recorded and agreed that the Employee will initially render his
services exclusively and on a full-time basis to the business of the
Company carried on in Belgium. However, the Employee shall render
services in such other places as the Company may from time to time
agree with the Employee.
7. REMUNERATION
7.1 The Employee will be paid a monthly salary initially in an amount of
US$12,500.00, which will be deposited into a bank account of the
Employee's choice not less than four days before the end of each
month.
7.2 The Employee's monthly salary will be reviewed annually. The adjusted
remuneration will be effective from 1 January. Such adjustment will
be no less than the increase in the Consumer Price Index, from time
to time, of the country in which the services are rendered.
7.3 The Employee will also be reimbursed for all expenses reasonably
incurred by him in the course of his duties, subject to delivery to
the Company of vouchers or other documentary evidence supporting such
expenses.
7.4 The Employee agrees that the company may take out a key man insurance
policy over the life of the Employee. The Company shall be
responsible for payment of the premium relating to cover of
US$1,000,000. In the event of the death of the Employee the Company
shall pay to the Employee's wife and dependent children and amount of
US$1,000,000 less any taxed attributable to such payment.
3
<PAGE>
7.5 The Employee's remuneration and benefits he receives in terms of his
employment will be subject to deductions required by law as well as
the rules of any Company employee benefit schemes which the Employee
may join.
8. ANNUAL LEAVE
8.1 The Employee shall be entitled to 25 working days' paid annual leave
in respect of every cycle of 12 completed calendar months of his
employment ("leave cycle").
8.2 The Employee shall take a minimum of 10 working days' annual leave
during each leave cycle or within 6 months of the expiry thereof.
8.3 Annual leave in addition to that referred to in 8.2 may be
accumulated.
9. SICK LEAVE
9.1 The Employee will be entitled to 30 working days' paid sick leave in
every 3 year cycle of employment, such entitlement to accrue only in
the event that sickness or injury requires him to be absent from
work.
9.2 Any further paid sick leave will only be given with the written
permission of the board of directors or the Company's management.
9.3 Should the Employee at any time become unable to perform his duties
adequately be reason of ill health, the Company and the Employee
shall agree the terms of termination of his employment, failing which
such terms will be determined by the Company in its reasonable
discretion.
10. INTELLECTUAL PROPERTY AND CONFIDENTIALITY
10.1 The Employee acknowledges that if, while he is employed by the
Company, he makes any invention, innovation or discovery that is
within the scope of the existing or planned activities of the
Company, whether of not he is employed in a capacity which normally
requires him to make technological or commercial improvement to the
property or assets or activities of the Company, or if, in the course
of
4
<PAGE>
making any invention, innovation or discovery, he makes use of the
personnel or other resources or facilities of the Company, all
proprietary rights in such invention, discovery or innovation
(including copyright in any work associated with the invention,
discovery or innovation) will vest in the Company.
10.2 The rights of the Company under clause 10.1 above will include the
right to obtain formal registration in its name of the proprietary or
intellectual property rights in the invention, discovery or
innovation. The Employee undertakes, both while employed by the
Company and after the termination of employment for any reason, to
take all steps reasonably necessary to assist the Company in this
regard, including:
10.2.1 disclosing full details promptly in writing to the Company of the
invention, discovery or innovation;
10.2.2 signing all assignment deeds or other documents prepared in this
regard by or on behalf of the Company;
10.2.3 giving the Company and its attorneys or other advisers such
assistance as may be required in obtaining legal protection for, and
in commercially exploiting, the invention, discovery or innovation.
10.3 If the Employee applies within 1 year after the termination of his
employment by the Company for any reason for the registration of a
patent, registered design or trade mark, or is cited as the inventor
or author in respect of any patent registered design or trade mark
applied for in this period, the invention, discovery or innovation
will be deemed, unless he proves otherwise, to have been made during
his employment by the Company. The Employee undertakes to notify the
Company in writing, and in advance of the event, of any proposed
application for such registration.
10.4 If the Company undertakes that if it decides not to obtain legal
protection for any invention, discovery or innovation mentioned
above, or if the Company decides not to exploit commercially any such
invention, discovery or innovation, the Company will promptly notify
the Employee in writing of the decision and if the Company in its
discretion so decides, the Company will also notify the Employee
5
<PAGE>
in writing that he may himself obtain legal protection for, and
exploit commercially, the invention, discovery or innovation, at his
cost and for his benefit.
10.5 The Employee acknowledges that he is obliged as part of his duties to
apply his skills, training and experience for the benefit of the
Company.
10.6 The Employee agrees that copyright in all works made in the course
and scope of his employment by the Company and of which he is the
author or co-author, will vest in the Company.
10.7 During the Employee's period of employment and subsequent thereto, he
shall not make use of, directly or indirectly, and shall not disclose
any of the Company's, or any of a group company's, trade secrets or
confidential information, including, but not limited to technical
knowhow and data, plans, drawings, systems, methods, software,
processes, client lists, business affairs, suppliers' lists,
marketing information or financial information, or those of other
persons who have made such disclosures to the Company or the group
company concerned under conditions of confidentiality other than to
persons authorized by the Company, the group company concerned or
those employed by them who are required to know such secrets or to
have such information for the purpose of their employment with the
Company or with the group company concerned.
10.8 If the Employee is uncertain as to whether any information is
confidential or is a trade secret, the Employee shall in writing
request a ruling from the Company. The Employee undertakes to abide
by any ruling made in good faith by the Company.
10.9 The obligations in this clause shall survive the termination of this
contract and the Employee shall at no time thereafter disclose any
such information until, and the onus shall be on the Employee to
demonstrate this, that information has become public knowledge as a
result of deliberate disclosure by the Company.
11. RESTRAINT OF TRADE
11.1 The Employee undertakes to the Company that for a period commencing
on the last day of his employment and terminating one year after the
termination of his employment with the Company, he will not, whether
directly or indirectly:
6
<PAGE>
11.1.1 compete with the Company or be interested in any business which
trades in the field of on-line travel e-commerce. For this purpose,
the Employee shall be deemed to be so "interested in a business", or
"competing with the Company" if he becomes engaged or interested
whether directly or indirectly, and whether as proprietor, partner,
shareholder, agent, consultant, financier or otherwise, in any
company, firm, business or undertaking which carries on business in
any of the fields referred to in 11.2 or in any of the areas referred
to in 11.3;
11.1.2 persuade, induce or encourage any employee if the Company or any
person who was an employee of the Company during the previous twelve
months, to become employed by or interested in any manner whatever in
any field of activity referred to in 11.2, or to terminate his
employment with the Company.
11.2 The Employee acknowledges -
11.2.1 that having regard to the nature of its business, the customers of
the Company are or could be drawn from any place within the world;
11.2.2 that the Company may suffer damage if he were to operate a on-line
travel e-commerce business within the area to which, and during the
time which, the restraint is to apply;
11.3 Each and every restraint contained in this clause is separate and
divisible from every other restraint in this clause and from any
other restraint so that if any one of the restraints is or becomes
unenforceable for any reason that restraint will be severable and
will not affect the validity of any other restraint contained in this
clause 11 or otherwise.
11.4 Insofar as the restraints are considered by the parties to be
reasonable in all the circumstances, they agree that if the
restraints, taken together, are adjudged to go beyond what is
reasonable in all the circumstances but would be adjudged reasonable
if part or parts of the wording of the restrains were deleted, the
restraints shall apply with such words deleted.
7
<PAGE>
12. PROCEDURES AND REGULATIONS
The policies, rules and regulations set down by the Company from time
to time, including all rules relating to disciplinary and grievance
procedures, form part of the Employee's conditions of employment.
13 MISCELLANEOUS MATTERS
13.1 POSTAL ADDRESS
13.1.1 Any written notice in connection with this contract may be addressed:
13.1.1.1 in the case of the Company to:
Mispel Street
1st Floor Corporate Place
Belleville 7530
South Africa
13.1.1.2 in the case of the Employee to:
Pierre Kleinhans
Oude Putsebaan 43
3140 Keerbergen
Belgium
13.1.2 The notice shall be deemed to have been duly given:
13.1.2.1 7 days after posting, if posted by registered post to the party's
address in terms of this sub-clause;
13.1.2.2 on delivery, if delivered to the party's physical address in terms of
either this sub-clause or the next sub-clause dealing with service of
legal documents;
8
<PAGE>
13.1.2.3 on dispatch, if sent to the party's then telefax number, and
confirmed by registered letter posted no later than the next business
day.
13.1.3 A party may change that party's address for this purpose, by notice
in writing to the other party.
13.2 ADDRESS FOR SERVICE OF LEGAL DOCUMENTS
13.2.1 The parties choose the following physical addresses at which
documents in legal proceedings in connection with this Agreement may
be served (i.e. their domicilia citandi et executandi):
13.2.1.1 The Company:
13 Mispel Street
1st floor Corporate Place
Belleville 7530
South Africa
13.2.1.2 The Employee:
Pierre Kleinhans
Oude Putsebaan 43
3140 Keerbergen
Belgium
13.2.2 A party may change that party's address for this purpose to another
physical address by notice in writing to the other party.
13.3 INDULGENCES
If either party at any time breaches any of its obligations under
this contract, the other party ("the aggrieved party"):
9
<PAGE>
13.3.1 may at any time after that breach exercise any right that became
exercisable directly or indirectly as a result of the breach, unless
the aggrieved party has expressly elected in writing or by clear and
unambiguous conduct, amounting to more than mere delay, not to
exercise the right. (If the aggrieved party is willing to relinquish
that right the aggrieved party will on request do so in writing.) In
particular, acceptance of late performance shall be for a reasonable
period after performance be provisional only, and the aggrieved party
may still exercise that right during that period;
13.3.2 shall not be estopped (i.e. precluded) from exercising the aggrieved
party's rights arising out of that breach, despite the fact that the
aggrieved party may have elected or agreed on one or more previous
occasions not to exercise the rights arising out of any similar
breach or breaches.
13.4 ENTIRE CONTRACT
This contract, read with the further personnel documentation to which
the Employee has a right of access at any reasonable time, contains
all the express provisions agreed on by the parties with regard to
the subject matter of this contract and the parties waive the right
to rely on any alleged express provision not contained in the
contract and/or the other documents mentioned above.
13.5 NO REPRESENTATIONS
Neither party may rely on any representation which allegedly induced
that party to enter into this contract, unless the representation is
recorded in this contract.
13.6 VARIATION, CANCELLATION AND WAIVER
No agreement varying, adding to, deleting from or cancelling this
contract, and no waiver of any right under this contract, shall be
effective unless reduced to writing and signed by or on behalf of the
parties.
13.7 ASSIGNMENT
Neither party may cede that party's rights or delegate that party's
obligations in terms of this contract without the prior written
consent of the other party.
10
<PAGE>
13.8 SURVIVAL RIGHTS, DUTIES AND OBLIGATIONS
Termination of this contract for any cause will not release a party
from any liability which at the time of termination has already
accrued to the other party or which after termination may accrue in
respect of any act or omission prior to termination.
13.9 APPLICABLE LAW
All matters arising out of or in connection with the interpretation,
implementation, termination or cancellation of this contract, shall
be governed in accordance with the laws in force in the United
Kingdom, from time to time, and the law of United Kingdom shall be
deemed for all purposes to be the proper law of this contract.
Signed at on 1999.
WITNESS: for LPI LIMITED
- ----------------------------------- --------------------------------------
duly authorised hereto
Signed at on 1999.
WITNESS:
- ----------------------------------- --------------------------------------
PETRUS FREDERICK KLEINHANS
11
<PAGE>
EXHIBIT 21.1
LEISUREPLANET HOLDINGS, LTD. (formerly known as First
South Africa Corp., Ltd.)
Bermuda
Listed on NASDAQ
<TABLE>
<CAPTION>
100% OF
81% OF 100% OF FIRST SOUTH AFRICA
LPI LIMITED FIRST SOUTH AFRICAN HOLDINGS (PTY.) LTD. MANAGEMENT CORP.
ENGLAND SOUTH AFRICA DELAWARE
100% OF 100% OF 51.5% OF
LEISUREPLANET LEISUREPLAN FIRST LIFESTYLE HOLDINGS
(PTY.) LTD. BELGIUM LISTED ON JOHANNESBURG STOCK EXCHANGE
(N.V.)
<S> <C> <C> <C> <C>
LIFESTYLE PRODUCTS
REPUBLIC UMBRELLAS PIEMANS PANTRY
GALACTEX OUTDOOR ASTORIA BAKERY
SA LEISURE SEEMANNS MEAT
PRODUCTS
TRADEWINDS GULL FOODS
PARASOL
FIFERS BAKERY
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<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<NAME> LEISUREPLANET HOLDINGS, LTD.
<S> <C>
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9,891,000
0
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