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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended June 30, 2000
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
incorporation or organization) Identification No.)
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 October 16, 2000, was $7,065,995.
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date.
As of October 16, 2000, there were 8,391,899 shares of the Registrant's Common
Stock outstanding and 926,025 shares of the Registrant's Class B Common Stock
outstanding.
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EXPLANATORY NOTE
The purpose of this Amendment on Form 10-K/A to the Annual Report of
Leisureplanet Holdings, Ltd. is to revise the disclosure as follows.
Item 1, presented here in its entirety, is amended with respect to:
- the third paragraph of the description of the Company's History,
- the third and fifth paragraphs of the description of the Company's
Internet and E-Commerce Services and Technology, and
- the fourth and sixth pargraphs describing the Company's South
African Lifestyle Products Operations.
Item 5, presented here in its entirety, is amended to include data
current as of September 30, 2000.
Item 6 is being amended in its entirety to correct certain
typographical errors.
Item 7 is being amended in its entirety to
- correct certain typographical errors,
- change the subtitle "Gain on disposal of subsidiary stock" to "Gain
on sale of subsidiary stock," under Fiscal 2000 Compared to Fiscal
1999, and
- change the subtitle "Loss on disposal of subsidiary stock" to "Loss
on sale of subsidiary stock" under Fiscal 1999 Companred to Fiscal
1998.
Note 2 to the Company's Consolidated Financial Statements, presented
here in its entirety, is amended with respect to the Company's disclosure
regarding Restatements and Reclassifications.
Note 7 to the Company's Consolidated Financial Statements is amended in
its entirety to include certain paragraphs inadvertently omitted from the
Company's Annual Report on Form 10-K.
The title of Note 13 to the Company's Consolidated Financial Statements
is amended to read "Gain / (Loss) On Sale Of Subsidiary Stock."
Note 22 to the Company's Consolidated Financial Statements is amended
in it's entirety to correct a typographical error.
Note 23 to the Company's Consolidated Financial Statements is amended
in its entirety to clarify the quarters in which certain restatements of net
income occurred.
The Exhibit Index is amended to include Exhibit 11.1, Statement re:
Computation of (loss) earnings per share, and a new Exhibit 11.1 is filed
herewith.
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PART 1
ITEM 1. DESCRIPTION OF BUSINESS
We are a holding company that seeks to acquire controlling stakes in
Internet and technology related companies. We own a majority interest in
Leisureplanet.com. Leisureplanet.com 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. We are also the
largest shareholder in Magnolia Broadband Wireless, a startup company which is
developing fixed wireless broadband internet access products. We also own a
majority interest in Hotelsupplygroup.com, a startup company which plans to
provide various goods and services to hotels worldwide.
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 shifted our focus to
the Internet, technology and e-commerce sectors and away from South Africa. We
are currently engaged in the following industry segments:
- Internet and e-commerce services and technology; and
- Lifestyle products.
In 2000 we have entered into an agreement to dispose of our operations in
South Africa. The agreement contemplates our receiving approximately $36 million
in cash, which we plan to use to retire certain of our debt, fund future
acquisitions and fund various other corporate purposes. The agreement is subject
to a number of conditions, including obtaining South African regulatory
approvals and the buyer obtaining sufficient funding to complete the
acquisition. Although we anticipate that these conditions will be met, they are
beyond our control and therefore we cannot be certain that they will be met.
In addition, in July 2000, Leisureplanet.com announced that it had sought
the protection of the United Kingdom courts in an administrative procedure.
Leisureplanet.com had hoped that this protection would facilitate the
renegotiation of its various co-brand agreements and give it an opportunity to
seek out a recapitalization of the company. Such a recapitalization was not
realized and as a result, we have been forced to write down the value of our
investment in Leisureplanet.com from $26,203,230 to $0.00.
As a result of these changes, and developments we have reestablished our
investment criteria. We aim to acquire majority or controlling stakes in
Internet related businesses and technology companies. These companies must be
either profitable, or reasonably close to profitability. In the case of
technology companies, we look for the opportunity to invest definable amounts
with the expectation of realizing clearly marked milestones in terms of product
development or marketing goals.
DESCRIPTION OF OUR CORE INDUSTRY SEGMENTS
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INTERNET AND E-COMMERCE SERVICES AND TECHNOLOGY
Through Leisureplanet.com, 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.
For fiscal year ended June 30, 2000, our online travel services business had
revenues of approximately $547,000 which accounted for approximately 0.6% of our
revenues. Our online travel services business had a loss from operations of
approximately $14.6 million for fiscal 2000.
As a result of these and past losses, in recent months, Leisureplanet.com
had sought to obtain additional financing from a variety of sources to fund its
operations, including from various of its strategic partners. After the failure
of those efforts to yield additional financing, on July 26, 2000,
Leisureplanet.com announced that it had decided to shift its business strategy
from business-to-consumer strategy to a business-to-business strategy. In
addition, Leisureplanet.com has sought to renegotiate various of its co-branding
agreements to reduce the expenses associated with those agreements. By doing the
foregoing, Leisureplanet.com hopes to lower its expenses and capitalize on its
content and other technology-oriented assets. The company also announced that it
would continue to explore alternatives with various strategic partners, as well
as opportunities for a sale or merger of the company with other industry
players.
On August 2, 2000, Leisureplanet.com announced that it had sought the
protection of the United Kingdom courts in an administrative procedure.
Leisureplanet.com had hoped that this protection would facilitate the
renegotiation of its various co-brand agreements and give it an opportunity to
seek out a
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recapitalization of the company. Such a recapitalization was not realized and as
a result, we have been forced to write down the entire value of our investment
in Leisureplanet.com from $26,203,230 to $0.00. Our participation in the online
travel business has substantially ended and it is unlikely that we will make
any further investments in the online travel sector in the foreseeable future.
On April 14, 2000, we entered into a Securities Purchase Agreement with
Magnolia Broadband, Inc. Magnolia is a start up company that is developing fixed
wireless broadband solutions. Magnolia is seeking to develop technology the
provides residential and small business users of the Internet with high speed
access to Internet services at lower capital costs and with faster deployment.
Magnolia will initially target its products in the United States and plans to
later penetrate international markets.
We invested $2,500,000 in Magnolia and received shares of preferred stock in
Magnolia. We also received board representation rights and registration rights.
The shares of Magnolia preferred stock we own are convertible into common stock
of Magnolia, and we are entitled to voting rights on an as-converted basis, and
certain preferred dividend, liquidation and anti-dilution rights. We initially
own approximately 48% of Magnolia. Certain of the shares of the founders of
Magnolia are subject to repurchase by Magnolia if the founders' employment with
Magnolia terminates before October 15, 2002. Magnolia has reserved additional
shares for issuance to founders, employees, consultants, directors and other
investors. Assuming full issuance of such shares, our ownership interesting
Magnolia will be reduced to 33%.
We also own 51% of Hotelsupplygroup.com a business to business internet
based e-commerce supplier to the hotel and catering industry. It initially plans
to market a broad range of goods to the independent hotels currently under
contract to Leisureplanet.com. The offers will be provided exclusively to these
hotels both through the e-commerce platform, embodied at the
hotelsupplygroup.com website, and through more traditional methods such as
catalog and other offline marketing campaigns
OUR SOUTH AFRICAN LIFESTYLE PRODUCTS OPERATIONS
We have recently entered into an agreement pursuant to which we disposed of
our operations in South Africa. Under the terms of the agreement we received
approximately $36 million in cash, which we plan to use to retire certain of
our debt, fund future acquisitions and fund various other corporate purposes.
The agreement was subject to a number of conditions, including obtaining South
African regulatory approvals and the buyer obtaining sufficient funding to
complete the acquisition, all of which were met.
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.
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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 Weber was entered into in 1984. 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, 2000, the following customers accounted
for approximately the following percentage of our sales revenue: Woolworths,
15.7%; Clodchain, 9.9%; Spar, 6.0%; Pick n Pay, 6.9%; and Massmart, 10.2%. Our
lifestyle products businesses had revenues of approximately $93.3 million which
accounted for approximately 99% of our revenues for fiscal year ended June 30,
2000. Our lifestyle products business had income from operations of
approximately $6.5 million for fiscal 2000.
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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. We believe 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 three full-time salaried employees. Our subsidiary, First South African
Holdings (Pty.) Ltd. has only two 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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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 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.
<TABLE>
<CAPTION>
High Low
Common Stock
Fiscal 1999
<S> <C> <C>
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........................ $7.938 $3.625
2nd Quarter........................ $16.50 $3.563
3rd Quarter........................ $14.25 $8.063
4th Quarter........................ $9.063 $2.438
Fiscal 2001
1st Quarter (through September 30, 2000) $3.313 $1.031
</TABLE>
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<TABLE>
<CAPTION>
High Low
Class A Warrants
Fiscal 1999
<S> <C> <C>
1st Quarter........................ $1.375 $0.375
2nd Quarter........................ $0.625 $0.0625
3rd Quarter........................ $0.75 $0.0625
4th Quarter........................ $9.00 $0.4375
Fiscal 2000
1st Quarter........................ $4.75 $2.00
2nd Quarter........................ $16.250 $2.375
3rd Quarter........................ $13.00 $5.875
4th Quarter........................ $3.25 $1.875
Fiscal 2001
1st Quarter (through September , 2000) $2.375 $0.50
Class B Warrants
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........................ $2.00 $0.719
2nd Quarter........................ $8.50 $0.563
3rd Quarter........................ $6.00 $2.125
4th Quarter........................ $2.688 $0.25
Fiscal 2001
1st Quarter (through September , 2000) $0.375 $0.063
</TABLE>
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As of September , 2000, there were approximately 3,350 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.
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.
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.
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ITEM 6
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
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."
SELECTED CONSOLIDATED FINANCIAL INFORMATION
STATEMENT OF OPERATIONS DATA THE COMPANY
YEARS ENDED JUNE 30,
<TABLE>
<CAPTION>
1996 (1) 1997 (1) 1998 1999 2000
$ $ $ $ $
<S> <C> <C> <C> <C> <C>
Revenues 1,570,888 41,885,993 -- -- --
Total operating expenses (8,198,079) (38,559,968) 2,000,920 2,504,838 2,662,108
Operating (loss)/income (6,627,191) 3,325,945 (2,000,920) (2,504,838)
Interest (expense)/income (351,793) 26,016 (1,223,654) (2,403,997) (1,363,360)
(Loss)/income from continuing
operations before
income taxes (6,965,556) 7,149,970 (615,740) (6,208,976) (4,232,603)
Net (loss)/income from
continuing operations (6,743,363) 5,832,932 (615,740) (6,210,195) (4,233,222)
(Loss)/gain from discontinued
operations 1,005,803 850,243 3,387,631 (4,916,267) (27,605,448)
Net (loss)/income 6,683,165 2,771,891 (11,126,46) (31,838,670)
(Loss)/income per share - from
continuing
operations ($3,56) $1,13 ($0,10) ($0,95) ($0,54)
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET THE COMPANY
DATA JUNE 30,
1996 1997 1998 1999 2000
RESTATED
$ $ $ $ $
<S> <C> <C> <C> <C> <C>
Total assets 23,604,994 64,197,149 89,561,459 102,615,018 94,821,499
Long term 2,361,372 13,341,758 29,507,926 33,598,241 5,473,769
liabilities
Net working 4,624,417 25,357,584 25,491,685 28,276,771 31,414,757
capital (2)
Stockholders' 12,792,376 23,220,014 16,097,666 2,090,966 6,150,930
equity
</TABLE>
(1) Due to the unavailability of financial data on discontinued operations for
the 1996 and 1997 fiscal years, the discontinuation of First Lifestyle
Holdings and Leisureplanet have not been taken into account in these
figures.
(2) Net working capital is the net of current assets and current liabilities.
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MANAGEMENT DISCUSSION AND ANALYSIS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
BACKGROUND AND HISTORY
Leisureplanet Holdings Limited ("LPHL"), formerly First South Africa Corp., Ltd
was incorporated in September 1995 with the intention to actively pursue
acquisitions fitting a pre defined investment strategy. Prior to our acquisition
of Leisureplanet.com, an online travel services company, in February 1999, the
broad strategy followed by us in all of our investment decisions was as follows:
- Revenue is to be within the range of $5Million - $50 Million.
- Net income must yield a sustainable above average return on investment.
- Growth in revenue must be above average growth rates and must be
sustainable over the medium term.
- The industry in which the target operates must meet the pre defined
industry sectors identified by management as sectors meeting our broad
investment strategy.
LPHL holds, through its South African subsidiary, First South African Holdings
(Pty) Ltd. ("FSAH"), an investment in First Lifestyle Holdings limited
("Lifestyle"), which has met the acquisition criteria identified above. In
addition, the Company holds a stake in Leisureplanet. Com ("LPI"), an Internet
travel related company. The focus of the Company has changed from investing in
South African companies to actively seeking out investments in Internet related
industries.
In keeping with this new focus, we will be basing our investments on the
following strategy:
- Acquiring controlling stakes in small, high quality, high growth,
Technology and Internet related businesses with strong management teams.
- Our investments must show an ability to contribute, in the short to
medium term, to earnings per share through operating profit or capital
appreciation.
- We aim to add value to our investments by operating in partnership with
committed, incentivised, entrepreneurial management who show the vision
and ability to grow their businesses into industry or niche leaders.
The Company has made two additional investments during the current year, taking
up equity stakes in Magnolia Broadband, a start-up operation in the Internet
broadband field, and HotelSupplyGroup.com, Limited, a start-up operation seeking
to provide supply services via the Internet to hotel groups.
Due to this change in focus the Company has disposed of Lifestyle. On June 21,
2000 the Company received an offer from Lifestyle management to buy Lifestyle
from the Company. The Company accepted the offer on September 26, 2000 at a
general meeting of Lifestyle shareholders. This deal is still subject to
regulatory approval.
Due to the lack of investor appetite for loss making Internet businesses, no
further funding was available to fund the activities of LPI, the Internet travel
related business. On August 2, 2000 LPI was placed under voluntary
administration in the United Kingdom. Full provision has been made for the
Company's investment in LPI.
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RESULTS OF OPERATIONS
The results of operations analyse the corporate activity of the group as
Lifestyle and LPI are no longer included as continuing operations. Discussion of
the results of these operations is given under the heading, discontinued
operations, below.
FISCAL 2000 COMPARED TO FISCAL 1999
Selling, general and administrative expenses
Selling, general and administrative expenses for the year ended June 30,
2000 decreased by $0,25 Million to $1,84 Million as compared to $2,09
Million for the fiscal year ended June 30, 1999. This decrease is primarily
due to a reduction in corporate support needed for the Lifestyle business
due to the shift in focus to Internet and Technology related investments.
Amortisation of intangibles
Amortisation of intangibles increased from $0,41 Million in fiscal 1999 to
$0,73 Million in fiscal 2000. This increase is primarily due to a change in
estimate of the useful life of non-competition agreements. Goodwill arose
on the investment in Magnolia Broadband, which contributed $0,1 Million to
the current year charge.
Depreciation
Depreciation charge relates to minor office equipment; furniture and
computer equipment. Due to the nature of the head office function, these
charges are immaterial.
Foreign currency loss
Foreign currency loss of $0,08 Million represents the loss realized on the
repayment and the translation of the current account between FSAH and LPHL.
The South African Rand has depreciated by 37,6% over the fiscal period 1998
to 2000.
Gain on sale of subsidiary stock
In the prior year 13,946,500 shares held by first South African Holdings in
Lifestyle were sold at an average price of R2,48 per share realising a
consolidated gain on disposal of $0,62 Million. In addition, a loss on
dilution on a group restructure of $1,42 Million was realised. During the
current year 900,000 shares in First Lifestyle Holdings Limited were sold
at R3,00 per share, realising a gain of $0,1 Million.
Interest expense
Interest expense has decreased by $1,04 Million from an interest expense of
$2,40 Million to $1,36 Million. The conversion of 3,000 of the increasing
rate debentures and the remaining 9% debentures gave rise to an interest
saving of $0,23 Million in the current year. The balance of the movement
was made on interest earned on cash balances; the Company had significant
cash resources throughout the year as compared to the previous fiscal year.
Provision for income taxes
The Company is registered in Bermuda, where no tax laws are applicable.
<PAGE> 15
FISCAL 2000 COMPARED TO FISCAL 1999 (CONTINUED)
Interest in losses of affiliates
The Company acquired a 48% stake in Magnolia Broadband, a 51% stake in
HotelSupplyGroup.com and a 50% stake in Hall Lifestyle Products. All of
these companies are start-up ventures, which have only incurred expenses to
date. The charge of $0,16 Million represents our equity accounted share of
their operating losses for the period.
Discontinued operations
During the 2000 fiscal year a loss of $11,93 Million arose on discontinued
operations as compared to $3,94 Million in fiscal 1999, representing an
increase of $7,99 Million over the prior year. The prior fiscal year
included the industrial and packaging business segments, which incurred
losses of $1,46 and were disposed of during 1999. The loss realized on the
LPI business segment increased by $8,95 Million from $6,17 Million in 1999
to $15,12 Million in 2000. The increase in the loss was primarily due to an
aggressive attempt to increase the awareness of the product offered by
signing up expensive portal agreements and advertising arrangements. Due to
the lack of investor appetite for loss making Internet enterprises, LPI
could no longer fund its operations and was placed under voluntary
administration on August 2, 2000. Full provision has been made for the
Company's investment in LPI. The Lifestyle business sector contributed a
profit of $3,19 Million as compared to $3,69 Million during the previous
fiscal year, a decrease of $0,48 Million over the fiscal year. This is
primarily because the growth experienced in this division in South African
Rand was 3,9% which is below the currency depreciation of the South African
Rand against the US Dollar of 13%. The growth in the business sector was
below expectations due to the lack of consumer demand in South Africa and
the inability to increase selling prices to recover increased costs passed
by Lifestyle suppliers due to competitive pressures experienced in a weak
consumer market.
The loss on disposition of $15,67 Million in fiscal 2000 increased by
$14,70 Million from $0,97 Million in fiscal 1999. The increase is primarily
due to the estimated loss on liquidation of the LPI business segment.
Preference dividend declared
During fiscal 2000, the preference dividend on the mandatory redeemable
preference shares has been accrued on a time proportion basis as the
agreement to pay preference dividends provides for two options, the first
being that the dividend payable must be based on the ordinary dividend
declared by Lifestyle, or the second option must increase by a minimum of
25% percent over the prior year. The first option is payable three days
after receipt of the Lifestyle dividend, the second option is payable on
February 19, of each calendar year. Since no Lifestyle preference dividend
was declared during the current fiscal year the dividend of $0,15 Million
represents the time proportion of the dividend payable on February 19,
2001.
Net (loss)/income
As a result of the above the Company has achieved a loss of $31,84 Million
as compared to a loss of $11,13 Million in the prior year.
FISCAL 1999 COMPARED TO FISCAL 1998
Selling, general and administrative expenses
Selling, general and administrative expenses for the year ended June 30,
1999 increased by $0,83 Million to $2,09 Million as compared to $1,26
Million for the fiscal year ended June 30, 1998. This increase related to
the corporate activity undertaken with the acquisition of LPI.
<PAGE> 16
FISCAL 1999 COMPARED TO FISCAL 1998 (CONTINUED)
Amortisation of intangibles
Amortisation of intangibles increased from $0,27 Million in fiscal 1998 to
$0,41 Million in fiscal 1999. This increase is primarily due to the
amortisation of the non-competition agreements entered into with the
management of the Lifestyle business sector during the second quarter of
the 1999 fiscal year. These non-competition agreements are being amortised
over a three-year period.
Foreign currency loss
The foreign currency loss incurred in 1998 represents a loss on current
account payments made to LPHL. No loss was incurred in 1999.
Loss on sale of subsidiary stock
A loss on dilution during a group restructure of $1,42 Million and a gain
of $0,61 Million on the disposal of a part interest in Lifestyle was
realised during the 1999 fiscal year. The loss on dilution arose on an
inter-group disposal, which resulted in an increase in minority share of
the underlying businesses. The gain of $0,61 Million was realised on the
disposal of a part interest in Lifestyle at an average stock price of R2,48
per share. In the prior year an average price of R5,50 was realized per
share sold. This decrease in average price is due to a decline in the
overall South African stock market.
Interest expense
Interest expense has increased by $1,18 Million from an interest expense of
$1,22 Million to $2,40 Million. This is primarily due to the increase of
$0,28 Million in the debenture redemption reserve raised for the current
year being for a full year as opposed to 9 months for the 1998 fiscal year.
A decrease in the interest earned on cash resources due to the redemption
of debentures during the period, utilizing a substantial portion of the
surplus cash reserves of the Company, thereby depleting the interest earned
on these resources. In addition the company incurred addition interest of
$0,17 Million on the increasing rate debentures which incurred interest for
the full year as opposed to 9 months in the 1998 fiscal year
Provision for income taxes
The Company is registered in Bermuda, where no tax laws are applicable.
The taxation charge for the current year arose in First South Africa
Management Corp., Ltd., which is an American registered company and a
subsidiary of the Company. This company had no taxable income for the 1998
fiscal year.
Preference dividend declared
During fiscal 1999, we declared a preference dividend of $0,50 million.
This dividend represents the payment to the holders of $9,891 Million
preferred stock in First South African Holdings. This stock was issued to
fund the acquisition of LPI during the current fiscal year.
<PAGE> 17
MANAGEMENT DISCUSSION AND ANALYSIS
FISCAL 1999 COMPARED TO FISCAL 1998 (CONTINUED)
Discontinued operations
During the 1999 fiscal year a loss from operations of $3,94 Million arose
on the discontinued operations as compared to a profit of $3,39 Million
in fiscal 1998, representing an increase of $7,33 Million over the prior
year. The industrial and packaging business segments incurred a loss of
$1,46 Million in the 1999 fiscal year and a loss of $2,18 Million in the
1998 fiscal year, an increase of $0,72 Million. The Lifestyle business
sector contributed a profit of $3,86 Million as compared to $5,49 Million
during the previous fiscal year, a decrease of $1,63 Million over the
fiscal year. This is primarily due to, the percentage shareholding in the
Lifestyle business sector decreasing by 15,18% during the year, coupled
with a decline of 21,7% of the South African Rand against the US Dollar.
The loss on disposal of $0,97 Million in fiscal 1999 represents the
losses that were expected to occur subsequent to June 30, 1999. These
losses were provided for in full and represented guarantees made to third
parties on behalf of the discontinued operations. No operating losses
were incurred beyond June 30, 1999.
Net (loss)/income
As a result of the above the Company has achieved a loss of $11,13
Million as compared to a profit of $2,77 Million in the prior year.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Cash increased by $9,04 Million from $20,81 Million to $29,85 Million.
Included in the $29,85Million is $4,64 Million which is restricted and
will be used to repay LPI creditors. The increase is primarily due to the
cash generated in the Lifestyle business sector, which increased by $3,20
Million from $14,92 Million to $18,12 Million over the fiscal year. The
remaining increase is due to the retention of some of the $20,00 Million
raised in LPHL during the current fiscal year. The remainder of these
funds raised was used to fund LPI by equity injections. On August 2,
2000, LPI was placed under voluntary administration due to the lack of
further funding available to loss making Internet related businesses. No
return is expected on our capital injections into LPI.
Working capital increased by $3,13 Million to $31,41 Million at June 30,
2000 from $28,28 Million at June 30, 1999. This is primarily due to the
increase in cash balances offsetting decreases in trade accounts
receivable and other current assets, which were partially offset by
decreases in dividends payable.
At June 30, 2000 we had borrowings of $18,48 Million which has decreased
from $36,69 Million. The decrease is due to the voluntary administration
of the LPI business segment which included $10,00 Million of loans owing
to LPI minority shareholders. The conversion of debentures of $7,50
Million into shares of common stock also occurred during the fiscal year.
In addition, the mortgage notes and equipment notes in Lifestyle
decreased by repayments of $1,58 Million during the fiscal year.
Operations for the year ended June 30, 2000, excluding non-cash charges
resulted in the utilisation of $12,72 Million, primarily in the Internet
travel related business. Investing activities undertaken by the group
resulted in the utilisation of an additional $8,71 Million during the
year, this included the acquisition of property, plant and equipment of
$5,86 Million, additional purchase price payments of $0,59 Million and
investments in affiliates of $2,81 Million. The operations and investing
activities were financed primarily by stock issues in the Company and LPI
of $39,54 Million, a portion of these proceeds were used to repay debt of
$6,23 Million.
<PAGE> 18
MANAGEMENT DISCUSSION AND ANALYSIS
FUTURE COMMITMENTS
Under the various acquisition agreements, the Company will spend $1,02
Million in cash for its contingent payments over the next 12 months. The
cash receivable from the disposal of Lifestyle will fully fund these
payments as well as fund the redemption of the mandatory redeemable
preference shares and partial redemption of the increasing rate
debentures during the current fiscal year. Excess cash will be utilised
to fund additional acquisitions in the Internet technology market sector.
There are no longer-term contingent acquisition payments remaining after
payment of the $1,02 Million mentioned above.
The Company intends to continue to pursue an acquisition strategy in
Internet technology companies and anticipates utilising a substantial
portion of its remaining cash balances and the proceeds of its disposal
of Lifestyle to fund this strategy to the extent that suitable
acquisition candidates can be identified.
The Company may be required to incur additional indebtedness or equity
financing in connection with the funding of future acquisitions. There is
no assurance that the Company will be able to incur additional
indebtedness or raise additional equity to finance future acquisitions on
terms acceptable to management, if at all.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The company does not ordinarily hold market risk sensitive instruments
for trading purposes. The company does however recognise market risk from
interest rate and foreign currency exchange exposure.
INTEREST RATE RISK
At June 30, 2000 the Company's cash resources earn interest at variable
rates. Accordingly the Company's return on these funds is affected by
fluctuations in interest rates. The debt of the continuing operations is
primarily at fixed interest rates. Any decrease in interest rates will
have a negative effect on the Company's earnings. There is no assurance
that interest rates will increase or decrease over the next fiscal year.
FOREIGN CURRENCY RISK
The expected proceeds from the sale of Lifestyle will be received in
South African Rands. This exposes the Company to market risk with respect
to fluctuations in the relative value of the South African Rand against
the US Dollar. Due to the prohibitive cost of hedging these proceeds, the
exposure has not been covered as yet, should more favorable conditions
arise a suitable Rand hedge may be considered by management. For every 1%
decline in the Rand/US Dollar exchange rate, the Company loses R68,400 on
every R1,000,000 retained in South Africa, at year-end exchange rates,
this is equivalent to $10,000. Subsequent to year-end the Rand has
depreciated against the US Dollar by an average 7%.
<PAGE> 19
MANAGEMENT DISCUSSION AND ANALYSIS
SUPPLEMENTAL DISCLOSURE
DISCONTINUED SOUTH AFRICAN OPERATIONS
As the Lifestyle results are reported in US Dollars, but 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
the understanding of the Lifestyle results.
In broad terms, if the deterioration of the Rand is in excess of the rate of
price increases in the Company's products, which generally equates the South
African inflation rate, then the company would need to generate South African
revenue in excess of the South African inflation rate to maintain US Dollar
parity.
The average rates 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, JUNE 30, JUNE 30,
-------- -------- --------
2000 1999 1998
<S> <C> <C> <C>
Rate of exchange vs. $1 6,84 6,05 4,97
Depreciation 13,06% 21,7% 9,7%
Annual rate of inflation 7,8% 4,9% 7,2%
</TABLE>
<PAGE> 20
MANAGEMENT DISCUSSION AND ANALYSIS
PROFORMA INFORMATION
The Proforma information presented below is to give a better understanding of
the Balance Sheet position of the Company, assuming the disposal of Lifestyle
and the liquidation of LPI effective June 30, 2000.
ASSETS
<TABLE>
<CAPTION>
JUNE 30,
2000
$
----------
<S> <C>
CURRENT ASSETS
Cash and cash equivalents 27,354,772
Prepaid expenses and other current assets 2,102,681
----------
TOTAL CURRENT ASSETS 29,457,453
Property, plant and equipment, net 20,270
Other assets 7,602,339
Investments in Affiliates 1,259,472
Intangible assets, net 1,210,564
Deferred charges 228,078
----------
39,778,176
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank overdraft 327,952
Current portion of long term debt 1,016,542
Accounts payable 87,459
Other provisions and accruals 1,523,313
Dividends payable 179,753
----------
TOTAL CURRENT LIABILITIES 3,135,019
Long term debt 14,025,000
----------
TOTAL LIABILITIES 17,160,019
----------
STOCKHOLDERS' EQUITY
Capital stock: 93,753
Additional paid-in capital 64,307,442
Accumulated deficit (30,442,545)
Accumulated Other Comprehensive Income (11,340,493)
TOTAL STOCKHOLDERS' EQUITY 22,618,157
39,778,176
==========
</TABLE>
<PAGE> 21
PRICEWATERHOUSECOOPERS Logo
PricewaterhouseCoopers
Thames Court
1 Victoria Street
Windsor SL4 1HB
To the Board of Directors and Stockholders of Leisureplanet Holdings Limited
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of stockholders' equity, of
comprehensive income and of each flows, present fairly, in all material
respects, the financial position of Leisureplanet Holdings Limited and its
subsidiaries at June 30, 2000 and 1999, and the results of their operations and
their cash flows for each of the three years in the period ended June 30, 2000
in conformity with accounting principles generally accepted 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.
As discussed in Note 2 to the consolidated financial statements, the Company
restated its consolidated financial statements for the years ended June 30,
1999 and 1998.
/s/ PricewaterhouseCoopers
PricewaterhouseCoopers
Windsor
27 November 2000
<PAGE> 22
LEISUREPLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF ACCOUNTING POLICIES
The consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States and
incorporate the following significant accounting policies:
CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and all of its subsidiaries in which it has a majority voting interest.
Investments in affiliates are accounted for under the equity method of
accounting. All inter-company accounts and significant transactions have
been eliminated in the consolidated financial statements.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to
make estimates and assumptions that affect the reported amounts of assets
and liabilities, disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of cash and cash equivalents, accounts receivable and
accounts payable approximate fair value due to the short-term nature of
these instruments. The carrying value of long-term debt, other than
convertible debentures; approximates fair values since interest rates are
keyed to the South African prime-lending rate. The carrying values of
investments in affiliates and convertible debentures approximate fair
value.
INVENTORIES
Inventories are valued at the lower of cost or market with cost
determined on the first-in, first-out and weighted average methods.
<PAGE> 23
2. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recorded at cost. Depreciation is
provided using the straight-line method over the estimated useful lives
of the assets. Land is not depreciated. Buildings are depreciated over 20
years. Plant and equipment and motor vehicles are depreciated over 3 to
10 years. Leasehold improvements are amortised over the terms of the
related leases.
INTANGIBLE ASSETS
Intangible assets include goodwill, patents and trademarks, recipes and
other intellectual property and non-competition agreements. Intangible
assets are stated on the basis of cost and are amortised on a
straight-line basis over a period of three to twenty five years.
Management periodically reviews intangible assets for impairment based on
an assessment of undiscounted future cash flows, which are compared to
the carrying value of the intangible. Should these cash flows not equate
or exceed the carrying value of the intangible a discounted cash flow
model is used to determine the extent of any impairment charge required.
Goodwill is amortised over a period of 3 to 25 years, patents,
trademarks, recipes and other intellectual property are amortised over a
period of 25 years, and non-competition agreements are amortised over a
3-year period. Previously, non-compete agreements were amortised over
6 years. The effect has been to increase the amortisation charge for the
year by $156,432.
DEFERRED CHARGES
Debt issue costs are capitalized and amortised over the tenure of the
related debt. Where convertible debt is converted to equity, any
remaining debt issue costs are offset against additional paid-in capital.
FOREIGN CURRENCY TRANSLATION
The functional currency of the Company is the United States Dollar, the
functional currency of the underlying companies in the Lifestyle segment
is the South African Rand. Accordingly, the following rates of exchange
have been used for translation purposes:
Assets and liabilities are translated into United States Dollars using
exchange rates at the balance sheet date. Common stock and additional
paid-in capital are translated into United States Dollars using
historical rates at date of issuance. 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' equity designated as
accumulated other comprehensive income.
Transactions in foreign currencies arise as a result of inventory
purchases from foreign countries and inter-company funding transactions
between the subsidiaries and the Company. 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.
REVENUES
Revenues comprise net invoiced sales of shipped Lifestyle enhancing
products and Internet travel related commissions. Revenues are stated net
of allowances for estimated returns of defective or damaged product and
other sales promotions and discounts.
INCOME TAXES
Income tax expense is based on reported earnings before income taxes.
Deferred income taxes are provided utilizing an asset and liability
method that requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have
been recognised in the Company's financial statements or tax returns. A
valuation allowance is established to reduce deferred tax assets if it is
more likely than not that all, or some portion of the deferred tax assets
will not be realised.
<PAGE> 24
LEISUREPLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
NET INCOME/(LOSS) PER SHARE
Basic net income/(loss) per share is computed by dividing net
income/(loss) by the weighted average number of common shares
outstanding. Diluted net income/(loss) per share is computed by dividing
net income/(loss) by the weighted average number of common shares
outstanding and dilutive potential common shares which includes the
dilutive effect of stock options, warrants and convertible debentures.
Dilutive potential common shares for all periods presented are computed
utilising the treasury stock method. The diluted share base for the years
ended June 30, 2000, 1999 and 1998 excludes shares of 2,997,230,
2,565,817 and 3,208,322, respectively related to stock options, warrants
and convertible debentures. These shares are excluded due to their
anti-dilutive effect as a result of the Company's loss from continuing
operations during 2000, 1999 and 1998.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and all highly liquid
investments with original maturities of three months or less.
RESTATEMENTS AND RECLASSIFICATIONS
Deferred tax expense has been restated for the years ended June 30, 1999
and 1998 by $597,718 and $1,384,385 respectively, to correctly reflect
the change in deferred tax liabilities related to certain intangible
assets. The minority interest has been restated for the years ended June
30, 1999 and 1998 to reflect the above adjustments by $282,608 and
$311,864 respectively. The gain/(loss) on sale of subsidiary stock has
been restated for the year ended June 30, 1999 to correctly reclassify
the loss of $624,554 to additional paid in capital. The gain/(loss) on
sale of subsidiary stock for the year ended June 30, 1999 has been
restated by $1,703,729 to record a loss on dilution in Lifestyle which
was not recorded in the prior year.
Certain items in the prior year financial statements have been
reclassified to conform to the current period presentation.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the FASB adopted SFAS No. 133, as amended by SFAS No. 137
and SFAS No. 138, "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 recognised 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.
Staff Accounting bulletin, "SAB" 101 provides the staff's views in
applying Generally Accepted Accounting Principles to selected revenue
recognition issues. SAB 101 is effective no later than the fourth quarter
of fiscal years beginning after December 15, 1999. The Company believes
that the adoption of the provision of this SAB will not have any
significant impact on the continuing results of operations and financial
position.
<PAGE> 25
7. INVESTMENTS IN AFFILIATES
A summary of the impact of these investments on the consolidated
financial statements is presented below:
<TABLE>
<CAPTION>
EFFECTIVE JUNE 30, JUNE 30,
PERCENTAGE 2000 1999
OWNERSHIP $ $
----------------------------------------------------- ---------------- ---------------- ----------------
<S> <C> <C> <C>
Investments in and receivables from unconsolidated
affiliates
HotelSupplyGroup. Com 51% 183,134 -
Magnolia Broadband 48% 1,076,338 -
Hall Lifestyle Products 50% 24,463 -
1,283,935 -
Share of losses of unconsolidated affiliates:
HotelSupplyGroup. Com 51% (37,223) -
Magnolia Broadband 48% (123,662) -
(160,885) -
</TABLE>
On July 13, 1999 the Company organized a new company,
HotelSupplyGroup.Com Limited ("HSG"), with Intercommerce Trading Limited.
HSG is 51% owned by the Company and 49% by Intercommerce Trading limited.
However, the Company does not have a majority voting interest therefore
HSG has been accounted for under the equity method in the consolidated
financial statements.
A shareholders loan of $250,000 has been advanced to HSG as initial
funding. A provision of $35,763 has been raised against the carrying
value of this investment, which represents the deficit of the book value
of the investment to its net asset value at year-end.
<PAGE> 26
7. INVESTMENTS IN AFFILIATES
On February 21, 2000, the Company organized a new company, Hall Lifestyle
Products ((Pti) Ltd ("HLP") and entered into a joint venture agreement with HL
Hall & son's (Group Services) (Pty) Ltd ("Hall"), whereby each venture
injected equal sum of $275,000 into a newly formed entity. The Company and
Hall each own 50% of HLP with equal voting rights.
The losses incurred in HLP of $23,111 are included in the Lifestyle
discontinued operation.
On April 14, 2000, the Company purchased 3,447,774 shares of Series A Preferred
Stock in Magnolia Broadband ("Magnolia") with voting rights representing a 48%
interest in Magnolia for a consideration of $2,500,000.
Goodwill arising on the Company's investment in Magnolia of $1,300,000 is
amortized over a three-year period.
<PAGE> 27
LEISUREPLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
13. GAIN /(LOSS) ON SALE OF SUBSIDIARY STOCK
The gain on disposal of subsidiary stock includes any gains or losses
made on the dilution of the Company's effective interest in subsidiaries
by the issuance of shares in its underlying subsidiaries to minority
shareholders.
The gain/(loss) on disposal and dilution recognised in the consolidated
statements of operations is made up as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30,
2000 1999 1998
RESTATED
$ $ $
------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Proceeds received 421,400 5,712,671 4,358,027
Less: Net carrying value of shares of First
Lifestyle Holdings Limited (317,895) (5,097,527) (1,749,193)
-------- ---------- ----------
103,505 615,144 2,608,834
-------- ---------- ----------
Loss on dilution in First Lifestyle Holdings
Limited - (1,419,294) -
-------- ---------- ----------
103,505 (804,150) 2,608,834
-------- ---------- ----------
</TABLE>
<PAGE> 28
LEISUREPLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
22. COMMITMENTS AND CONTINGENCIES
South African Secondary Tax on Companies at 12,5 percent is payable on
all dividends declared out of distributable reserves of South African
companies.
The Company is liable to pay to the previous vendors an estimated
$1,016,542 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 its
subsidiaries previously disposed of during the prior year. These
guarantees amount to $1,580,000
The Future minimum non-cancellable operating lease payments are not
material.
<PAGE> 29
LEISUREPLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
23. QUARTERLY INFORMATION
The Company restated the presentation of certain information for the
first three quarters. Net income/(loss) has been restated by an equal
charge of $107,027 for each of the quarters ended September 30, 1999,
December 31, 1999 and March 31, 2000 to correctly reflect the change in
deferred tax liabilities related to certain intangible assets. Operating
income/(loss) and net income/(loss) has been restated in the quarters
ended September 30, 1999, December 31, 1999 and March 31, 2000 by
$39,934, $289,796 and $434,651 respectively to correctly reflect the
amortisation of prepaid assets which was recorded in the quarter ended
June 30, 2000. Net income/(loss) has been restated by $393,750 in the
quarter ended March 31, 2000 to correctly reflect transfer of capital
redemption reserve, on conversion of debentures into shares, to
additional paid in capital. Other income and net income/(loss) has been
restated by $6,308,858 and $2,320,999 in the quarter ended December
31, 1999 and the quarter ended March 31, 2000 respectively, to correctly
reflect the gain made on dilution of investment in LPI, to additional
paid in capital.
<TABLE>
<CAPTION>
QUARTERS ENDED
--------------------------------------------
SEPTEMBER DECEMBER MARCH
30, 31, 31,
1999 1999 2000
$ $ $
------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues 22,721,938 30,055,350 21,100,519
---------- ---------- ----------
Operating income/(loss) (1,687,277) (864,056) (7,618,889)
Net income/(loss) (2,980,397) (2,163,504) (4,623,494)
Net income/(loss) per share - basic and diluted ($,047) ($0,30) ($0,51)
Weighted average common stock outstanding -
Basic and diluted 6,377,981 7,153,185 9,002,398
</TABLE>
<PAGE> 30
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
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, 2000 and 1999
Consolidated Statements of Income for the years ended June 30, 2000,
1999 and 1998 Consolidated Statements of Cash Flows for the years ended
June 30, 2000, 1999 and 1998 Consolidated Statement of Changes in
Stockholders' Investment for the period June 30, 1998 to June 30, 2000
Notes to the Consolidated Financial Statements for the years ended June
30, 2000, 1999 and 1998
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.
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
<S> <C>
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)
</TABLE>
<PAGE> 31
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
<S> <C>
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 Leisureplanet.com
in favor of Twin Media (Proprietary) Limited(9)
5.1 Auditors' Report of PricewaterhouseCoopers dated
November 27, 2000 (10)
10.1 Form of Escrow Agreement regarding the Earnout Escrow
Shares(7)
10.2 Form of FSAH Escrow Agreement(7)
10.3 Form of First Amended and Restated 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 Leisureplanet.com(9)
10.12 Form of Employment Agreement of Pierre Kleinhans(9)
11.1 Statement re: computation of (loss) earnings per
share (10)
21.1 Subsidiaries of the Registrant(9)
27.1 Financial Data Schedule (9)
</TABLE>
-----------
(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, Form S-1/A No. 3 (filed on December 27,
1995, January 16, 1996 and January 24, 1996, respectively) and Form
10-Q for the fiscal quarter ended March 31, 2000.
(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) Incorporated by reference to the Company's Annual Report on Form 10-K
filed on October 13, 2000.
(10) Filed herewith.
<PAGE> 32
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.
LEISUREPLANET HOLDINGS, LTD.
BY: /s/ Clive Kabatznik
------------------------------
Clive Kabatznik
President
November 15, 2000
