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1
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, 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.)
--------------------------------------------------
(Exact name of Registrant as specified in its charter)
Bermuda N/A
------- ---
(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
---- ----
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
----------------------------
("Common Stock")
Class A Redeemable Warrants
---------------------------
("Class A Warrants")
Class B Redeemable Warrants
---------------------------
("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 , 2000, was $ .
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 , 2000, there were _____ shares of the Registrant's Common Stock
outstanding and ______ shares of the Registrant's Class B Common Stock
outstanding.
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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 $ to $ .
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 $ _____ which accounted for approximately 1% of our
revenues. Our online travel services business had a loss from operations of
approximately $ ______ 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 $ to $ _____ . 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 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.
Until such time, if ever, that the agreement is completed, we will continue to
own the companies that comprise our Lifestyle division.
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 and has been renewed
until ___________________________ . 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, %;
Pick n Pay, %; and Massmart, %. Our lifestyle products businesses had revenues
of approximately $ 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 $ 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.
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.
Leisureplanet.com, 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.
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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 6100 Glades Road, Suite 305, Boca Raton, Fl 33434. The lease expires in
February 20003 and costs us approximately $28,000 per year.
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 May 1, 2000 we held our annual meeting of shareholders. At the annual
meeting, our shareholders elected five 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 an increase in the
number of authorized shares of our common stock from 23,000,000 to 50,000,000
and approved the appointment of PricewaterhouseCoopers Inc as our independent
public accountants. The votes for directors were as follows:
Votes
--------------------------
For Withheld
--------------------------
Michael Levy 10,527,219 327,548
Clive Kabatznik 10,527,219 327,548
Cornelius Roodt 10,527,219 327,548
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David BenDaniel 10,527,219 327,548
Chris Matty 10,527,219 327,548
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The votes with respect to the increase in our authorized shares was as follows:
For Against Abstain
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10,455,365 77,664 321,738
The votes with respect to the appointment of our independent public accountants
were as follows:
For Against Abstain
- ----------- -------- ---------
10,837,607 15,310 1,850
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.
High Low
Common Stock
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........................ $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 2000) $ $
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High Low
Class A Warrants
Fiscal 1999
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) $ $
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) $ $
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As of September , 2000, there were approximately _______ 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 , 2000, there were approximately _____ 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.
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,
1996 (1) 1997 (1) 1998 1999 2000
$ $ $ $ $
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)
BALANCE SHEET THE COMPANY
DATA JUNE 30,
1996 1997 1998 1999 2000
RESTATED
$ $ $ $ $
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 28,876,771 31,414,757
capital (2)
Stockholders' 12,792,376 23,220,014 16,097,666 2,090,966 6,150,930
equity
(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 disposal 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.
16
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.
17
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 disposal 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.
18
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.
19
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%.
20
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:
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30,
-------- -------- --------
2000 1999 1998
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%
21
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 that the disposal of
Lifestyle and the liquidation of LPI effective June 30, 2000.
ASSETS
JUNE 30,
2000
$
----------
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
==========
22
LEISUREPLANET HOLDINGS LIMITED
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Accountants
Consolidated Balance Sheets at June 30, 2000 and 1999
Consolidated Statements of Operations for the years ended June 20, 2000, 1999
and 1998
Consolidated Statements of Stockholders' Equity and Comprehensive 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
Notes to the Consolidated Financial Statements
23
LEISUREPLANET HOLDINGS LIMITED
REPORT OF THE INDEPENDENT ACCOUNTANTS
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 and comprehensive
income and of cash flows, after the restatements described in note 2, 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.
PricewaterhouseCoopers
Windsor
October 13, 2000
24
LEISUREPLANET HOLDINGS LIMITED
CONSOLIDATED BALANCE SHEETS
ASSETS
JUNE 30, JUNE 30,
2000 1999
RESTATED
$ $
---------- -----------
CURRENT ASSETS
Cash and cash equivalents 29,853,067 20,813,301
Accounts receivable, net 10,608,197 12,945,389
Inventories 9,386,857 9,152,575
Prepaid expenses and other current assets 3,631,348 5,236,587
Deferred income taxes 898,280 539,884
---------- ----------
TOTAL CURRENT ASSETS 54,377,749 48,687,736
Property, plant and equipment, net 18,215,196 19,288,417
Investments in Affiliates 1,283,935 -
Intangible assets, net 20,685,179 33,735,933
Deferred charges 228,078 868,944
Other assets 31,362 33,988
---------- ----------
TOTAL ASSETS 94,821,499 102,615,018
========== ===========
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
25
LEISUREPLANET HOLDINGS LIMITED
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
JUNE 30, JUNE 30,
2000 1999
RESTATED
$ $
---------- ----------
CURRENT LIABILITIES
Bank overdraft 896,860 -
Current portion of long term debt 2,105,153 3,088,435
Accounts payable 13,046,686 9,060,327
Other provisions and accruals 5,754,638 4,618,283
Dividends payable 179,840 1,870,959
Income taxes payable 676,003 1,214,292
Other taxes payable 303,812 558,669
TOTAL CURRENT LIABILITIES 22,962,992 20,410,965
Long term debt 15,473,769 33,598,244
Deferred income taxes 4,402,038 3,722,971
TOTAL LIABILITIES 42,838,799 57,732,180
Minority interest 37,059,840 32,900,675
FSAH mandatory redeemable preferred stock 8,771,930 9,891,197
Commitments and contingencies (Note 22) STOCKHOLDERS' EQUITY Capital stock:
A class common stock, $0.01 par value - authorized 23,000,000 Shares,
issued and outstanding 8,368,676 shares
(1999: 5,383,142 shares) 83,687 53,832
B class common stock, $0.01 par value - authorized 2,000,000 shares,
Issued and outstanding 946,589 shares (1999: 946,589 shares) 9,466 9,466
FSAH B class common stock, R0,001 par value - authorized 10,000,000
shares, issued and outstanding 2,671,087 shares
(1999: 2,550,466 shares) 600 580
Preferred stock, $0.01 par value - authorized 5,000,000 shares, none
Issued - -
Additional paid-in capital 64,307,442 22,321,906
Accumulated deficit (37,772,100) (5,933,430)
Accumulated Other Comprehensive Income (20,478,165) (14,361,388)
TOTAL STOCKHOLDERS' EQUITY 6,150,930 2,090,966
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 94,821,499 102,615,018
========== ===========
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
26
LEISUREPLANET HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30,
2000 1999 1998
RESTATED RESTATED
$ $ $
----------- ----------- ---------
Revenues - -
-
Operating expenses
Cost of sales - - -
Selling, general and administrative costs 1,844,197 2,090,086 1,263,081
Amortisation of intangibles 730,719 410,466 271,387
Depreciation 6,490 4,286 5,644
Foreign currency loss 80,702 - 460,808
2,662,108 2,504,838 2,000,920
----------- ----------- ---------
Operating loss (2,662,108) (2,504,838) (2,000,920)
----------- ----------- ---------
Gain/(loss) on sale of subsidiary stock 103,505 (804,150) 2,608,834
Interest in losses of affiliates (160,885) - -
Preference dividend (149,755) (495,991) -
Interest expense (Net of interest income of $668,109,
$297,834 and $644,610) (1,363,360) (2,403,997) (1,223,654)
Income/(loss) from continuing operations before income
Taxes (4,232,603) (6,208,976) (615,740)
Provision for income taxes (619) (1,219) -
----------- ----------- ---------
Income/(loss) from continuing operations (4,233,222) (6,210,195) (615,740)
Discontinued operations (Note 15):
(Loss)/income from operations, net of income taxes
of $2,543,255, $2,893,380 and $3,966,916 (11,931,286) (3,941,319) 3,387,631
Loss on disposition, net of taxes of $nil, $nil and
$nil (15,674,162) (974,948) -
----------- ----------- ---------
Net (loss)/income (31,838,670) (11,126,462) 2,771,891
----------- ----------- ---------
Earnings/(Loss) per share - basic and diluted
Continuing operations ($0,54) ($0,95) ($0,10)
Discontinued operations ($3,52) ($0,75) $0,53
Net income/(loss) ($4,06) ($1,70) $0,43
Weighted average common stock outstanding:
Basic and diluted 7,836,387 6,548,491 6,424,981
=========== =========== =========
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
27
LEISUREPLANET HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
LEISUREPLANET HOLDINGS LEISUREPLANET HOLDINGS FIRST SA HOLDINGS
LIMITED LIMITED B CLASS COMMON
A CLASS COMMON STOCK B CLASS COMMON STOCK STOCK
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
$ $ $
Balance at June 30, 1997 3,536,500 35,361 1,822,500 18,225 1,921,458 466
Issuance of stock to FSAC escrow agent 386,324 3,863 - - - -
Issuance of stock to acquire subsidiaries 142,918 1,429 - - 84,751 19
Issuance of stock on additional purchase price - - - 301,573 52
payments
Warrants exercised 233,826 2,339 - - - -
Warrant swap out at par value 1,173,476 11,738 - - -
Options exercised 35,000 350 - - -
Conversion of 9% debentures to common stock 141,165 1,412 - - - -
Net income - - - - - -
Translation adjustment - - - - - -
Total comprehensive loss - - -
- - -
Balance at June 30, 1998 5,649,209 56,492 1,822,500 18,225 2,307,782 537
Issuance of stock to FSAC escrow agent 243,400 2,434 - - - -
Issuance on stock on additional purchase price - - - 242,684 43
payments
Options exercised 20,000 200 - - - -
Conversion of 9% debentures to common stock 320,700 3,207 - - - -
Redemption and cancellation of stock from FSAC
escrow (1,726,078) (17,260) - - - -
Agent
Conversion of B class common stock to A class
common 875,911 8,759 (875,911) (8,759) - -
Stock
Net loss - - - - - -
Translation adjustment - - - - - -
Total comprehensive loss - - -
- - -
Balance at June 30, 1999 5,383,142 53,832 946,589 9,466 2,550,466 580
RETAINED ACCUMULATED
ADDITIONAL EARNINGS OTHER
PAID-IN (ACCUMULATED COMPREHENSIVE
CAPITAL DEFICIT) INCOME TOTAL
$ $ $ $
Balance at June 30, 1997 22,891,093 2,421,141(1) (2,168,264) 23,198,022
Issuance of stock to FSAC escrow agent (3,863) - - -
Issuance of stock to acquire subsidiaries 1,685,282 - - 1,686,730
Issuance of stock on additional purchase price 1,227,137 - - 1,227,189
payments
Warrants exercised 1,517,765 - - 1,520,104
Warrant swap out at par value (11,738) - - -
Options exercised 137,150 - - 137,500
Conversion of 9% debentures to common stock 845,578 - - 846,990
Net income - 2,771,891
Translation adjustment - (15,209,049)
Total comprehensive loss (12,437,158)
-
Balance at June 30, 1998 28,288,404 5,193,032 (17,377,313) 16,179,377
Issuance of stock to FSAC escrow agent (2,434) - - -
Issuance on stock on additional purchase price 1,033,572 - - 1,033,615
payments
Options exercised 106,800 - - 107,000
Conversion of 9% debentures to common stock 1,732,895 - - 1,736,102
Redemption and cancellation of stock from FSAC
escrow (8,837,331) - - (8,854,591)
Agent
Conversion of B class common stock to A class
common - - - -
Stock
Net loss - (11,126,462)
Translation adjustment - 3,015,925
Total comprehensive loss (8,110,537)
- - -
Balance at June 30, 1999 22,321,906 (5,933,430) (14,361,388) 2,090,966
(1) Opening retained earnings has been restated to reflect prior year's
adjustments for deferred tax on intangibles to reduce the original retained
earnings by $381,904.
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
28
LEISUREPLANET HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
LEISUREPLANET HOLDINGS LEISUREPLANET HOLDINGS FIRST SA HOLDINGS
LIMITED LIMITED B CLASS COMMON
A CLASS COMMON STOCK B CLASS COMMON STOCK STOCK
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
$ $ $
Balance at June 30, 1999 5,383,142 53,832 946,589 9,466 2,550,466 580
Issuance of stock to FSAC escrow agent 120,621 1,206 - - - -
Issuance of stock on additional purchase price - - - - 120,621 20
payments
Issuance of shares 1,379,310 13,793 - - - -
Warrants exercised 247,311 2,473 - - - -
Options exercised 180,000 1,800 - - - -
Conversion of 9% debentures to common stock 742,503 7,425 - - - -
Increasing rate debentures converted to common 315,789 3,158 - - - -
stock
Issuance of warrants - - - - - -
Equity gain on group restructure - - - - - -
Net loss - - - - - -
Translation adjustment - - - - - -
Total comprehensive loss - - -
- - -
Balance at June 30, 2000 8,368,676 83,687 946,589 9,466 2,671,087 600
RETAINED ACCUMULATED
ADDITIONAL EARNINGS OTHER
PAID-IN (ACCUMULATED COMPREHENSIVE
CAPITAL DEFICIT) INCOME TOTAL
$ $ $ $
Balance at June 30, 1999 22,321,906 (5,933,430) (14,361,388) 2,090,966
Issuance of stock to FSAC escrow agent (1,206) - - -
Issuance of stock on additional purchase price 567,687 - - 567,707
payments
Issuance of shares 18,361,207 - - 18,375,000
Warrants exercised 1,356,434 - - 1,358,907
Options exercised 872,296 - - 874,096
Conversion of 9% debentures to common stock 4,083,465 - - 4,090,890
Increasing rate debentures converted to common 3,312,657 - - 3,315,815
stock
Issuance of warrants 3,446,633 - - 3,446,633
Equity gain on group restructure 9,986,363 - - 9,986,363
Net loss - (31,838,670)
Translation adjustment - (6,116,777)
Total comprehensive loss (37,955,447)
- -
Balance at June 30, 2000 64,307,442 (37,772,100) (20,478,165) 6,150,930
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
29
LEISUREPLANET HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30,
2000 1999 1998
RESTATED RESTATED
$ $ $
---------- ---------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss) from continuing operations (4,233,222) (6,210,195) (615,740)
ADJUSTMENTS TO RECONCILE NET INCOME/(LOSS) TO NET CASH PROVIDED BY/(USED IN)
OPERATING ACTIVITIES:
Dividend charge 149,755 495,991 -
Depreciation and amortisation 737,209 414,752 277,036
Non-cash compensation charge - 268,802
Deferred income taxes 748,359 1,104,397 1,640,022
Net loss/(gain) on sale of assets (34,419) 665,842 (200,408)
Net gain on sale of and dilution in subsidiaries (103,505) 804,150 (2,608,834)
Net loss/(gain) on minority shares issued in Lifestyle - (557)
Changes in operating assets and liabilities, net 3,838,445 541,506 421,084
Creation of debenture redemption reserve fund 1,012,500 843,750 562,500
Provision for affiliate losses 35,763 - -
Interest in losses of affiliates 160,885 - -
Net cash provided by/(used in) continuing operations 2,311,770 (1,071,005) (524,897)
Net cash provided by/(used in) discontinued operations (15,032,079) 1,042,217 8,454,191
Net cash provided by/(used in) operating activities (12,720,309) (28,788) 7,929,294
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds on disposal of investment in subsidiaries 421,400 5,712,671 4,358,027
Proceeds on disposal of discontinued operations - 91,718 -
Additional shares acquired in subsidiaries - (51,402) -
Acquisition of intangibles (25,232) (74,832) -
Acquisition of property, plant and equipment (5,862,741) (5,968,074) (5,346,671)
Proceeds on disposal of property, plant and equipment 147,237 740,482 1,226,083
Additional purchase price payments (586,589) (2,523,311) (4,183,439)
Other assets acquired (1,512) (171,322) (229,857)
Investment in affiliates (2,805,423) -
Settlement of share price warranties (5,073,339)
Acquisitions of subsidiaries (net of cash of $nil, $430,556,
1998: $347,052) (2,438,375) (17,881,676)
-
Net cash provided by/(used in) investing activities (8,712,860) (9,755,784) (22,057,533)
========== ========== ===========
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
30
LEISUREPLANET HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30,
2000 1999 1998
RESTATED RESTATED
$ $ $
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short term borrowings, net 301,767 836,250 1,946,515
Proceeds from long term debt 234,542 1,317,219 11,683,238
Repayment of long term debt (6,227,693) (200,486) -
Redemption of debentures - (2,630,132) -
Proceeds on issuance of FSAH mandatory redeemable
Preferred stock - 9,891,197 -
Share issue expenses in subsidiary company - (59,489)
Dividends paid (1,342,996) (284,219)
Proceeds on minority shares issued in Lifestyle 16,887 - 6,054
Proceeds of subsidiary stock issue 18,997,589 -
Proceeds on issuance of common stock 20,543,100 107,000 2,496,719
Net cash provided by financing activities 32,523,196 8,977,340 16,132,526
Effect of exchange rate changes on cash (2,050,261) 3,671,542 (3,944,407)
Net increase/(decrease) in cash and cash equivalents 9,039,766 2864,310 (1,940,120)
Cash and cash equivalents at beginning of year 20,813,301 17,948,991 19,889,111
Cash and cash equivalents at end of year 29,853,067 20,813,301 17,948,991
SUPPLEMENTARY DISCLOSURE:
Interest paid 1,363,360 1,298,438 464,165
Taxes paid 2,218,165 2,170,203 1,532,677
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31
LEISUREPLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANISATION AND PRINCIPAL ACTIVITIES OF THE GROUP
Leisureplanet Holdings Limited (formerly First South Africa Corp., Ltd.)
(the "Company"), was founded on September 6, 1995. The purpose of the
Company has changed from acquiring and operating South African Companies
to one of investing in Internet and technology related industries.
The principal activities of the group include the following:
INTERNET RELATED ACTIVITIES
The original investment made in Leisureplanet.com ("LPI"), the Internet
travel related services company, has been unsuccessful due to a lack of
further investor funding into the loss making entity, and is currently
under voluntary administration in the United Kingdom.
Further investments have been made in Internet technology related
companies, which is in line with the Company's new focus.
DISCONTINUED OPERATIONS
In addition to LPI, the Lifestyle products segment is also being
discontinued in line with the shift in strategy of the holding company.
This segment is involved in the manufacture, sale and distribution of
lifestyle enhancing products, which includes both consumable food
products and semi durable outdoor and indoor products.
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.
32
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.
33
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 $1,384,385 and $597,718 respectively, to correctly reflect
the change in deferred tax liabilities related to certain intangible
assets. 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 $1,146,487 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.
34
LEISUREPLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3. ACQUISITIONS AND DISPOSALS
The results of operations of these acquisitions are included in the
consolidated financial statements from the date of acquisition. The costs
of the acquisitions were allocated on the basis of the estimated fair
value of the assets acquired and liabilities assumed.
PERCENTAGE PURCHASE
ACQUIRED CONSIDERATION
SUBSIDIARY/BUSINESS DATE ACQUIRED % $
YEAR ENDED JUNE 30, 1999
LPI, Ltd January 1, 1999 81 2,868,932
YEAR ENDED JUNE 30, 1998
Fifers Bakery (Pty) Ltd July 1, 1997 67 2,294,851
Pacforce (Pty) Ltd October 1, 1997 100 618,507
Galactex (Pty) Ltd October 1, 1997 84 3,656,646
Republic Umbrella (Pty) Ltd October 1, 1997 84 6,512,598
S.A. Leisure (Pty) Ltd October 1, 1997 84 8,650,968
Tradewinds Parasol (Pty) Ltd March 1, 1998 84 1,229,857
Cocam Foods (Pty) Ltd June 1, 1998 67 615,133
23,578,560
YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30,
1999 1998
$ $
ACQUISITION COSTS
Stock issued in lieu of cash - 1,686,730
Minority contribution to business acquired - 3,663,102
Cash consideration 2,868,932 18,228,728
2,868,932 23,578,560
NET ASSETS ACQUIRED
Cash and cash equivalents 430,556 347,052
Current assets 226,907 18,052,553
Property, plant and equipment 307,168 11,979,546
Other assets - 5,171,794
Intangibles 11,416,020 3,088,954
TOTAL ASSETS 12,380,651 38,639,899
Current liabilities 828,938 10,514,165
Long-term debt 8,682,781 4,494,195
Deferred income taxes 52,979
-
TOTAL LIABILITIES 9,511,719 15,061,339
2,868,932 23,578,560
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.
35
LEISUREPLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3. ACQUISITIONS AND DISPOSALS (CONTINUED)
Additional purchase price payments made during the current year total
$1,154,296. This amount was allocated as follows:
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30,
2000 1999 1998
$ $ $
----------------------------------------------------- ---------------- ---------------- ----------------
Goodwill 447,507 649,610 2,169,332
Recipes 706,789 603,509 1,900,935
Trademarks - 2,303,807 1,340,361
1,154,296 3,556,926 5,410,628
These additional purchase price payments were made and are to be made as
follows:
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30,
2000 1999 1998
$ $ $
----------------------------------------------------- ---------------- ---------------- ----------------
Cash 586,589 2,523,311 4,183,439
Shares issued in lieu of cash 567,707 1,033,615 1,227,189
1,154,296 3,556,926 5,410,628
4. ACCOUNTS RECEIVABLE
Accounts receivable consists of the following:
JUNE 30, JUNE 30,
2000 1999
$ $
---------------------------------------------------------------------- ---------------- ----------------
Accounts receivable 11,034,417 13,388,561
Less: Allowances for bad debts (426,220) (443,172)
10,608,197 12,945,389
5. INVENTORIES
Inventories consist of the following:
JUNE 30, JUNE 30,
2000 1999
$ $
---------------------------------------------------------------------- ---------------- ----------------
Finished goods 5,147,642 4,515,138
Work in progress 358,890 587,544
Raw materials and ingredients 2,701,284 2,983,298
Supplies 1,179,041 1,066,595
9,386,857 9,152,575
36
LEISUREPLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
JUNE 30, JUNE 30,
2000 1999
$ $
---------------------------------------------------------------------- ---------------- ----------------
Land and buildings 2,174,364 2,028,094
Leasehold improvements 1,265,657 1,203,152
Plant and equipment 23,721,346 24,570,108
Motor vehicles 2,325,005 2,508,450
Construction in progress 558,416 467,595
30,044,788 30,777,399
Less: accumulated depreciation (11,829,592) (11,488,982)
Property, plant and equipment, net 18,215,196 19,288,417
Depreciation expense was $2,906,643, $2,510,953 and $2,485,838 for the
years ended June 30, 2000, 1999 and 1998 respectively. Included in this
depreciation expense was $2,900,153, $2,506,667 and $2,480,194 of the
discontinued operations.
7. INVESTMENTS IN AFFILIATES
A summary of the impact of these investments on the consolidated
financial statements is presented below:
EFFECTIVE JUNE 30, JUNE 30,
PERCENTAGE 2000 1999
OWNERSHIP $ $
----------------------------------------------------- ---------------- ---------------- ----------------
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) -
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.
37
8. INTANGIBLE ASSETS
Intangible assets consist of the following:
JUNE 30, JUNE 30,
2000 1999
RESTATED
$ $
------------------------------------------------- ---------------- ----------------
Goodwill 5,596,624 15,802,699
Patents and Trademarks 5,366,800 6,083,062
Recipes and other intellectual property 11,590,790 12,451,747
Non-competition agreements 1,304,498 1,480,465
--------- ---------
23,858,712 35,817,973
Less: accumulated amortisation (3,173,533) (2,082,040)
----------- -----------
Intangible assets, net 20,685,179 33,735,933
========== ==========
Amortisation expense was $2,379,626, $1,613,206 and $1,152,831for the
years ended June 30, 2000, 1999 and 1998 respectively. Included in the
amortisation expense was $1,648,907, $1,209,253 and $881,444 of the
discontinued operations.
38
LEISUREPLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
9. DEBT
Debt consists of the following:
JUNE 30, JUNE 30,
2000 1999
$ $
---------------------------------------------------------------------------
LONG TERM DEBT
9% convertible debentures -- 4,495,000
Increasing rate convertible debentures 12,000,000 15,000,000
Debenture redemption reserve fund 2,025,000 1,406,250
Mortgage loans 373,333 489,503
Equipment notes 2,164,047 3,623,319
Deferred purchase consideration 1,016,542 1,672,607
Interest free notes -- 10,000,000
---------- ----------
17,578,922 36,686,679
Less: current portion (2,105,153) (3,088,435)
---------- ----------
15,473,769 33,598,244
---------- ----------
9% CONVERTIBLE DEBENTURES
10,000 9% convertible debentures of $1,000 each 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, by the debenture holder, at any time prior to
maturity at a price of $6,00 per share. 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
installments totaling 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 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).
During the current financial year the remaining 4,495 9% convertible
debentures of $1,000 each were converted to shares of common stock.
During the prior year, 1,924 9% convertible debentures of $1,000 each
were converted to shares of common stock and a further 2,734 9%
convertible debentures of $1,000 each were repurchased and cancelled.
During the current fiscal year the unamortised debt issue costs of the
remaining 9% convertible debentures were offset against additional
paid-in capital upon conversion of these debentures to shares of A Class
common stock.
39
LEISUREPLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
9. DEBT (CONTINUED)
INCREASING RATE CONVERTIBLE DEBENTURES
15,000 increasing rate convertible debentures of $1,000 each 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 the option
of the debenture holder, 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).
During the current year 3,000 increasing rate convertible debentures of
$1,000 each were converted to shares of common stock at $9,50 per share.
INCREASING RATE CONVERTIBLE DEBENTURES (CONTINUED)
Debt issue costs of $669,294, relating to these debentures is being
amortised over the tenure of the debenture issue. The charge to interest
expense for the current year is $223,731. During the current fiscal year,
3,000 of the increasing rate debentures were converted to A class shares,
the unamortised debt issue costs related to these debentures was offset
against additional paid-in capital.
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 current year charge to interest expense for the debenture redemption
reserve is $1,012,500.
40
LEISUREPLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
9. DEBT (CONTINUED)
MORTGAGE LOANS
Mortgage loans are collateralized by first and second mortgage bonds over
property with a net book value of $2,174,364. These loans are repayable
in equal monthly installments and equal annual installments over periods
ranging from five to twenty years and bear interest at rates ranging from
13,5% to 14,5%. Generally these interest rates are linked to the South
African prime lending rate which was 14,5% at June 30,2000.
EQUIPMENT NOTES
Equipment notes are collateralized over movable assets with a net book
value of $26,048,139. These loans are generally repayable in equal
monthly installments over a maximum period of five years. These loans
bear interest at rates ranging from 2% below to 1,75% above the South
African prime lending rate, which was 14.5% at June 30, 2000.
DEFERRED PURCHASE CONSIDERATION
Represents payments due to the previous owners of Gull Foods and Fifers
Bakery which are only payable at fixed dates in terms of the agreements
entered into with those owners.
INTEREST FREE NOTES
Represented loan funds due to the minority shareholders of LPI. This
amount was interest free and was only repayable when and if LPI produced
positive earnings. Due to the recent voluntary administration of LPI,
these loans will no longer be payable.
Aggregate annual maturities of long-term debt at June 30, 2000 were as
follows:
$
----------------------------------------------------------------------
2001 2,105,153
2002 14,869,725
2003 366,994
2004 93,183
2005 143,867
----------
17,578,922
----------
10. FSAH MANDATORY REDEEMABLE PREFERRED STOCK
On April 16, 1999, FSAH issued 60,000,000 mandatory redeemable preferred
stock for R60,000,000, each with a par of R0,001. FSAH is a wholly owned
subsidiary of the Company. The preferred stock is redeemable on April 17,
2002 at the original issue price. Dividends on the preferred stock are
equal to the greater of (i) the dividend declared by Lifestyle, a
subsidiary of FSAH, listed on the Johannesburg Stock Exchange, or (ii)
125% of the prior years dividend. These dividends accrue annually and are
payable 3 days after the receipt of the Lifestyle dividend or, if no such
dividend is declared, annually on February 19.
Lifestyle did not declare a dividend in the current fiscal year.
41
LEISUREPLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11. BANKING FACILITIES
FSAH, a wholly-owned subsidiary of the Company, has a short term banking
facility equal to its exposure to certain South African financial
institutions on the strength of guarantees provided by a pledge of 14
million shares in Lifestyle, which represents 17,3% of FSAH's interest in
Lifestyle. This facility will need to be renegotiated upon the sale of
Lifestyle. This facility bear interest at interest rates linked to the
prime lending rate, which is currently 14,5%, and is repayable on demand.
Lifestyle, the discontinued operation, has a general short term banking
facility of $5,921,000 available to it. This facility bears interest at
rates linked to the prime lending rate, which is currently 14,5%, and is
repayable on demand. The term of this facility is generally less than
twelve months.
12. FORWARD EXCHANGE CONTRACTS
The functional currency of the Company's major South African subsidiary
is the South African Rand. Due to the volatility of this currency against
the currencies of 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. Unrealized gains and losses at June 30, 2000 and 1999 were not
material.
13. GAIN /(LOSS) ON DISPOSAL 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:
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30,
2000 1999 1998
RESTATED
$ $ $
------------------------------------------------------------------------------------------------
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
-------- ---------- ----------
42
LEISUREPLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
14. INCOME TAXES
The provision for income taxes charged to operations was as follows:
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30,
2000 1999 1998
$ $ $
--------------------------------------------------------------------------------
Current:
Normal taxation 619 1,219 --
--- ----- ---
PROVISION FOR TAXES ON INCOME 619 1,219 --
--- ----- ---
The Company is a Bermuda registered corporation where there are no tax
laws applicable.
FSAH, a South African registered corporation, incurred a tax charge of
$619 in the current fiscal year, relating to prior year underprovisions.
First South Africa Management Corp., an American registered corporation,
incurred a normal taxation charge of $1,219 in 1999.
Net deferred tax liabilities is comprised of the following:
JUNE 30, JUNE 30,
2000 1999
RESTATED
$ $
----------------------------------------------------------------------------------
Accruals and prepaid expenditure 203,313 (42,125)
Assessable losses 694,967 582,009
---------- ----------
Gross deferred tax assets 898,280 539,884
---------- ----------
Property, plant and equipment and intangibles (4,402,038) (3,722,971)
---------- ----------
Gross deferred tax liabilities (4,402,038) (3,722,971)
---------- ----------
NET DEFERRED TAX LIABILITY (3,503,758) (3,183,087)
---------- ----------
15. DISCONTINUED OPERATIONS
FIRST LIFESTYLE HOLDINGS LIMITED ("LIFESTYLE")
During the current fiscal year the Company changed its focus to investing
in the Internet and wireless communication industries. Although Lifestyle
has performed well over the past few years, it no longer fits the
Company's investment strategy. 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, which has been approved by the South African
competition authorities.
On August 14, 2000, the Company sold an effective 13,7% interest in
Lifestyle to the existing Lifestyle management as part of the plan to
dispose of the Lifestyle segment. This sale was done on the same terms
and conditions as the offer made by management to the remaining
shareholders as contained in a circular to Lifestyle shareholders dated
September 4, 2000.
43
LEISUREPLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
15. DISCONTINUED OPERATIONS (CONTINUED)
The following summarizes the remaining assets and liabilities of the
Lifestyle segment that are included n the accompanying consolidated
balance sheet at June 30, 2000.
JUNE 30,
2000
$
------------------------------------------------------------------------
ASSETS
Cash and cash equivalents 18,106,098
Accounts receivable, net 10,608,197
Inventories 9,386,857
Prepaid expenses and other current assets 1,528,667
Deferred income taxes 905,533
----------
TOTAL CURRENT ASSETS 40,535,352
Property, plant and equipment, net 18,194,926
Intangible assets, net 18,801,831
Other assets 55,826
----------
77,587,935
----------
LIABILITIES
Bank overdraft 568,908
Current portion of long term debt 1,088,611
Accounts payable 8,291,996
Other provisions and accruals 4,257,016
Dividends payable 87
Income taxes payable 676,003
Other taxes payable 303,812
----------
TOTAL CURRENT LIABILITIES 15,186,433
Long term debt 1,448,769
Deferred income taxes 4,409,291
----------
21,044,493
----------
56,543,442
----------
The following summarizes the operating results of the Lifestyle
discontinued operation:
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30,
2000 1999 1998
$ $ $
---------------------------------------------------------------------------------------------
Revenue 93,292,006 84,944,309 82,759,698
---------- ---------- ----------
Operating income 6,471,842 7,024,057 9,431,814
---------- ---------- ----------
Net income, net of minority interest of
$3,479,293, $3,010,194 and $1,704,391 3,188,161 3,685,334 5,566,104
---------- ---------- ----------
The Company anticipates making a profit on the disposal of Lifestyle and
accordingly no provision for losses on disposal has been recorded.
44
LEISUREPLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
15. DISCONTINUED OPERATIONS (CONTINUED)
LEISUREPLANET.COM ("LPI")
Due to the lack of investor appetite for loss making Internet businesses,
no further funding was available to fund the activities of LPI,
previously Leisureplanet Limited, the Internet travel related business.
On August 2, 2000 LPI was placed under voluntary administration in the
United Kingdom, subsequent to this date, on August 31, 2000 the
administrator placed LPI into liquidation. The liabilities of LPI exceed
the assets and, where appropriate, provision has been made for any
liabilities, contingent or otherwise, which the Company may incur. The
remaining cash is considered restricted as a result of the administrative
liquidation.
The following summarizes the remaining assets and liabilities of the LPI
segment which are included in the accompanying consolidated balance sheet
at June 30, 2000:
JUNE 30, PROVISION FOR JUNE 30,
2000 LOSSES ON 2000
DISPOSAL
$ $ $
----------------------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents 4,641,539 4,641,539
Accounts receivable, net 304,741 (304,741) --
Prepaid expenses and other current assets 25,727,155 (25,727,155) --
---------- ----------- ---------
TOTAL CURRENT ASSETS 30,673,435 (26,031,896) 4,641,539
Property, plant and equipment, net 1,571,009 (1,571,009) --
Intangibles, net 11,336,630 (11,336,630) --
---------- ----------- ---------
43,581,074 (38,939,535) 4,641,539
---------- ----------- ---------
LIABILITIES
Bank overdraft 1,510 (1,510) --
Accounts payable 6,864,781 (2,223,242) 4,641,539
Other provisions and payables 1,004,239 (1,004,239) --
---------- ----------- ---------
TOTAL CURRENT LIABILITIES 7,870,530 (3,228,991) 4,641,539
Long term debt 4,155,561 (4,155,561) --
---------- ----------- ---------
12,026,091 (7,384,552) 4,641,539
Minority interest 2,547,488 (2,547,488) --
Preference share capital 13,333,333 (13,333,333) --
---------- ----------- ---------
27,906,912 (23,265,373) 4,641,539
---------- ----------- ---------
15,674,162 (15,674,162) --
---------- ----------- ---------
The following summarizes the operating results of the LPI segment:
YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30,
2000 1999
$ $
------------------------------------------------------------------------------------------
Revenue 546,942 164,486
----------- ----------
Operating loss (30,124,852) (6,231,845)
----------- ----------
Net loss, net of minority interest of $14,598,890 and $nil (15,119,447) (6,167,662)
----------- ----------
45
LEISUREPLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
15. DISCONTINUED OPERATIONS (CONTINUED)
During the prior fiscal year the Company completed the discontinuation of
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.
The following summarizes the operating results of the industrial and
packaging business segments:
YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30,
1999 1998
$ $
--------------------------------------------------------------------------
Revenue 18,492,864 30,648,652
---------- ------------
Operating loss (695,700) (1,371,879)
---------- ------------
Net loss (1,458,991) (2,178,473)
---------- ------------
Loss on disposal of discontinued operations (612,858) -
Write off of development costs incurred on
Processed food pie business (362,090) -
---------- ------------
(974,948) -
---------- ------------
Net loss on discontinued operations (2,433,939) (2,178,473)
---------- ------------
The Company disposed of the following subsidiaries:
PROCEEDS ON
DISPOSAL
SUBSIDIARY/BUSINESS DATE DISPOSED $
------------------------------------------------------------------------------------------
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
--------
46
LEISUREPLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
15. DISCONTINUED OPERATIONS (CONTINUED)
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 Company.
$
-------------------------------------------------------------------------
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)
-----------
(213,280)
-----------
16. CASH FLOWS
The changes in assets and liabilities consist of the following:
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30,
2000 1999 1998
$ $ $
---------------------------------------------------------------------------------------------
(Increase)/decrease in accounts receivable (837,497) (1,609,848) 1,251,842
(Increase)/decrease in inventories (1,415,494) (1,257,940) (956,318)
Increase in prepaid expenses and other current
Assets (2,245,402) (3,758,667) (169,887)
Increase/(decrease) in accounts payable 7,259,517 2,141,313 (894,445)
Increase in other provisions and accruals 1,703,222 5,398,166 -
Increase in other taxes payable (202,532) 8,483 676,319
(Decrease)/increase in income taxes payable (423,369) (380,001) 513,573
---------- ---------- --------
3,838,445 541,506 421,084
---------- ---------- --------
47
LEISUREPLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
16. CASH FLOWS (CONTINUED)
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30,
2000 1999 1998
$ $ $
------------------------------------------------------------------------------------------------
DIVIDENDS PAID IS RECONCILED TO THE CASH FLOW AS
FOLLOWS:
Movement in opening and closing balances (1,572,434) 1,315,222 -
Minority dividend movements 379,193 (1,103,450) -
Dividend charge (149,755) (495,991) -
----------- ---------- ---------
Dividend paid (1,342,996) (284,219) -
----------- ---------- ---------
NET CASH PROVIDED BY/(USED IN) DISCONTINUED
OPERATIONS CONSISTS OF THE FOLLOWING:
Net income/(loss) of discontinued operations: (27,605,448) (4,916,267) 3,387,631
Provision for losses on discontinuance 15,674,162 - -
Depreciation and amortisation 4,549,060 3,715,552 3,361,638
Minority share of (losses)/gains (11,119,597) 3,010,194 1,704,922
Interest in losses of affiliates 23,111 -
Shares to be issued 3,446,633 - -
Loss on sale of shares - (767,262) -
----------- ---------- ---------
(15,032,079) 1,042,217 8,454,191
=========== ========== =========
17. EMPLOYMENT BENEFITS
The Company does not maintain retirement funds for the benefit of its
employees of its continuing operations.
The Company and employees of continuing operations participate in various
health plans, which provide medical cover for employees on an annual
basis. Neither the health plan nor the Company are liable for post
retirement medical costs. The contributions to the health plan are borne
by the Company. The Company has no liability for employees' medical costs
in excess of the contributions to the health plan.
The Company's contribution to these health plans was as follows:
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30,
2000 1999 1998
$ RESTATED RESTATED
$ $
-------------------------------------------------------------------------
6,927 - -
------ ------ ------
18. BUSINESS SEGMENT INFORMATION
In the previous year the Company had two reportable segments which
included strategic business units that offered different products and
services. These business units were both managed separately as each unit
was in a different technological and marketing field. Both of these
segments, Internet travel related businesses and Lifestyle enhancing
products, are reported as discontinued operations in the current year as
the company has changed its focus to investing in Internet technology
companies and related service industries. As a result, as of June 30,
2000 the Company operates in only one segment. This segment currently
generates no revenues and all significant identifiable assets are located
in the United States and Israel.
48
LEISUREPLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
19. 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).
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.
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
installments 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.
Option activity under the stock option plans is summarised as follows:
SHARES WEIGHTED
SUBJECT TO AVERAGE
OPTIONS EXERCISE PRICE
OUTSTANDING PER OPTION
---------------------------------------------------------------------
Balance at July 1, 1997 395,000 3,78
Granted - non plan options 500,000 4,75
Granted - plan options 40,000 5,00
Exercised - plan options (10,000) 4,38
Balance at June 30, 1998 925,000 4,40
Granted - plan options 135,000 2,75
Exercised (20,000) 5,19
Balance at June 30, 1999 1,040,000 4,21
Granted - non plan options 600,000 4,88
Granted - plan options 60,000 3,76
Exercised - non plan options (100,000) 2,00
Exercised - plan options (80,000) 4,75
Balance at June 30, 2000 1,520,000 4,54
49
LEISUREPLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
19. STOCK OPTION PLAN (CONTINUED)
Significant option groups outstanding at June 30, 2000 and related
weighted average exercise price and weighted average remaining life are
as follows:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
RANGE OF AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE REMAINING
PRICES SHARES PRICE SHARES PRICE LIFE
------------------------------------------------------------------------------------
$1,00 to $2,19 165,000 1,81 165,000 1,81 7 Years
4 months
$3,75 to $4,875 1,075,000 4,81 435,000 4,72 8 Years
3 months
$5,00 to $6,00 280,000 5,13 280,000 5,13 5 Years
--------- ---- ------- ----
1,520,000 4,54 880,000 4,30
--------- ---- ------- ----
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:
1999 1998
2000 RESTATED RESTATED
$ $ $
------------------------------------------------------------------------------------------------
Net income/(loss) from continuing operations
As reported (4,233,222) (6,210,195) (615,740)
Proforma (6,809,446) (7,895,108) (3,683,094)
Basic and diluted (loss)/income per common share
As reported ($0,54) ($0,95) ($0,10)
Proforma ($0,86) ($1,21) ($0,57)
The weighted average grant date fair value of options granted in 2000,
1999 and 1998 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:
2000 1999 1998
-------------------------------------------------------------------------------------
Weighted average grant-date fair value of options
Granted $4,07 $4,51 $6,82
Assumptions:
Risk free interest rate 14,96% 14,96% 14,0%
Expected life 4 Years 5 Years 5 Years
Expected volatility 106.45% 108,6% 87,3%
Expected dividend yield 0,0% 0,0% 0,0%
50
LEISUREPLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
20. WARRANTS OUTSTANDING
In connection with the initial public offering ("the 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, 100,000 warrants
were issued to the underwriter pursuant to the underwriting agreement.
Concurrently with the 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 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.
In consideration for the capital raising exercise undertaken during the
current year the Company issued warrants over 150,000 shares of common
stock at an exercise price of $0,01 per share.
In terms of an agreement entered into with Infospace, the Company
undertook to issue warrants over 720,000 shares of common stock valued at
$5,00 per share. Infospace were to provide services to the
Leisureplanet.com subsidiary in exchange for the Company increasing its
holding in Leisureplanet.com equal to the value placed on the warrants.
These warrants have an exercise price of $0,01 per share. As at June 30,
2000, 480,000 of these warrants have vested and 240,000 were issued.
Warrants over 25,000 of the debenture warrants and 57,811 of the Class A
Redeemable warrants were exercised during the current year.
Warrants outstanding at June 30, 2000 were as follows:
NUMBER OF EXERCISE
WARRANT WARRANTS PRICE EXPIRY DATE ENTITLEMENT
-------------------------------------------------------------------------------------------
One share of common
Class A Redeemable January 24, stock and one Class B
Warrants 1,015,938 $6,50 2001 warrant
Class B Redeemable January 24, One share of common
Warrants 2,101,547 $8,75 2001 Stock
July 31, One share of common
Debenture warrants 110,000 $6,00 2007 Stock
Capital raising One share of common
Warrants 150,000 $6,00 Stock
One share of common
Infospace warrants 240,000 $0,01 Stock
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 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.
51
LEISUREPLANET HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
21. FIRST SOUTH AFRICAN HOLDINGS ESCROW AGREEMENT
The FSAH Escrow Agreement was executed prior to the closing of the
Company's 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 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 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 issuance's of FSAH
Class B common stock by FSAH.
In 2000 a further 120,621 shares of common stock were issued to the FSAH
escrow agent in terms of the FSAC Escrow agreements entered into, in
connection with the acquisition of Gull Foods.
No further shares of common stock are to be issued in terms of FSAC or
FSAH escrow agreements.
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 underpinned at
certain minimum values. The previous vendors had the option to put the
shares to the Company at those values, which was obligated to honor the
minimum values placed on those shares. These vendors exercised this
option during the prior 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.
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.
52
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 to correctly reflect the gain made
on dilution of investment in LPI, to additional paid in capital.
QUARTERS ENDED
--------------------------------------------
SEPTEMBER DECEMBER MARCH
30, 31, 31,
1999 1999 2000
$ $ $
------------------------------------------------------------------------------------------------
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 ($,040) ($0,30) ($0,51)
Weighted average common stock outstanding -
Basic and diluted 6,377,981 7,153,185 9,002,398
53
DATA FOR EXHIBIT 11.1
(Loss)/earnings per share data is calculated as follows:
BASIC LOSS PER SHARE FOR THE YEAR ENDED JUNE 30, 2000 $
----------------------------------------------------------------------------------------
Net loss available to common stockholders from continuing operations (4,233,222)
Net loss available to common stockholders from discontinued operations (27,605,448)
Total net loss (31,838,670)
DATES OUTSTANDING SHARES FRACTION OF WEIGHTED
OUTSTANDING PERIOD AVERAGE
SHARES
--------------------------------------------------------------------------------------------
July 1, 1999 6,329,731 6,329,731
July 1, 1999 to June 30, 2000
Options converted to shares during the year 180,000 0,66 117,930
Additional purchase price payments 120,621 0,75 90,548
A Warrants exercised 164,500 0,43 71,036
Underwriters options exercised 82,811 0,36 29,583
9% debentures converted 742,503 0,48 353,973
Increasing rate debentures 315,789 0,46 144,484
New shares issued 1,379,310 0,51 699,102
WEIGHTED AVERAGE SHARES 9,315,265 7,836,387
BASIC LOSS PER SHARE FOR THE YEAR ENDED JUNE 30, 1999 $
-----------------------------------------------------------------------------------------
Net loss available to common stockholders from continuing operations (6,210,195)
Net loss available to common stockholders from discontinued operations (4,916,267)
Total net loss (11,126,462)
DATES OUTSTANDING SHARES FRACTION OF WEIGHTED
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 year 320,700 0,46 148,307
WEIGHTED AVERAGE SHARES 6,329,731 6,548,491
54
DATA FOR EXHIBIT 11.1
(Loss)/earnings per share data is calculated as follows:
BASIC EARNINGS PER SHARE FOR THE YEAR ENDED JUNE 30, 1998 $
---------------------------------------------------------------------------------------
Net loss available to common stockholders from continuing operations (615,740)
Net loss available to common stockholders from discontinued operations 3,387,631
---------
Total net income 2,771,891
---------
DATES OUTSTANDING SHARES FRACTION OF WEIGHTED
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
--------- ---------
DILUTED LOSS PER SHARE FOR THE YEAR ENDED JUNE 30, 2000 $
----------------------------------------------------------------------------------------
Net loss available to common stockholders from continuing operations (4,233,222)
Add impact of assumed conversions 2,030,232
-----------
(2,202,990)
Net loss available to common stockholders from discontinued operations (27,605,448)
-----------
ADJUSTED NET LOSS (29,808,438)
-----------
Weighted average shares 7,836,387
Warrants and options not yet exercised 1,150,698
9% convertible debentures 392,069
Increasing rate debentures 1,434,463
-----------
ADJUSTED WEIGHTED AVERAGE SHARES 10,813,617
===========
55
DATA FOR EXHIBIT 11.1
(Loss)/earnings per share data is calculated as follows:
DILUTED LOSS PER SHARE FOR THE YEAR ENDED JUNE 30, 1999 $
--------------------------------------------------------------------------------------
Net loss available to common stockholders from continuing operations (6,210,195)
Add impact of assumed conversions 2,258,044
----------
(3,952,151)
Net loss available to common stockholders from discontinued operations (4,916,267)
----------
ADJUSTED NET LOSS (8,868,418)
==========
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
==========
DILUTED EARNINGS PER SHARE FOR THE YEAR ENDED JUNE 30, 1998 $
--------------------------------------------------------------------------------------
Net income available to common stockholders from continuing operations (615,740)
Add impact of assumed conversions 1,646,170
----------
1,030,430
Net loss available to common stockholders from discontinued operations 3,387,631
----------
ADJUSTED NET INCOME 4,418,061
==========
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
==========
56
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:
NAME AGE POSITIONS
---- --- ---------
Michael Levy 54 Chairman of the Board
Clive Kabatznik 44 Vice Chairman of the Board, Chief Executive Officer,
President and Chief Financial Officer
Cornelius J. Roodt 41 Director
David BenDaniel 68 Director
Chris Matty 32 Director
Mark J. Korb 32 Chief Financial Officer of First South African Holdings
(Pty.) Ltd.
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. 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 was responsible for overseeing all of the South African
operations of First South African Holdings (Pty.) Ltd. Mr. Roodt has led the
buyout of First Lifestyle Holdings and will no longer act as an executive
officer of any of our subsidiaries. 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.
57
DAVID BENDANIEL, PH.D. has been a professor at Cornell University since
1985 and is currently the Berens Professor of Entrepreneurship at the Johnson
Graduate School of Management at Cornell University. Dr. BenDaniel is the
co-editor of International M&A, Joint Ventures and Beyond - Doing the Deal,
printed in 1998. Dr. BenDaniel holds a B.A. and M.S. in Physics from the
University of Pennsylvania and a Ph.D. in Engineering from the Massachusetts
Institute of Technology.
CHRIS MATTY has been Vice President of Strategic Development for
InfoSpace.com, Inc., an aggregator of content on the Internet, since February
1997. Prior to that time, Mr. Matty was a consultant for Wiredweb, an Internet
service provider, from December 1996 to February 1997. In May 1996, Mr. Matty
founded Environmental Products, a recycling company, and was responsible for
finance and marketing of that company until December 1996. From June 1994 to May
1996, Mr. Matty was Program Manager at Clarion Communications, a
telecommunications company, where he was responsible for international business
development.
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.
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 Chris Matty, David BenDaniel, 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.
The compensation committee is currently composed of Michael Levy and
Chris Matty. 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.
Section 16(a) of the Securities Exchange Act of 1934 requires our
executive officers and directors, and persons who beneficially own more than 10%
of our common stock, to file initial reports of ownership and reports of changes
of ownership with the Securities and Exchange Commission and furnish copies of
those reports to us. Based solely on a review of the copies of the reports
furnished to us to date, or written representations that no reports were
required, we believe that all reports required to be filed by such persons with
respect to our fiscal year ended June 30, 2000 were timely made.
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
58
subsidiaries, First South African Holdings (Pty.) Ltd. and First Lifestyle
Holdings Ltd. during the fiscal years ended June 30, 1997, June 30, 1998, June
30, 1999 and June 30, 2000. Apart from Mr. Kabatznik, whose annual salary is
$300,000, 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.
59
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------- ----------------------
FISCAL SALARY BONUS
YEAR OTHER ANNUAL RESTRICTED SECURITIES
NAME AND ENDED COMPENSATION STOCK AWARDS UNDERLYING
PRINCIPAL POSITION JUNE 30, STOCK OPTIONS
- ------------------ -------- --------- ------- ------------ ------------ -------------
$ $
Clive Kabatznik, 2000 230,000 0 --- --- 255,000
President and Chief 1999 180,000 0 5,000
Executive Officer 1998 180,000 170,509 255,000
Cornelius J. Roodt, 2000 150,000 0 5,000
Managing Director and 1999 150,000 0 --- --- 5,000
Chief Financial 1998 150,000 170,509 --- --- 255,000
Officer of First
South African
Holdings (Pty.) Ltd.
and First Lifestyle
Holdings Ltd.
The options granted to Mr. Kabatznik during fiscal year ended June 30,
2000 represent:
- 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 $5.125 per share; and
- 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 $4.875 per share.
The options granted to Mr. Roodt during fiscal year ended June 30, 2000
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 $5.125 per share.
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:
- 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
- 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.
60
OPTIONS GRANTED IN FISCAL 2000
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, 2000, 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.
OPTIONS GRANTED
---------------
POTENTIAL REALIZABLE
NAME NUMBER OF PERCENT OF TOTAL PER EXPIRATION DATE VALUE AT ASSUMED ANNUAL
SECURITIES TO SHARE RATE OF STOCK PRICE
UNDERLYING EMPLOYEES IN EXERCISE APPRECIATION
OPTIONS FISCAL YEAR PRICE FOR OPTION TERM
------- ----------- ----- --------------- ---------------
5% 10%
Clive Kabatznik 250,000 49.00% $4.875 August 15, 2010 $336,718 $744,059.00
Clive Kabatznik 5,000 1.00% $5.125 May 1, 2005 $7080.00 $15,644.32
Cornelius J. Roodt 5,000 1.00% $5.125 May 1, 2005 $7080.00 $15,644.32
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
During the fiscal year ended June 30, 2000, Mr. Roodt exercised 180,000
options. The following table sets forth the number of shares of our common stock
underlying unexercised stock options granted by us to our executive officers and
the value of those options at June 30, 2000. 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, 2000, or $3.25, over the
exercise price of the option.
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
- ------------------------- ----------- ------------- ----------- -------------
Clive Kabatznik 558,333 166,666 $5,300 $0
Cornelius J. Roodt 240,000 0 $92,800 $0
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. Directors
are reimbursed for their reasonable out-of-pocket expenses incurred in
connection with their duties.
61
EMPLOYMENT AGREEMENTS
On April 12, 2000, the Company's Board of Directors approved an Amended and
Restated Employment Agreement with Clive Kabatznik (the "Employment Agreement").
Pursuant to the Employment Agreement, Mr. Kabatznik will serve as the Chief
Executive Officer, President and Chief Financial Officer of the Company
beginning as of February 1, 2000 and continuing through and until January 31,
2005. As compensation for his services, Mr. Kabatznik will receive an annual
base salary of $300,000 (with five percent increases each year), and an annual
bonus of five percent of net realized capital gains upon the sale, liquidation
or distribution by the Company of any Portfolio Company (as defined in the
Employment Agreement). A Portfolio Company does not include any of the South
African entities currently owned by the Company. In the event of a Change in
Control (as defined in the Employment Agreement), Mr. Kabatznik may also be
entitled to a payment of five percent of any net unrealized capital gains on any
Portfolio Company, which gains may, at the option of the Company, be paid in
cash, stock of the Portfolio Company or any combination of the foregoing.
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:
- 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;
- 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
- 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.
Mr. Roodt's employment contract with First South African Holdings
(Pty.) Ltd. terminated on December 31, 1999 when he became Chief Executive
Officer of First Lifestyle Holdings, Ltd.
62
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:
- 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
- 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 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 to purchase 10,000 shares of our common stock following each
annual meeting of shareholders. 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 630,000 shares of our common stock
under our 1995 Stock Option Plan, 110,000 of which have been exercised.
63
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.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of September 28, 2000, certain
information as to the beneficial ownership of the our common stock by:
- each person known by us to own more than five percent (5%)
of our outstanding shares;
- each of our directors;
- each of our executive officers named in the Summary
Compensation Table under "Executive Compensation"; and
- all of our directors and executive officers as a group.
64
Amount and Nature of Beneficial
-------------------------------
Ownership (1)
-------------
Name and Address of Common Stock Class B Percentage Percentage of
of Voting
Beneficial Shareholder Common Ownership Power
Stock (2) (1)(3) (1)(3)
--------- ------ ------
Michael Levy 63,333(4) 736,589(5) 8.58% 28.98%
9511 West River Street
Shiller Park, IL 60176
Clive Kabatznik 519,999(6) 190,000 7.26% 10.98%
6100 Glades Road
Suite 305
Boca Raton, FL 33434
Cornelius J. Roodt 188,333(7) 0 2.0% 1.4%
P.O. Box 4001
Kempton Park
South Africa
BT Global Credit Limited 1,263,157(8) 0 12.00% 8.94%
c/o Bankers Trust
Luxembourg S.A.
P.O. Box 807
14 Boulevard F.D. Roosevelt
L-2540 Luxembourg
Luxembourg
American Stock Transfer 354,334(9) 166,452(9) 5.62% 9.22%
& Trust Company
6201 15th Avenue
Brooklyn, New York 11219
UBS AG 1,379,310 0 14.89% 10.72%
c/o Warburg Dillon Read
677 Washington Boulevard
Stamford, Connecticut 06901
David BenDaniel 10,000(10) 0 * *
6100 Glades Road
Suite 305
Boca Raton, Florida 33434
Chris Matty 10,000(10) 0 * *
6100 Glades Road
Suite 305
Boca Raton, Florida 33434
All executive officers and 791,665(11) 926,589 17.13% 39.74%
directors as a group (5
persons)
* Less than 1 %.
65
(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
March 13, 2000.
(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. Our Class B
common stock is entitled to five votes per share, whereas our common
stock is entitled to one vote per share.
(4) Includes 63,333 shares of our common stock issuable upon exercise of
options that are immediately exercisable.
(5) Includes (i) 570,137 shares of our Class B common stock and (ii)
166,452 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. American Stock Transfer &
Trust Company has granted to Mr. Levy a proxy to vote each of such
shares of our Class B common stock.
(6) Includes 519,999 shares of our common stock issuable upon exercise of
options that are immediately exercisable.
(7) Includes 188,333 shares of our common stock issuable upon exercise of
options that are immediately exercisable.
(8) Includes 1,263,157 shares of our common stock issuable upon conversion
of certain Increasing Rate Senior Subordinated Convertible Debentures
(9) Based solely upon information contained in a Schedule 13G, Amendment
No. 1, dated 12/31/99 filed with the Securities and Exchange
Commission. All shares are held as escrow agent pursuant to various
escrow agreements. American Stock Transfer & Trust Company holds a
proxy to vote the shares of common stock. Michael Levy holds a proxy to
vote the shares of Class B Common Stock.
(10) Includes 10,000 shares of our common stock issuable upon the exercise
of options that are immediately exercisable
(11) Represents 791,665 shares issuable upon exercise of options that are
immediately exercisable.
66
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.
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)
67
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
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)
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)
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, 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) Filed herewith.
68
(B) REPORTS ON FORM 8-K
Not applicable.
69
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 Boca
Raton, State of Florida, on the 13th day of October, 2000.
LEISUREPLANET HOLDINGS, LTD.
BY: /s/ Clive Kabatznik
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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 October 13, 2000
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Michael Levy Directors
/s/ Clive Kabatznik President, Vice Chairman, October 13, 2000
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Clive Kabatznik Chief Executive Officer, Chief
Financial Officer, Director and
Controller
/s/ Cornelius Roodt Director October 13, 2000
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Cornelius Roodt
/s/ David BenDaniel Director October 13, 2000
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David BenDaniel
/s/ Chris Matty Director October 13, 2000
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Chris Matty