SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
__X__ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1999
OR
____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________to ______________
Commission file number 0-27494
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LEISUREPLANET HOLDINGS, LTD.
(Exact name of Registrant as Specified in Its Charter)
Bermuda Not Applicable
------- --------------
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
Clarendon House, Church Street, Hamilton HM CX, Bermuda
-------------------------------------------------------
(Address of Principal Executive Offices with Zip Code)
Registrant's Telephone Number, Including Area Code: 441-295-1422
------------------------------------------------------------------
Former Name, Former Address and Former Fiscal Year, if Changed Since
Last Report.
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
-- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes ____No __
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares of common stock outstanding as of February 11, 2000 was
8,027,359.
LEISUREPLANET HOLDINGS, LTD.
AMENDED FORM 10-Q FOR THE QUARTER ENDED DECEMBER 31, 1999
PART I - FINANCIAL INFORMATION
ITEM 1 Leisure Planet Holdings Limited
Consolidated Balance Sheets at December 31, 1999 and June 30, 1998
Consolidated Statements of Income/(loss) and Comprehensive
Income/(loss) for the three months and six months ended December
31, 1999 and 1998
Consolidated Statements of Cash Flows for the six months ended
December 31, 1999, 1998
Consolidated Statement of Changes in Stockholders Investment for
the period June 30, 1999 to December 31, 1999
Notes to the Consolidated Financial Statements for the six months
ended December 31, 1999 and 1998
ITEM 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations
ITEM 3 Quantitative and Qualitative Disclosures About Market Risk
PART II - OTHER INFORMATION
ITEM 6 Exhibits and Reports on 8-K
Signatures
-2-
INDEX TO FINANCIAL STATEMENTS
LEISURE PLANET HOLDINGS LIMITED
Consolidated Balance Sheets at December 31, 1999 and June30, 1998 F-1
Consolidated Statements of Income/(loss) and Comprehensive
Income/(loss) for the three months and six months ended December
31, 1999 and 1998 F-2
Consolidated Statements of Cash Flows for the six months ended
December 31, 1999, 1998 F-4
Consolidated Statement of Changes in Stockholders Investment for
the period June 30, 1999 to December 31, 1999 F-5
Notes to the Consolidated Financial Statements for the six months
ended December 31, 1999 and 1998 F-6
-3-
PART I - FINANCIAL INFORMATION
ITEM 1.
LEISUREPLANET HOLDINGS, LTD.
CONSOLIDATED BALANCE SHEETS
- ----------------------------------------------------------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------------------------ -------------------- ------------------
DECEMBER 31, JUNE 30,
1999 1999
RESTATED $ $
- ------------------------------------------------------------------------------------ -------------------- ------------------
CURRENT ASSETS
Cash on hand 48,048,435 20,813,301
Trade accounts receivable 22,562,978 13,388,561
Less: Allowances for bad debts (390,081) (443,172)
--------- ---------
22,172,897 12,945,389
- ------------------------------------------------------------------------------------ -------------------- ------------------
Inventories (net) 9,751,657 9,152,575
Prepaid expenses and other current assets 6,081,836 5,236,587
Deferred income taxes - 539,884
---------- -------
- ------------------------------------------------------------------------------------ -------------------- ------------------
TOTAL CURRENT ASSETS 86,054,825 48,687,736
- ------------------------------------------------------------------------------------ -------------------- ------------------
Property, plant and equipment 33,677,625 30,777,399
Less: Accumulated depreciation (12,795,614) (11,488,982)
------------ ------------
20,882,011 19,288,417
- ------------------------------------------------------------------------------------ -------------------- ------------------
Intangible assets (net) 29,037,644 34,024,745
Deferred charges (net) 557,494 868,944
Other assets 33,279 33,988
---------- ------------
- ------------------------------------------------------------------------------------ -------------------- ------------------
136,565,253 102,903,830
- ----------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' INVESTMENT
- ------------------------------------------------------------------------------------ -------------------- ------------------
CURRENT LIABILITIES
Bank overdraft payable 1,656,886 -
Current portion of long term debt 1,091,651 3,088,435
Trade accounts payable 15,089,201 9,058,811
Other provisions and accruals 4,775,239 4,618,283
Dividends payable 3,149 1,870,959
Other taxes payable 773,061 558,669
Income taxes payable 677,353 1,214,292
--------- ---------
- ------------------------------------------------------------------------------------ -------------------- ------------------
TOTAL CURRENT LIABILITIES 24,066,540 20,409,449
- ------------------------------------------------------------------------------------ -------------------- ------------------
Long term debt 26,975,647 33,598,244
Deferred income taxes 1,742,148 1,551,724
--------- ---------
- ------------------------------------------------------------------------------------ -------------------- ------------------
52,784,335 55,559,417
- ------------------------------------------------------------------------------------ -------------------- ------------------
Minority stockholders investment 43,857,413 32,198,314
- ------------------------------------------------------------------------------------ -------------------- ------------------
FSAH mandatory redeemable preferred stock 9,891,197 9,891,197
- ------------------------------------------------------------------------------------ -------------------- ------------------
STOCKHOLDERS INVESTMENT
Capital stock:
A class common stock, $0.01 par value - authorized 23,000,000 shares,
issued and outstanding 7,905,947 shares (1998: 5,383,142 shares) 79,059 53,832
B class common stock, $0.01 par value - authorized 2,000,000 shares, issued
and outstanding 946,589 shares (1998: 946,589 shares) 9,466 9,466
FSAH B class common stock, R0.001 par value - authorized 10,000,000 shares,
issued and outstanding 2,671,066 shares (1998: 2,550,466 shares) 599 580
Preferred stock, $0.01 par value - authorized 5,000,000 shares, issued and
outstanding nil shares - -
Capital in excess of par 53,888,106 22,971,261
- ------------------------------------------------------------------------------------ -------------------- ------------------
Retained (loss)/earnings (8,079,197) (3,084,700)
----------- -----------
- ------------------------------------------------------------------------------------ -------------------- ------------------
45,898,033 19,950,439
- ------------------------------------------------------------------------------------ -------------------- ------------------
Foreign currency translation adjustments (15,865,725) (14,695,537)
------------ ------------
- ------------------------------------------------------------------------------------ -------------------- ------------------
30,032,308 5,254,902
----------- ---------
- ------------------------------------------------------------------------------------ -------------------- ------------------
136,565,253 102,903,830
- ------------------------------------------------------------------------------------ -------------------- ------------------
F-1
LEISUREPLANET HOLDINGS, LTD.
CONSOLIDATED STATEMENTS OF INCOME/(LOSS) AND COMPREHENSIVE INCOME/(LOSS)
FOR THE THREE MONTHS ENDED DECEMBER 31,
- ------------------------------------------------------------------------------------- --------------- ----------------
1999 1998
RESTATED RESTATED
$ $
- ------------------------------------------------------------------------------------- --------------- ----------------
Revenues 30,055,350 26,054,480
---------- ----------
- ------------------------------------------------------------------------------------- --------------- ----------------
Operating expenses
Cost of sales 19,587,667 15,609,329
Selling, general and administrative costs 9,834,735 8,017,917
Loss on sale of investment in First SA Lifestyle Holdings Limited - 1,094,190
Amortization of intangibles 435,020 281580
Depreciation 1,061,980 894,642
---------- ----------
30,919,402 25,897,658
- ------------------------------------------------------------------------------------- --------------- ----------------
Operating (loss)/income (864,052) 156,822
- ------------------------------------------------------------------------------------- --------------- ----------------
Other income 558,460 75,123
Interest (expense)/income (298,104) 175,254
--------- -------
- ------------------------------------------------------------------------------------- --------------- ----------------
Income from consolidated companies before income taxes and minority interests (603,696) 407,199
Provision for taxes on income (1,454,964) (859,032)
----------- ---------
- ------------------------------------------------------------------------------------- --------------- ----------------
Income/(loss)from continuing operations before minority interests (2,058,660) (451,833)
Minority interest in consolidated subsidiary companies (52,266) (1,102,264)
--------- -----------
- ------------------------------------------------------------------------------------- --------------- ----------------
Income from continuing operations (2,110,926) (1,554,097)
Income from discontinued operations - 578,723
--------- ----------
- ------------------------------------------------------------------------------------- --------------- ----------------
Net Income/(loss) (2,110,926) (975,374)
Other comprehensive (loss)/income:
Foreign currency translation adjustments (1,688,732) 182,971
----------- - -------
- ------------------------------------------------------------------------------------- --------------- ----------------
Comprehensive income/(loss) 2,853,445 (792,403)
--------- ---------
- ------------------------------------------------------------------------------------- --------------- ----------------
Basic loss per share from continuing operations ($0,30) ($0,25)
Basic earnings per share from discontinued operations - $0,09
----- -----
- ------------------------------------------------------------------------------------- --------------- ----------------
Total basic loss per share ($0,30) ($0,16)
----- -------
- ------------------------------------------------------------------------------------- --------------- ----------------
Diluted loss per share from continuing operations ($0,30) ($0,25)
Diluted earnings per share from discontinued operations - $0,09
----- -----
- ------------------------------------------------------------------------------------- --------------- ----------------
Total diluted loss per share ($0,30) ($0,16)
----- -------
- ------------------------------------------------------------------------------------- --------------- ----------------
* Additional shares were not considered in the prior year as the result would be anti-dilutive
F-2
LEISUREPLANET HOLDINGS, LTD.
CONSOLIDATED STATEMENTS OF INCOME/(LOSS) AND COMPREHENSIVE INCOME/(LOSS)
FOR THE SIX MONTHS ENDED DECEMBER 31,
- -------------------------------------------------------------------------------------- -------------- ---------------
1999 1998
RESTATED RESTATED
$ $
- -------------------------------------------------------------------------------------- -------------- ---------------
Revenues 52,777,288 45,311,600
---------- ----------
- -------------------------------------------------------------------------------------- -------------- ---------------
Operating expenses
Cost of sales 34,755,179 27,541,911
Selling, general and administrative costs 17,703,784 13,529,643
Loss on sale of investment in First SA Lifestyle Holdings Limited - 1,094,190
Amortization of intangibles 919,381 563,160
Depreciation 1,950,272 1,338,414
---------- ---------
55,328,616 44,067,318
- -------------------------------------------------------------------------------------- -------------- ---------------
Operating (loss)/income (2,551,328) 1,244,282
- -------------------------------------------------------------------------------------- -------------- ---------------
Other income 767,941 139,906
Interest (expense)/income (508,865) 318,829
--------- -------
- -------------------------------------------------------------------------------------- -------------- ---------------
(Loss)/income from consolidated companies before income taxes and minority interests (2,292,252) 1,703,017
Provision for taxes on income (2,116,378) (1,353,428)
----------- -----------
- -------------------------------------------------------------------------------------- -------------- ---------------
Loss from continuing operations before minority interests (4,408,630) 349,589
Minority interest in consolidated subsidiary companies (630,117) (1,513,675)
--------- -----------
- -------------------------------------------------------------------------------------- -------------- ---------------
Loss from continuing operations (5,038,747) (1,164,086)
Loss from discontinued operations - (927,427)
--------- ---------
- -------------------------------------------------------------------------------------- -------------- ---------------
Net loss (5,038,747) (2,091,513)
Other comprehensive (loss)/income:
Foreign currency translation adjustments (1,170,191) 1,142,214
----------- ---------
- -------------------------------------------------------------------------------------- -------------- ---------------
Comprehensive loss (6,208,938) (953,299)
------- ----------
- -------------------------------------------------------------------------------------- -------------- ---------------
Basic earnings loss per share from continuing operations ($0,74) ($0.17)
Basic loss per share from discontinued operations - ($0.13)
----- -------
- -------------------------------------------------------------------------------------- -------------- ---------------
Total basic loss per share ($0,74) ($0.30)
----- -------
- -------------------------------------------------------------------------------------- -------------- ---------------
Diluted loss per share from continuing operations ($0,74) ($0.17)
Diluted loss per share from discontinued operations - ($0.13)
----- -------
- -------------------------------------------------------------------------------------- -------------- ---------------
Total diluted loss per share ($0,74) ($0.30)
----- -------
- -------------------------------------------------------------------------------------- -------------- ---------------
* Additional shares were not considered as the result would be anti-dilutive
F-3
LEISUREPLANET HOLDINGS, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED
- ---------------------------------------------------------------------------------------- ------------------ ------------------
DECEMBER 31, DECEMBER 31,
1999 1998
RESTATED RESTATED
$ $
- ---------------------------------------------------------------------------------------- ------------------ ------------------
Cash flows from operating activities:
Net Income/(loss) (5,038,747) (2,091,513)
Loss from discontinued operations - 927,427
--------- -----------
Loss from continuing operations (5,038,747) (1,164,086)
Adjustments to reconcile loss to net cash (utilized)/generated by
operating activities:
Depreciation and amortization 2,869,653 1,901,574
Deferred income taxes 753,358 162,897
Net loss on sale of assets 68,729 -
Net gain on sale of subsidiary - (384,919)
Net loss on debenture redemption - 282,359
Net loss/(gain) on transactions with minorities (4,560,698) 247,365
Effect of changes in current assets and current liabilities (6,921,414) (5,660,833)
Non cash value of warrants issued 1,978,379 -
Minority interest in consolidated subsidiary companies 630,117 1,513,675
Creation of debenture redemption reserve fund 562,500 281,250
------- -------
- ---------------------------------------------------------------------------------------- ------------------ ------------------
Net cash (utilized)/generated by continuing operating activities (9,658,123) (2,820,718)
Net cash utilized by discontinued operations - (927,427)
---------- ---------
- ---------------------------------------------------------------------------------------- ------------------ ------------------
Net cash utilized by operating activities (9,658,123) (3,748,145)
- ---------------------------------------------------------------------------------------- ------------------ ------------------
Cash flows from investing activities:
Proceeds on minority shares issued in LPI Limited 20,844,442 -
Proceeds on minority shares issued in First Lifestyle Holdings Limited 16,645 -
Proceeds on First Lifestyle Holdings shares sold 437,773 4,559,222
Additional intangibles acquired (493,073) -
Additions to property, plant and equipment (4,004,673) (1,818,244)
Proceeds on disposal of property, plant and equipment 9,065 767,629
Additional purchase price payments - (2,085,313)
Other assets acquired - (89,019)
Proceeds on disposal of subsidiary (Net of cash of $10,562) - 48,262
-------- ----------
- ---------------------------------------------------------------------------------------- ------------------ ------------------
Net cash realized by/(used in) investing activities 16,810,179 1,382,537
- ---------------------------------------------------------------------------------------- ------------------ ------------------
Cash flows from financing activities:
Net borrowings in bank overdrafts 1,665,575 2,004,268
(Repayments)/borrowings in long term debt (36,915) 1,493,164
Redemption of debentures - (2,733,910)
Repayments of short term debt (1,945,223) (1,158,727)
Proceeds/(redemption)on stock issues 20,576,253 (2,088,674)
---------- -----------
- ---------------------------------------------------------------------------------------- ------------------ ------------------
Net cash provided in financing activities 20,259,690 (2,438,879)
- ---------------------------------------------------------------------------------------- ------------------ ------------------
Effect of exchange rate changes on cash (176,612) 1,548,700
--------- ---------
- ---------------------------------------------------------------------------------------- ------------------ ------------------
Cash generated/(utilized) by operations 27,235,134 (3,255,787)
Cash on hand at beginning of period 20,813,301 17,948,991
---------- ----------
- ---------------------------------------------------------------------------------------- ------------------ ------------------
Cash on hand at end of period 48,048,435 14,693,204
========== ==========
- ---------------------------------------------------------------------------------------- ------------------ ------------------
F-4
LEISUREPLANET HOLDINGS, LTD.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' INVESTMENT
- -------------------------------------------------------------------------------------------------------------------------------
OTHER
LEISUREPLANET LEISUREPLANET FIRST SOUTH COMPREHENSIVE
HOLDINGS, HOLDINGS, AFRICAN (LOSS)/INCOME
LTD. LTD. HOLDINGS (FOREIGN
A CLASS B CLASS B CLASS CAPITAL IN CURRENCY
COMMON COMMON COMMON EXCESS OF RETAINED TRANSLATION TOTAL
STOCK STOCK STOCK PAR (LOSS)/EARNING ADJUSTMENTS)
---------$ ---------$ --------$ ----------$ -----------$ ----------$ $
- -------------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1999 53,832 9,466 580 22,971,261 (3,084,700) (14,695,537) 5,254,902
- -------------------------------------------------------------------------------------------------------------------------------
Options exercised 800 - - 159,200 - - 160,000
- -------------------------------------------------------------------------------------------------------------------------------
Debentures converted 165 - - 98,835 - - 99,000
- -------------------------------------------------------------------------------------------------------------------------------
Share issue expenses written - - - (25,092) - - (25,092)
off
- -------------------------------------------------------------------------------------------------------------------------------
Issuance of warrants - - - 479,205 - - 479,205
- -------------------------------------------------------------------------------------------------------------------------------
Net loss - - - - (2,927,820) - (2,927,820)
- -------------------------------------------------------------------------------------------------------------------------------
Translation difference - - - - - 518,541 518,541
----- ----- ----- ----- ----- ------- ----------
- -------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1999 54,797 9,466 580 23,683,409 (6,012,520) (14,176,996) 3,558,736
- -------------------------------------------------------------------------------------------------------------------------------
Options exercised 255 - - 120,870 - - 121,125
- -------------------------------------------------------------------------------------------------------------------------------
Debentures converted 3,585 - - 2,147,409 - - 2,150,994
- -------------------------------------------------------------------------------------------------------------------------------
A warrants exercised 724 - - 476,626 - - 477,350
- -------------------------------------------------------------------------------------------------------------------------------
Escrow shares issued 5,905 - - (5,905 - - -
- -------------------------------------------------------------------------------------------------------------------------------
New shares issued 13,793 - - 19,986,207 - - 20,000,000
- -------------------------------------------------------------------------------------------------------------------------------
FSAH B class shares issued - - 19 567,842 - 567,861
- -------------------------------------------------------------------------------------------------------------------------------
Share issue expenses incurred - - - (896,382) - - (896,382)
- -------------------------------------------------------------------------------------------------------------------------------
Issuance of warrants - - - 1,499,174 - - 1,499,174
- -------------------------------------------------------------------------------------------------------------------------------
Gain on dilution of investment - - - 6,308,856 - - 6,308,856
in subsidiary Company
- -------------------------------------------------------------------------------------------------------------------------------
Net loss - - - - (2,110,927) - (2,110,927)
- -------------------------------------------------------------------------------------------------------------------------------
Dividends reversed - - - - 44,250 - 44,250
- -------------------------------------------------------------------------------------------------------------------------------
Translation difference - - - - - (1,688,729) (1,688,729)
------ ------ ------ ----- ----- ----------- ---------
- -------------------------------------------------------------------------------------------------------------------------------
79,059 9,466 599 53,888,106 (8,079,197) (15,865,725) 30,032,308
====== ===== === ========== =========== ============ ==========
- -------------------------------------------------------------------------------------------------------------------------------
F-5
LEISUREPLANET HOLDINGS, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998
1. ORGANISATION AND PRINCIPAL ACTIVITIES OF THE GROUP
Leisure Planet Holdings Limited (formerly First South Africa Corp., Ltd.),
(the Company) was founded on September 6, 1995. The purpose of the Company
is to acquire and operate South African companies.
The principal activities of the group include the following:
LIFESTYLE PRODUCTS
The manufacture, sale and distribution of lifestyle enhancing products,
which includes both consumable food products and semi durable outdoor and
indoor products.
INTERNET RELATED ACTIVITIES
The maintenance and provision of an Internet travel service to Internet
subscribers, providing the convenience of one stop travel planning with on
line booking and flexibility.
3. SUMMARY OF ACCOUNTING POLICIES
The consolidated financial statements have been prepared in accordance with
US generally accepted accounting principles and incorporate the following
significant accounting policies:
CONSOLIDATION
Leisure Planet Holdings Limited, consolidates its majority owned
subsidiaries. The consolidated financial statements include the accounts of
the Company and its subsidiaries. Minority interests have been taken into
account when determining the net income due to the Company. Intercompany
transactions have been eliminated on consolidation.
ACCOUNTING ESTIMATES
Preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of
the financial statements, disclosure of contingent liabilities at the
financial statement date and reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those
estimates.
(LOSS)/EARNINGS PER SHARE
(Loss)/earnings per share on common shares is based on net (loss)/income
and reflects dilutive effects of any stock options and warrants which exist
at year end.
INTANGIBLE ASSETS
Goodwill, recipes and other intellectual property, and trademarks are being
amortized on a straight line basis over a period of twenty to twenty five
years. If facts and circumstances were to indicate that the carrying amount
of goodwill, recipes and other intellectual property is impaired, the
carrying amount would be reduced to an amount representing the discounted
future cash flows to be generated by the operation.
Also included in intangible assets are non competition agreements which are
being amortized on a straight line basis over the six year term of the
agreements.
The company has adopted Statement of Financial Accounting Standards No. 121
(ASFAS 121@) Accounting for the impairment of long-lived Assets and for
long-lived Assets to be Disposed Of. No impairments in long-lived assets
has taken place.
F-6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998
3. SUMMARY OF ACCOUNTING POLICIES
(continued)
Foreign currency translation The functional currency of the underlying
companies in the Lifestyle enhancing segment is that of South African
Rands. Accordingly, the following rates of exchange have been used for
translation purposes:
Assets and liabilities are translated into United States Dollars using the
exchange rates at the balance sheet date.
Common stock and capital in excess of par are translated into United States
Dollars using historical rates at date of issuance.
Revenue, expenses, gains and losses are translated into United States
Dollars using the weighted average exchange rates for each year.
The resultant translation adjustments are reported in the component of
stockholders' investment designated as a Foreign currency translation
adjustments.
Foreign assets and liabilities Transactions in foreign currencies arise as
a result of inventory purchases from foreign countries and intercompany
funding transactions between the subsidiaries and Leisure Planet Holdings
Limited. Transactions in foreign currencies are accounted for at the rates
ruling on transaction dates. Exchange gains and losses are charged to the
income statement during the period in which they are incurred. Foreign
assets and liabilities of the group which are not denominated in United
States Dollars are converted into United States Dollars at the exchange
rates ruling at the financial year end or at the rates of forward cover
purchased. Forward cover is purchased to cover the currency exposure on
foreign liabilities.
INVENTORIES
Inventories are valued at the lower of cost and net realizable value, using
both the first-in, first-out and the weighted average methods. The value of
work-in-progress and finished goods includes an appropriate portion of
manufacturing overheads. A valuation reserve has been established to reduce
the values of certain identified inventories (determined to be obsolete or
otherwise impaired) to their estimated net realizable values (market or
selling price less costs to dispose).
PROPERTY, PLANT AND EQUIPMENT
Land is stated at cost and is not depreciated. Buildings are depreciated on
the straight line basis over estimated useful lives of 20 years.
Plant and equipment, and motor vehicles are written off over their
estimated useful lives of 5 to 10 years.
INCOME TAXES
Income tax expense is based on reported earnings before income taxes.
Deferred income taxes represent the impact of temporary differences between
the amounts of assets and liabilities recognized for financial reporting
purposes and such amounts recognized for tax purposes. Deferred taxes are
measured by applying currently enacted tax laws.
FAIR VALUE OF FINANCIAL INSTRUMENTS
As at December 1999, the carrying value of accounts receivable, accounts
payable and investments approximate their fair value. The carrying value of
long term debt approximates fair value, as the debt, other than convertible
debentures, interest rates are keyed to the prime lending rate. The
convertible debentures are believed to approximate fair market.
REVENUES
Revenues comprise net invoiced sales of shipped Lifestyle enhancing
products and Internet travel related commissions. Combined revenues exclude
sales to group companies.
Revenues are stated net of allowances granted to customers and trade
discounts. Returns of defective product are offset against revenues.
F-7
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998
3. SUMMARY OF ACCOUNTING POLICIES
(continued)
GAIN ON DISPOSAL OF SUBSIDIARY STOCK
Subsidiary stock disposed of during the period is recognized as a gain in
the statement of income and is separately disclosed as a non operating
gain.
CASH FLOWS
For the purposes of the statements of cash flows, cash includes cash on
hand and deposits held on notice.
RECLASSIFICATION
Certain items in the prior year financial statements have been reclassified
to conform with the current period presentation.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the FASB adopted SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in
the balance sheet as either an asset or liability measured at its fair
value and that changes in the derivatives fair value be recognized
currently in earnings unless specific hedge accounting criteria are met.
Special accounting for qualifying hedges allows derivatives gains and
losses to offset related results on the hedged item in the income statement
and requires that the company must formally document, designate and assess
the effectiveness of transactions that receive hedge accounting. SFAS No.
133 is effective for fiscal years beginning after June 15, 2000. The
Company believes that the future adoption of this statement will not have a
significant impact on the results of operations or financial position of
the Company.
4. INVENTORIES
Inventories consist of the following:
------------------------------------------------------------- ---------------------- ---------------
DECEMBER 31, JUNE 30,
1999 1999
$ $
------------------------------------------------------------- ---------------------- ---------------
Finished goods 4,058,332 4,655,361
Work in progress 569,319 587,544
Raw materials and ingredients 3,883,385 2,983,298
Supplies 1,365,844 1,066,595
--------- ---------
------------------------------------------------------------- ---------------------- ---------------
Inventories (Gross) 9,876,880 9,292,798
Less: Valuation allowances (125,223) (140,223)
--------- ---------
------------------------------------------------------------- ---------------------- ---------------
Inventories (Net) 9,751,657 9,152,575
========= =========
------------------------------------------------------------- ---------------------- ---------------
5. DISCONTINUED OPERATIONS
During the previous fiscal year the Company discontinued its operations in
the Industrial manufacturing and Packaging business segments in order to
concentrate all of its efforts on its core operations of Lifestyle
enhancing products and Internet travel related businesses.
F-8
6. EARNINGS/(LOSS) PER SHARE
Earnings/(loss) per share data is calculated as follows:
----------------------------------------------------------- ----------------- ------------- ---------------
BASIC LOSS PER SHARE FOR THE THREE MONTHS ENDED
DECEMBER 31, 1999
Net loss available to common stockholders 2,110,926
---------
----------------------------------------------------------- ----------------- ------------- ---------------
SHARES FRACTION OF WEIGHTED
DATES OUTSTANDING OUTSTANDING PERIOD AVERAGE SHARES
----------------------------------------------------------- ----------------- ------------- ---------------
October 1, 1999 6,426,231 1.00 6,426,231
October 1, 1999 to December 31, 1999
New shares issued during the quarter 1,379,310 0.04 59,970
Options converted to shares during the quarter 25,500 0.04 1,109
Escrow shares issued during the quarter 590,596 1.00 590,596
A Warrants exercised during the quarter 72,400 0.16 11,819
Debentures converted into shares during the 358,499 0.18 63,460
------- ---- ------
quarter
----------------------------------------------------------- ----------------- ------------- ---------------
WEIGHTED AVERAGE SHARES 8,852,536 7,153,185
========= =========
----------------------------------------------------------- ----------------- ------------- ---------------
----------------------------------------------------------- ----------------- ------------- ---------------
BASIC LOSS PER SHARE FOR THE SIX MONTHS ENDED
DECEMBER 31, 1999
Net loss available to common stockholders (5,038,747)
---------
----------------------------------------------------------- ----------------- ------------- ---------------
SHARES FRACTION OF WEIGHTED
DATES OUTSTANDING OUTSTANDING PERIOD AVERAGE SHARES
----------------------------------------------------------- ----------------- ------------- ---------------
July 1, 1999 6,329,731 1.00 6,329,731
July 1, 1999 to December 31, 1999
New shares issued during the year 1,379,310 0.02 29,985
Options converted to shares during the year 105,500 0.57 60,554
Escrow shares issued during the year 590,596 0.51 298,508
A Warrants exercised during the year 72,400 0.08 5,911
Debentures converted into shares during the year 374,999 0.12 44,463
------- ---- ------
----------------------------------------------------------- ----------------- ------------- ---------------
WEIGHTED AVERAGE SHARES 8,852,536 6,769,152
========= =========
----------------------------------------------------------- ----------------- ------------- ---------------
----------------------------------------------------------- ----------------- ------------- ---------------
BASIC LOSS PER SHARE FOR THE THREE MONTHS ENDED DECEMBER
31, 1998
Net loss available to common stockholders from continuing
operations (1,554,097)
Net income available to common stockholders from
discontinued operations 578,723
-------
Total net loss (975,374)
---------
----------------------------------------------------------- ----------------- ------------- ---------------
SHARES FRACTION OF WEIGHTED
DATES OUTSTANDING OUTSTANDING PERIOD AVERAGE SHARES
----------------------------------------------------------- ----------------- ------------- ---------------
October 1, 1998 7,837,708 1.00 7,837,708
October 1, 1998 to September 30, 1998
Redemption of escrow shares (1,583,059) 1.00 (1,583,059)
----------- -----------
----------------------------------------------------------- ----------------- ------------- ---------------
WEIGHTED AVERAGE SHARES 6,254,649 6,254,649
========= =========
----------------------------------------------------------- ----------------- ------------- ---------------
F-9
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998
6. EARNINGS/(LOSS) PER SHARE (CONTINUED)
----------------------------------------------------------- ----------------- ------------- ---------------
BASIC LOSS PER SHARE FOR THE SIX MONTHS ENDED DECEMBER
31, 1998
Net loss available to common stockholders from continuing
operations (1,164,086)
Net loss available to common stockholders from
discontinued operations (927,427)
---------
Total net loss (2,095,513)
-----------
----------------------------------------------------------- ----------------- ------------- ---------------
SHARES FRACTION OF WEIGHTED
DATES OUTSTANDING OUTSTANDING PERIOD AVERAGE SHARES
----------------------------------------------------------- ----------------- ------------- ---------------
July 1, 1998 7,472,324 1.00 7,472,324
July 1, 1998 to December 31, 1998
Additional purchase price payments 242,684 0.51 122,661
Debentures converted into shares during the 122,700 0.95 116,032
year (1,583,059) 0.51 (800,134)
----------- ---------
Redemption of escrow shares during the quarter
----------------------------------------------------------- ----------------- ------------- ---------------
WEIGHTED AVERAGE SHARES 7,072,892 6,910,883
========= =========
----------------------------------------------------------- ----------------- ------------- ---------------
----------------------------------------------------------- ----------------- ------------- ---------------
DILUTED LOSS PER SHARE FOR THE THREE MONTHS ENDED
DECEMBER 31, 1999
Net loss available to common stockholders (2,110,926)
Add impact of assumed conversions 605,510
----------------------------------------------------------- ----------------------- ------- ---------------
ADJUSTED NET LOSS (1,505,416)
----------------------------------------------------------- ----------------------- ------- ---------------
Weighted average shares 7,153,185
Warrants and options not yet exercised 1,137,823
9% convertible debentures 669,206
Increasing rate debentures 1,578,947
---------
----------------------------------------------------------- ----------------------- ------- ---------------
ADJUSTED WEIGHTED AVERAGE SHARES 10,539,161
----------------------------------------------------------- ----------------------- ------- ---------------
----------------------------------------------------------- ----------------------- ------- ---------------
DILUTED LOSS PER SHARE FOR THE SIX MONTHS ENDED
DECEMBER 31, 1999
Net loss available to common stockholders (5,038,747)
Add impact of assumed conversions 1,226,569
----------------------------------------------------------- ----------------------- ------- ---------------
ADJUSTED NET LOSS (3,812,178)
----------------------------------------------------------- ----------------------- ------- ---------------
Weighted average shares 6,769,152
Warrants and options not yet exercised 835,198
9% convertible debentures 705,062
Increasing rate debentures 1,578,947
---------
----------------------------------------------------------- ----------------------- ------- ---------------
ADJUSTED WEIGHTED AVERAGE SHARES 9,888,359
----------------------------------------------------------- ----------------------- ------- ---------------
F-10
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998
6. EARNINGS/(LOSS) PER SHARE (CONTINUED)
----------------------------------------------------------- ----------------------- ------- ---------------
DILUTED LOSS PER SHARE FOR THE THREE MONTHS ENDED
DECEMBER 31, 1998
Net loss available to common stockholders from continuing
operations (1,554,097)
Add impact of assumed conversions 643,100
(910,997)
Net income available to common stockholders from
discontinued operations 578,723
----------------------------------------------------------- ----------------------- ------- ---------------
ADJUSTED NET LOSS (332,274)
----------------------------------------------------------- ----------------------- ------- ---------------
Weighted average shares 6,254,649
9% convertible debentures 947,166
Increasing rate debentures 1,578,947
---------
----------------------------------------------------------- ----------------------- ------- ---------------
ADJUSTED WEIGHTED AVERAGE SHARES 8,780,762
----------------------------------------------------------- ----------------------- ------- ---------------
----------------------------------------------------------- ----------------------- ------- ---------------
DILUTED LOSS PER SHARE FOR THE SIX MONTHS ENDED
DECEMBER 31, 1998
Net loss available to common stockholders from continuing
operations (1,164,086)
Add impact of assumed conversions 979,963
(184,123)
Net loss available to common stockholders from
discontinued operations (927,427)
----------------------------------------------------------- ----------------------- ------- ---------------
ADJUSTED NET LOSS (1,111,550)
----------------------------------------------------------- ----------------------- ------- ---------------
Weighted average shares 6,910,883
9% convertible debentures 1,001,559
Increasing rate debentures 1,578,947
---------
----------------------------------------------------------- ----------------------- ------- ---------------
ADJUSTED WEIGHTED AVERAGE SHARES 9,491,389
----------------------------------------------------------- ----------------------- ------- ---------------
The adjusted weighted average number of shares and the adjusted net loss
available to common stockholders has not been taken into account as the
result achieved is anti-dilutive.
7. SUBSEQUENT EVENTS
CNN Agreement
Prior to December 31, 1999, Leisureplanet Investments entered into an
agreement with CNN whereby CNN and Leisureplanet Investments will provide
co-branded Leisureplanet travel services and content on CNN properties and
web sites. This will result in CNN providing valuable marketing and
promotional exposure for Leisureplanet who will in exchange issue a total
of $20 Million of preferred stock at $20 per share in Leisureplanet
Investments to CNN. This preferred stock may be converted into common stock
at the option of the holder in three equal instalments of $6,66 Million at
a maximum price of $10.80 per share. These equal instalments may be
exercised as follows:
o Immediately upon closing or thereafter, o September 30, 2000, or
thereafter o September 30, 2001, or thereafter
Should CNN fulfill its commitments under the agreement prior to the
conversion options listed above, the conversion option will be accelerated
to the date that the promotional commitment is fulfilled.
In addition Leisurplanet Investment undertakes to spend a total of $30
Million on advertising with CNN equally over a three-year period.
F-11
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998
7. SUBSEQUENT EVENTS (continued)
Debenture conversions
Subsequent to December 31, 1999 an additional $0,38 Million of the 9%
Debentures and $3,00 Million of the increasing rate debentures were
converted to common stock.
Warrants and options exercised
Subsequent to December 31, 1999 option over 74,500 shares and 8,400 A
warrants were exercised.
F-12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
BACKGROUND AND HISTORY
Leisure Planet Holdings Limited, was incorporated in September 1995 with the
intention to actively pursue acquisitions fitting a pre defined investment
strategy. The broad strategy followed in all investment decisions is 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.
Leisure Planet Holdings Limited holds, through its South African subsidiary,
First South African Holdings (Pty) Ltd, nine South African subsidiaries that
have met the acquisition criteria identified above. In addition, the Company
acquired an 81% stake in Leisure Planet PLC, an Internet travel company, on
January 1, 1999. Our subsidiaries are listed below and are engaged in the
following industry segments:
INTERNET AND E COMMERCE RELATED BUSINESSES
Leisure Planet PLC
LIFESTYLE PRODUCTS
Food division
Piemans Pantry
Astoria Bakery
Seemann's Quality Meat Products
Gull Foods
Fifers Bakery
Cocam Foods
Leisure division
SA Leisure
Galactex Outdoor
Republic Umbrella
Tradewinds
-4-
SOUTH AFRICAN OPERATIONS
As the company's 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 company's results.
In broad terms, if the deterioration of the Rand is in excess of 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 rate for the South African Rand against the US Dollar for the period
presented in this report is as follows:
- ------------------------------------------------------------- --------------------- ---------------------
THREE MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1999 1998
- ------------------------------------------------------------- --------------------- ---------------------
Rate of exchange vs $1 6,16 5,80
- ------------------------------------------------------------- --------------------- ---------------------
Depreciation 6,21%
- ------------------------------------------------------------- --------------------- ---------------------
- ------------------------------------------------------------- --------------------- ---------------------
SIX MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, 1999 DECEMBER 31,
1998
- ------------------------------------------------------------- --------------------- ---------------------
Rate of exchange vs $1 6,12 5,97
- ------------------------------------------------------------- --------------------- ---------------------
Depreciation 2,51%
- ------------------------------------------------------------- --------------------- ---------------------
The annual rate of inflation in South Africa for the year ended December 31,
1999 was approximately 1,9%
The result reflected below is therefore greater than inflation adjusted South
African Rand for both revenue and earnings growth.
RESULTS OF OPERATIONS
Three months ended December 31, 1999 as compared to three months ended December
31, 1998
REVENUES
Revenues for the three months ended December 31, 1999 increased by $4,001
Million or 15,3% to $30,055 Million as compared to $26,054 Million for the three
months ended December 31, 1998.
This revenue is primarily derived from the Lifestyle enhancing business segment
which has improved revenue 20,5% in South African Rand terms after factoring out
the effects of the improvement in the currency over the respective quarters,
which is significantly better than inflation.
This growth in revenue can be attributed to increased market share in the South
African market as well as a significant improvement in exports to European
destinations.
COST OF GOODS SOLD
Cost of goods sold has increased as a percentage of revenues from 60% to 65,2%.
This reflects a slight improvement over the fiscal year ended result of 69%
Generally, two operations in the Lifestyle enhancing business sector have
experienced difficulties during the current fiscal year, which resulted in lower
than anticipated margins being achieved. Corrective action is being taken to
address the margin deficiencies.
-5-
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the three months ended December
31, 1999 increased by $1,817 Million or 23% to $9,835 Million as compared to
$8,018 Million for the three months ended December 31, 1998. This increase takes
into account the operating expenses of our Internet travel related subsidiary
that was acquired on January 1, 1999.
LOSS ON SALE OF INVESTMENT IN FIRST SA LIFESTYLE HOLDINGS LIMITED
Loss realized on the disposal of the Leisure related companies to the food
related companies in October 1998. This merger of the two operations has given
rise to First Lifestyle Holdings Limited, the lifestyle enhancing company,
mentioned previously.
AMORTIZATION OF INTANGIBLES
Amortization of intangibles increased from $0,28 Million for the three months
ended December 31, 1998 to $0,43 Million for the three months ended December 31,
1999. This increase is primarily due to the additional purchase price payments
made at the end of fiscal 1999 incurred under the various purchase agreements
being allocated to intangibles in terms of the valuation placed on those
intangibles at the acquisition dates of the various subsidiaries.
DEPRECIATION
Depreciation increased from $0,89 Million for the three months ended December
31, 1998 to $1,062 Million for the three months ended December 31, 1999. This
increase is due to the amortisation of computer equipment in the Internet travel
related business acquired in January 1999 and additional plant and machinery
acquired in the Lifestyle sector to grow the sector organically.
OTHER INCOME
Other income consists of income, which is not related to normal operating
activities and includes gains made on foreign currency transactions.
INTEREST EXPENSE/(INCOME)
Interest expense of $0,3 Million for the three months ended December 31, 1999
has decreased by $0,47 Million from an interest income of $0,17 Million for the
three months ended December 31, 1998. This decrease is primarily due to a
reduction in the interest rats earned on cash balances coupled with average
lower cash balances than in the prior year. The majority of the additional funds
reflected in the group were received in the latter half of December 1999.
PROVISION FOR TAXES ON INCOME
Our income tax provision increased from $0,86 Million for the three months ended
December 31, 1998 to $1,45 Million for the three months ended December 31, 1999.
This increase is after accounting for the decrease in the South African tax rate
from 35% to 30% during 1999. The taxation charge represents the taxation charge
incurred by the Lifestyle enhancing business segment, which has reflected
increased taxable income over the comparative period in the prior quarter.
The losses incurred in the internet travel related business and the corporate
head office may not be offset against the taxable income of the Lifestyle
enhancing business segment, in terms of South African tax legislation.
LOSS FROM DISCONTINUED OPERATIONS
The loss resulted from the discontinuance of our industrial products and
packaging business segments. We decided to discontinue these segments during the
fiscal 1999 year as their performance was below average and these businesses
were considered as non-core to the group.
-6-
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY COMPANIES
The minority interest in our subsidiaries decreased from $1,1 Million for the
three months ended December 31, 1998 to $0,1 Million for the three months ended
December 31, 1999. This decrease is primarily due to the fact that after the
recent equity infusion into Leisureplanet, the minority interest in this company
has assumed a positive balance, which results in these minorities absorbing a
portion of the losses generated by that company, which is primarily incurring
marketing expenditure whilst it is still in its growth phase. The percentage of
Leisureplanet's losses absorbed by minorities during the current quarter was
38,2%.
NET (LOSS)/INCOME
As a result of the above the Company has achieved a loss of $2,111 Million as
compared to a loss of $0,98 Million for the comparative quarter in the prior
year.
The Internet travel related business is undergoing extensive development and
presently does not generate significant revenues, thereby sustaining a
significant loss for the quarter. These losses are expected to continue for the
foreseeable future.
Six months ended December 31, 1999 as compared to six months ended December 31,
1998
REVENUES
Revenues for the six months ended December 31, 1999 increased by $7,466 Million
or 16,48% to $52,777 Million as compared to $45,312 Million for the six months
ended December 31, 1998.
This revenue is primarily derived from the Lifestyle enhancing business segment
which has improved revenue 20% in South African Rand terms after factoring out
the effects of the improvement in the currency over the respective quarters,
which is significantly better than inflation.
This growth in revenue as mentioned previously is attributable to increased
market share in the South African market as well as a significant improvement in
exports to European destinations. The current focus of the Lifestyle enhancing
businesses is to improve export revenues where significant future growth is
expected.
COST OF GOODS SOLD
Cost of goods sold has increased as a percentage of revenues from 60,1% to
65,8%. This reflects a slight improvement over the fiscal year ended result of
69% As mentioned previously, two operations in the Lifestyle enhancing business
sector have experienced difficulties during the current fiscal year, which
resulted in lower than anticipated margins being achieved. Corrective action is
being taken to address the margin deficiencies.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the six months ended December
31, 1999 increased by $4,174 Million or 31% to $17,704 Million as compared to
$13,530 Million for the six months ended December 31, 1998. This increase takes
into account the operating expenses of our Internet travel related subsidiary
which was acquired on January 1, 1999.
LOSS ON SALE OF INVESTMENT IN FIRST SA LIFESTYLE HOLDINGS LIMITED
Loss realized on the disposal of the Leisure related companies to the food
related companies in October 1998. This merger of the two operations has given
rise to First Lifestyle Holdings Limited, the lifestyle enhancing company,
mentioned previously.
-7-
AMORTIZATION OF INTANGIBLES
Amortization of intangibles increased from $0,56 Million for the six months
ended December 31, 1998 to $0,92 Million for the six months ended December 31,
1999. This increase is primarily due to the additional purchase price payments
made at the end of fiscal 1999 incurred under the various purchase agreements
being allocated to intangibles in terms of the valuation placed on those
intangibles at the acquisition dates of the various subsidiaries.
DEPRECIATION
Depreciation increased from $1,338 Million for the six months ended December 31,
1998 to $1,95 Million for the six months ended December 31, 1999. This increase
is due to the amortisation of computer equipment in the Internet travel related
business acquired in January 1999 as well as depreciation on plant and machinery
required for organic expansion.
OTHER INCOME
Other income consists of income, which is not related to normal operating
activities and includes gains made on foreign currency transactions.
INTEREST EXPENSE/(INCOME)
Interest expense of $0,5 Million for the six months ended December 31, 1999 has
decreased by $0,83 Million from an interest income of $0,3 Million for the six
months ended December 31, 1998. This decrease is primarily due to a reduction in
the interest rats earned on cash balances coupled with lower average cash
balances than in the prior year. The significant increase in cash balances
materialized in the latter half of December 1999, the full effect of the
increase in cash on interest income will only materialize in future quarters.
PROVISION FOR TAXES ON INCOME
Our income tax provision increased from $1,35 Million for the six months
December 31, 1998 to $2,12 Million for the six months ended December 31, 1999.
This increase is after accounting for the decrease in the South African tax rate
from 35% to 30% during 1999. The taxation charge represents the taxation charge
incurred by the Lifestyle enhancing business segment, which has reflected
increased taxable income over the comparative period in the prior quarter.
The losses incurred in the internet travel related business and the corporate
head office may not be offset against the taxable income of the Lifestyle
enhancing business segment, in terms of South African tax legislation.
LOSS FROM DISCONTINUED OPERATIONS
The loss resulted from the operations of our currently discontinued industrial
products and packaging business segments. We decided to discontinue these
segments during the fiscal 1999 year as their performance was below average and
these businesses were considered as non-core to the group.
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY COMPANIES
The minority interest in our subsidiaries decreased from $1,51 Million for the
six months ended December 31, 1998 to $0,63 Million for the six months ended
December 31, 1999. This decrease is primarily due to the fact that after the
recent equity infusion into Leisureplanet, the minority interest in this company
has assumed a positive balance, which resulted in these minorities absorbing a
portion of the losses generated by that company, which is primarily incurring
marketing expenditure whilst it is still in its growth phase. The percentage of
Leisureplanet's losses absorbed by minorities during the current period was
38,2%.
-8-
NET (LOSS)/INCOME
As a result of the above the Company has achieved a loss of $5,037 Million as
compared to a loss of $2,092 Million for the comparative period in the prior
year.
The Internet travel related business is undergoing extensive development and
presently does not generate significant revenues, thereby contributing a
significant proportion of the quarter's loss. These losses are expected to
continue for the foreseeable future.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Cash increased by $27,235 Million from $20,813 Million to $48,048 Million. The
increase is primarily as a result of the additional $20 Million injection of
capital by minorities into Leisure Planet Investments Limited and an additional
$20 Million capital injection into Leisure Planet Holdings limited by strategic
equity partners. The Lifestyle enhancing products segments utilized $1,642
million of cash, primarily due to a significant dividend payment during the
current year. The Internet travel related business still requires significant
cash resources as it incurs primarily marketing expenditure in developing its
future potential.
Working capital increased by $33,710 Million to $61,988 Million at December 31,
1999 from $28,278 Million at June 30, 1998. This is primarily as a result of the
increase in cash resources due to capital injections from strategic equity
partners. Accounts receivable has increased by $9,228 Million over June 30,
1998, this has been partially funded by an increase in Accounts payable by
$6,030 Million over June 30, 1998. The significant increase in Accounts
receivable is due to significant turnover generated in the Lifestyle enhancing
sector during December 1999. In addition several significant suppliers delayed
payment of accounts due to precautions taken for possible Y2K related problems.
At December 31, 1999 we had borrowings of $26,976 Million which has decreased
from $33,598 Million. This includes the conversion of $4.84 Million of debt
owing to the minority shareholders of Leisure Planet limited as loan funds to
equity, the remaining reduction resulted form the conversion of convertible
debentures to equity. The slight increase in borrowings arose primarily to fund
the acquisition of assets and an increase in the capital redemption reserve fund
of $0,28 Million during the quarter.
Cash flow from operations for the six months ended December 31 1999, excluding
non-cash charges resulted in the utilization of $9,658 Million, primarily
utilized to fund the losses in the Internet travel related business and to fund
the additional funds required for Accounts receivable balances at December 31,
1999. Investing activities undertaken by the group resulted in the generation of
an additional $16,810 Million during the year, this included the funds received
from the minority shareholders in Leisure Planet Investments Limited. The
financing activities undertaken by the group resulted in a net capital injection
of $20,260 Million, sourced primarily from the capital injection into Leisure
Planet Holdings Limited by strategic equity partners.
FUTURE COMMITMENTS
Under the various acquisition agreements, the Company anticipates having to
spend approximately $1,0 Million in cash for its contingent payments over the
next 12 months as well as approximately $0,8 Million in stock. The Company
anticipates that this cash and operating cash flows will be sufficient to fully
fund these payments as well as fund the capital expenditures for its various
operations. Excess cash will also be utilized to fund additional acquisitions.
The Company anticipates that any longer term contingent acquisition payments
will be funded out of operating cash flows of the acquired entities.
The Company's operating subsidiaries generally collect their receivables within
65 days to 90 days and reserve approximately 3% for doubtful accounts.
Historically, the companies' operating and capital needs have been met by
internal cash flow and outside bank borrowing. It is management's belief that
capital expenditures for the foreseeable future can continue to be met by
internal cash flow and bank borrowing.
The Company will be required to incur additional indebtedness or equity
financing in connection with the funding of Leisure Planet Limited, until such
time as that company is able to sustain its own infrastructural costs as well as
to fund future acquisitions. There is no assurance that the Company will be able
to incur additional indebtedness or raise additional equity to fund Leisure
Planet Limited or to finance future acquisitions on terms acceptable to
management, if at all.
-9-
Leisure Planet Limited currently incurs operational losses of approximately $1,4
Million per month with minimal revenues being realized, due to the nature and
stage of growth of the business and the Internet travel related industry. These
costs are expected to increase over the following few months, these operational
losses which are being generated by Leisure Planet Limited need to be funded by
further injections of capital for which there is no assurance that the Company
will be able to secure such funding.
-10-
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The company does not ordinarily hold market risk sensitive instruments for
trading purposes. The company does however recognize market risk from interest
rate, foreign currency exchange and commodity price exposure.
INTEREST RATE RISK
At December 31, 1999 approximately $2,6 Million of the Company's long term debt,
specifically the borrowings in First Lifestyle Holdings Limited, bear interest
at variable rates, similarly the cash resources of the company earns interest at
variable rates. Accordingly the Company's net income and after tax cash flows
are affected by fluctuations in interest rates. Assuming the current level of
cash resources and borrowings at variable interest rates and assuming a two
percentage point decrease in the average interest rate under these borrowings
and cash resources, it is estimated that the net effect on interest would be a
reduction in interest earned of $330,000. Resulting in a reduction in the
Company's net income and after tax cash flow of $231,000. Any adverse changes in
interest rates would likely result in management taking action to mitigate the
Company's exposure. However, due to the uncertainty of the actions that
management would take and their possible effects, this analysis assumes no
action is taken. There are also no assurances that decrease or increases in
interest rates will not exceed possible projections.
FOREIGN CURRENCY RISK
The primary operations of the Company are based in South Africa and most of the
economic activity of the Company is denominated 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. Certain of this risk is
covered through the purchase of foreign exchange contracts.
COMMODITY PRICE RISK
The Lifestyle enhancing products segment of the Company makes use of several
commodity products.
Processed foods The main ingredient in many of the processed food products
manufactured by the Company includes raw produce such as meat, potatoes,
vegetables and other staple products. These food groups are commodities whose
prices are largely dependent on demand and supply. The supply of these products
is also dependent on environmental factors such as weather conditions and
rainfall patterns. While these price fluctuations will impact on the input cost
of the products produced, these are not expected to have a material impact on
the profitability of the Company due to the pass through of commodity price
increases to customers.
Leisure products The Leisure products side of the Company makes use of processed
raw materials such as polypropylene, as well as natural resources such as
timber. The price of polypropylene is determined on an import parity basis in
South Africa, which means that worldwide surpluses and shortages are factored
into the product pricing. This results in fluctuations of the price of this
material from time to time. These price fluctuations impact on the per unit
input cost of the products produce. Management therefore mitigates this risk by
entering into pricing agreements with suppliers to limit the effects of any
adverse movements in the commodity price.
Timber as a natural resource is subject to sustainability requirements and is
also dependent on environmental factors such as weather conditions and rainfall
patterns. The price of timber may fluctuate depending on supply and demand which
has an impact on the input price of our products produced. In order to mitigate
this risk management enter into supply arrangements with suppliers wherever
possible, including pricing terms. In addition, raw material input prices may be
passed onto customers where the factors governing such price fluctuations are
outside of the control of the Company.
-11-
PART II - OTHER INFORMATION
ITEM 6: Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K filed during quarter ended
December 31, 1999:
None
-12-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned duly authorized.
Date: April 20, 2001
LEISUREPLANET HOLDINGS, LTD.
/s/ Clive Kabatznik
----------------------------------
Clive Kabatznik
Chief Executive Officer, President
and Chief Financial Officer
-13-