SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment No. 1
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, 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
-------
SILVERSTAR 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: 809-295-1422
------------
Leisureplanet Holdings, Ltd.
---------------------------------------------------------------------
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 12, 2001
was 7,892,333.
EXPLANATORY NOTE
December 31, 2000, the refiling, is due to a reversal of amortization
charges related to the write off of intangible assets in the amount of $7,000 as
well as the reversal of a charge of $447,000 to discontinued operations. These
charges were written off in the revised 10K filed by the company, hence a
restatement of the quarterly numbers.
PART I - FINANCIAL INFORMATION
ITEM 1 Unaudited Consolidated Balance Sheets at December 31, 2000 and
June 30, 2000
UnauditedConsolidated Statements of Income/(loss) and
Comprehensive Income/(loss) for the three and six months ended
December 31, 2000 and 1999
Unaudited Consolidated statements of Cash Flows for the six
months ended December 31, 2000 and 1999
Unaudited Consolidated Statement of Changes in Stockholders
Investment for the period June 30, 2000 to December 31, 2000
Notes to the Unaudited Consolidated Financial Statements
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 Form 8-K
SIGNATURES
-2-
SILVERSTAR HOLDINGS LIMITED
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------
ASSETS
- -------------------------------------------------------------------------------------- --------------- -----------------
DECEMBER JUNE
31, 30,
2000 2000
RESTATED RESTATED
$ $
- -------------------------------------------------------------------------------------- --------------- -----------------
CURRENT ASSETS
- -------------------------------------------------------------------------------------- --------------- -----------------
Cash and cash equivalents 19,016,537 29,853,067
- -------------------------------------------------------------------------------------- --------------- -----------------
Accounts receivable, net of $426,220 reserve at June 30, 2000 - 10,608,197
- -------------------------------------------------------------------------------------- --------------- -----------------
Inventories 15,909 9,386,857
- -------------------------------------------------------------------------------------- --------------- -----------------
Current portion of note receivable and prepaid expenses 661,844 3,631,348
- -------------------------------------------------------------------------------------- --------------- -----------------
Deferred income taxes - 898,280
---------------- -----------
- -------------------------------------------------------------------------------------- --------------- -----------------
TOTAL CURRENT ASSETS 19,694,290 54,377,749
- -------------------------------------------------------------------------------------- --------------- -----------------
Property, plant and equipment, net 205,633 18,215,196
- -------------------------------------------------------------------------------------- --------------- -----------------
Investments in affiliates 1,373,450 1,283,935
- -------------------------------------------------------------------------------------- --------------- -----------------
Long term portion of notes receivables, net of contingent consideration 5,212,902 -
- -------------------------------------------------------------------------------------- --------------- -----------------
Intangible assets, net 3,667,667 20,130,119
- -------------------------------------------------------------------------------------- --------------- -----------------
Deferred charges 144,416 228,078
- -------------------------------------------------------------------------------------- --------------- -----------------
Other assets - 31,362
--------------- -------------
- -------------------------------------------------------------------------------------- --------------- -----------------
TOTAL ASSETS 30,298,358 94,266,439
========== ==========
- -------------------------------------------------------------------------------------- --------------- -----------------
-3-
SEE ACCOMPANYING NOTES TO THE CONDENSED FINANCIAL STATEMENTS
SILVERSTAR HOLDINGS LIMITED
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- ----------------------------------------------------------------------------------------------- --------------- ----------------
DECEMBER JUNE
31, 30,
2000 2000
RESTATED RESTATED
$ $
- ----------------------------------------------------------------------------------------------- --------------- ----------------
CURRENT LIABILITIES
- ----------------------------------------------------------------------------------------------- --------------- ----------------
Bank overdraft 27,466 896,860
- ----------------------------------------------------------------------------------------------- --------------- ----------------
Current portion of long term debt 14,287,500 2,105,153
- ----------------------------------------------------------------------------------------------- --------------- ----------------
Accounts payable 23,111 13,046,686
- ----------------------------------------------------------------------------------------------- --------------- ----------------
Other provisions and accruals 1,236,040 5,754,638
- ----------------------------------------------------------------------------------------------- --------------- ----------------
Dividends payable - 179,840
- ----------------------------------------------------------------------------------------------- --------------- ----------------
Income taxes payable - 676,003
- ----------------------------------------------------------------------------------------------- --------------- ----------------
Other taxes payable - 303,812
--------------- -----------
- ----------------------------------------------------------------------------------------------- --------------- ----------------
TOTAL CURRENT LIABILITIES 15,574,117 22,962,992
- ----------------------------------------------------------------------------------------------- --------------- ----------------
Long term debt - 15,473,769
- ----------------------------------------------------------------------------------------------- --------------- ----------------
Deferred income taxes - 4,402,038
---------------- -----------
- ----------------------------------------------------------------------------------------------- --------------- ----------------
TOTAL LIABILITIES 15,574,117 42,838,799
---------- ----------
- ----------------------------------------------------------------------------------------------- --------------- ----------------
Minority interest - 37,059,840
- ----------------------------------------------------------------------------------------------- --------------- ----------------
FSAH mandatory redeemable preferred stock - 8,771,930
- ----------------------------------------------------------------------------------------------- --------------- ----------------
Commitments and contingencies (Note 8)
- ----------------------------------------------------------------------------------------------- --------------- ----------------
STOCKHOLDERS' EQUITY
- ----------------------------------------------------------------------------------------------- --------------- ----------------
Capital stock:
A class common stock, $0.01 par value - authorized 23,000,000 Shares,
issued and outstanding 8,099,776 shares
(June 30: 8,368,676 shares) 83,687 83,687
- ----------------------------------------------------------------------------------------------- --------------- ----------------
B class common stock, $0.01 par value - authorized 2,000,000 shares,
Issued and outstanding 946,589 shares (June 30: 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
(June 30: 2,671,087 shares) 600 600
- ----------------------------------------------------------------------------------------------- --------------- ----------------
Preferred stock, $0.01 par value - authorized 5,000,000 shares, none
Issued - -
- ----------------------------------------------------------------------------------------------- --------------- ----------------
Treasury stock, A class common stock - 268,900 shares,
(June 30: 0 shares) (215,645) -
- ----------------------------------------------------------------------------------------------- --------------- ----------------
Additional paid-in capital 64,307,442 64,307,442
- ----------------------------------------------------------------------------------------------- --------------- ----------------
Accumulated deficit (49,461,309) (44,595,916)
- ----------------------------------------------------------------------------------------------- --------------- ----------------
Accumulated other comprehensive income - (14,209,412)
---------- ------------
- ----------------------------------------------------------------------------------------------- --------------- ----------------
TOTAL STOCKHOLDERS' EQUITY 14,724,241 5,595,870
---------- -----------
- ----------------------------------------------------------------------------------------------- --------------- ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 30,298,358 94,266,439
========== ==========
- ----------------------------------------------------------------------------------------------- --------------- ----------------
-4-
SEE ACCOMPANYING NOTES TO THE CONDENSED FINANCIAL STATEMENTS
SILVERSTAR HOLDINGS LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
- ------------------------------------------------------------------------------------------- --------------- --------------
THREE THREE
MONTHS MONTHS
ENDED ENDED
DECEMBER 31 DECEMBER 31
2000 1999
RESTATED RESTATED
$ $
- ------------------------------------------------------------------------------------------- --------------- --------------
Revenues - -
------------- -------------
- ------------------------------------------------------------------------------------------- --------------- --------------
Operating expenses
- ------------------------------------------------------------------------------------------- --------------- --------------
Cost of sales - -
- ------------------------------------------------------------------------------------------- --------------- --------------
Selling, general and administrative costs 446,972 472,609
- ------------------------------------------------------------------------------------------- --------------- --------------
Amortization of intangibles 207,485 58,061
- ------------------------------------------------------------------------------------------- --------------- --------------
Depreciation 6,134 1,313
- ------------------------------------------------------------------------------------------- --------------- --------------
Foreign currency loss 323,526 -
------------ -------------
- ------------------------------------------------------------------------------------------- --------------- --------------
984,117 531,983
------------ -------------
- ------------------------------------------------------------------------------------------- --------------- --------------
Operating loss (984,117) (531,983)
- ------------------------------------------------------------------------------------------- --------------- --------------
Other income - 56,731
- ------------------------------------------------------------------------------------------- --------------- --------------
Equity in losses of affiliates (570,569) -
- ------------------------------------------------------------------------------------------- --------------- --------------
Preference dividend (43,531) -
- ------------------------------------------------------------------------------------------- --------------- --------------
Interest income 956,322 -
- ------------------------------------------------------------------------------------------- --------------- --------------
Interest expense (315,581) (508,776)
----------- ---------
- ------------------------------------------------------------------------------------------- --------------- --------------
Loss from continuing operations before income taxes (957,476) (984,028)
- ------------------------------------------------------------------------------------------- --------------- --------------
Provision for income taxes - (444)
--------------- ------------
- ------------------------------------------------------------------------------------------- --------------- --------------
Loss from continuing operations (957,476) (984,472)
- ------------------------------------------------------------------------------------------- --------------- --------------
Discontinued operations (Note 6)
- ------------------------------------------------------------------------------------------- --------------- --------------
Loss from discontinued operations, net of income taxes of $255,643 and
$1,454,540 - (1,126,454)
- ------------------------------------------------------------------------------------------- --------------- --------------
Loss on disposal of discontinued operations (837,919) -
------------ ----------
- ------------------------------------------------------------------------------------------- --------------- --------------
Net loss (1,795,395) (2,110,926)
----------- -----------
- ------------------------------------------------------------------------------------------- --------------- --------------
Loss per share - basic and diluted
- ------------------------------------------------------------------------------------------- --------------- --------------
Continuing operations ($0.10) ($0.14)
- ------------------------------------------------------------------------------------------- --------------- --------------
Discontinued operations $(0.09) ($0.16)
-------- -------
- ------------------------------------------------------------------------------------------- --------------- --------------
Net loss ($0.19) ($0.30)
------- -------
- ------------------------------------------------------------------------------------------- --------------- --------------
Weighted average common stock outstanding 9,274,776 7,153,185
--------- ---------
- ------------------------------------------------------------------------------------------- --------------- --------------
-5-
SEE ACCOMPANYING NOTES TO THE CONDENSED FINANCIAL STATEMENTS
SILVERSTAR HOLDINGS LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
- -------------------------------------------------------------------------------------- ----------------- ----------------
SIX SIX
MONTHS MONTHS
ENDED ENDED
DECEMBER DECEMBER
31 31
2000 1999
RESTATED RESTATED
$ $
- -------------------------------------------------------------------------------------- ----------------- ----------------
Revenues - -
-------------- ---------------
- -------------------------------------------------------------------------------------- ----------------- ----------------
Operating expenses
- -------------------------------------------------------------------------------------- ----------------- ----------------
Cost of sales - -
- -------------------------------------------------------------------------------------- ----------------- ----------------
Selling, general and administrative costs 915,477 706,294
- -------------------------------------------------------------------------------------- ----------------- ----------------
Amortization of intangibles 144,145 116,973
- -------------------------------------------------------------------------------------- ----------------- ----------------
Depreciation 8,024 3,069
- -------------------------------------------------------------------------------------- ----------------- ----------------
Foreign currency loss 789,042 -
---------- -------------
- -------------------------------------------------------------------------------------- ----------------- ----------------
1,856,688 826,336
--------- --------
- -------------------------------------------------------------------------------------- ----------------- ----------------
Operating loss (1,856,688) (826,336)
- -------------------------------------------------------------------------------------- ----------------- ----------------
Other income - 56,731
- -------------------------------------------------------------------------------------- ----------------- ----------------
Equity in losses of affiliates (926,642) -
- -------------------------------------------------------------------------------------- ----------------- ----------------
Preference dividend (165,110) -
- -------------------------------------------------------------------------------------- ----------------- ----------------
Interest income 875,967 -
- -------------------------------------------------------------------------------------- ----------------- ----------------
Interest expense (403,538) (986,388)
----------- ---------
- -------------------------------------------------------------------------------------- ----------------- ----------------
Loss from continuing operations before income taxes (2,476,011) (1,755,993)
- -------------------------------------------------------------------------------------- ----------------- ----------------
Provision for income taxes - (797)
--------------- ------------
- -------------------------------------------------------------------------------------- ----------------- ----------------
Loss from continuing operations (2,476,011) (1,756,790)
- -------------------------------------------------------------------------------------- ----------------- ----------------
Discontinued operations (Note 6)
- -------------------------------------------------------------------------------------- ----------------- ----------------
Loss from discontinued operations, net of income taxes of $760,658 and
$2,115,581 - (3,281,956)
----------- -----------
- -------------------------------------------------------------------------------------- ----------------- ----------------
Loss on disposal of discontinued operations (2,389,382) -
----------- -----------
- -------------------------------------------------------------------------------------- ----------------- ----------------
Net loss (4,865,393) (5,038,746)
----------- -----------
- -------------------------------------------------------------------------------------- ----------------- ----------------
Loss per share - basic and diluted
- -------------------------------------------------------------------------------------- ----------------- ----------------
Continuing operations $(0.00) ($0.26)
- -------------------------------------------------------------------------------------- ----------------- ----------------
Discontinued operations $(0.00) ($0.48)
------- -------
- -------------------------------------------------------------------------------------- ----------------- ----------------
Net loss ($0.00) ($0.74)
------- -------
- -------------------------------------------------------------------------------------- ----------------- ----------------
Weighted average common stock outstanding: 9,295,020 6,769,152
--------- ---------
- -------------------------------------------------------------------------------------- ----------------- ----------------
-6-
SEE ACCOMPANYING NOTES TO THE CONDENSED FINANCIAL STATEMENTS
SILVERSTAR HOLDINGS LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDUTED)
- ---------------------------------------------------------------------------------------------- ---------------- -----------------
SIX MONTHS SIX MONTHS
ENDED ENDED
DECEMBER DECEMBER
31 31
2000 1999
RESTATED RESTATED
$ $
- ---------------------------------------------------------------------------------------------- ---------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
- ---------------------------------------------------------------------------------------------- ---------------- -----------------
Net loss from continuing operations (2,476,011) (1,756,790)
- ---------------------------------------------------------------------------------------------- ---------------- -----------------
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED IN OPERATING ACTIVITIES:
- ---------------------------------------------------------------------------------------------- ---------------- -----------------
Dividend charge (165,110) -
- ---------------------------------------------------------------------------------------------- ---------------- -----------------
Depreciation and amortization 152,169 120,042
- ---------------------------------------------------------------------------------------------- ---------------- -----------------
Changes in operating assets and liabilities, net of discontinued
operations (1,491,848) (500,453)
- ---------------------------------------------------------------------------------------------- ---------------- -----------------
Creation of debenture redemption reserve fund 262,500 562,500
- ---------------------------------------------------------------------------------------------- ---------------- -----------------
Equity in losses of affiliates 926,642 -
----------- ----------------
- ---------------------------------------------------------------------------------------------- ---------------- -----------------
Net cash used in continuing operations (2,791,658) (1,574,701)
- ---------------------------------------------------------------------------------------------- ---------------- -----------------
Net cash used in discontinued operations (783,913) (8,083,422)
--------- ------------
- ---------------------------------------------------------------------------------------------- ---------------- -----------------
Net cash used in operating activities (3,575,571) (9,658,123)
----------- -----------
- ---------------------------------------------------------------------------------------------- ---------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
- ---------------------------------------------------------------------------------------------- ---------------- -----------------
Acquisition of intangibles (4,807) (493,073)
- ---------------------------------------------------------------------------------------------- ---------------- -----------------
Acquisition of property, plant and equipment (1,640,963) (4,004,673)
- ---------------------------------------------------------------------------------------------- ---------------- -----------------
Changes in long term receivables 1,046,522 -
- ---------------------------------------------------------------------------------------------- ---------------- -----------------
Acquisition of subsidiary (net of cash of $863,337) (3,454,569) -
- ---------------------------------------------------------------------------------------------- ---------------- -----------------
Proceeds on transactions with minorities - 21,298,860
- ---------------------------------------------------------------------------------------------- ---------------- -----------------
Proceeds on disposal of property, plant and equipment 74,150 9,065
- ---------------------------------------------------------------------------------------------- ---------------- -----------------
Net proceeds on sale of discontinued operations 11,102,549
- ---------------------------------------------------------------------------------------------- ---------------- -----------------
Proceeds on other assets sold 1,042 -
- ---------------------------------------------------------------------------------------------- ---------------- -----------------
Repayment of loan by affiliates 161,500 -
----------- -----------
- ---------------------------------------------------------------------------------------------- ---------------- -----------------
Net cash provided by investing activities 7,285,424 16,810,179
--------- ----------
- ---------------------------------------------------------------------------------------------- ---------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
- ---------------------------------------------------------------------------------------------- ---------------- -----------------
Short term borrowings, net (1,008,243) (279,648)
- ---------------------------------------------------------------------------------------------- ---------------- -----------------
Repayment of long term debt (1,186,661) (36,915)
- ---------------------------------------------------------------------------------------------- ---------------- -----------------
Treasury stock transactions (215,642) -
- ---------------------------------------------------------------------------------------------- ---------------- -----------------
Redemption of preference shares (8,153,928)
- ---------------------------------------------------------------------------------------------- ---------------- -----------------
Proceeds on issuance of common stock - 20,576,253
---------------- ----------
- ---------------------------------------------------------------------------------------------- ---------------- -----------------
Net cash (used in)/provided by financing activities (10,564,474) 20,259,690
------------ ----------
- ---------------------------------------------------------------------------------------------- ---------------- -----------------
Effect of exchange rate changes on cash (3,981,909) (176,612)
------------ ---------
- ---------------------------------------------------------------------------------------------- ---------------- -----------------
Net (decrease)/ increase in cash and cash equivalents (10,836,530) 27,235,134
- ---------------------------------------------------------------------------------------------- ---------------- -----------------
Cash and cash equivalents at beginning of period 29,853,067 20,813,301
---------- ----------
- ---------------------------------------------------------------------------------------------- ---------------- -----------------
Cash and cash equivalents at end of period 19,016,537 48,048,435
========== ==========
- ---------------------------------------------------------------------------------------------- ---------------- -----------------
-7-
SEE ACCOMPANYING NOTES TO THE CONDENSED FINANCIAL STATEMENTS
SILVERSTAR HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
RESTATED
1. FINANCIAL INFORMATION
Silverstar Holdings Limited, formerly Leisureplanet Holdings Limited (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.
2. BASIS OF PREPARATION
The unaudited interim condensed 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 inter-company transactions have been eliminated in the
consolidated financial statements.
Certain information and factual disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the
rules and regulations of the Securities and Exchange Commission. The
Company has recently become aware of the need to amend and reissue its
form 10K for the year ended June 30, 2000 as filed October 14, 2000. The
Company previously disclosed that it would record a profit from the sale
of Lifestyle in footnote 15 of its Form 10K. However, the Company failed
to consider the impact of the write off of the Company's related
accumulated other comprehensive income balance (accumulated translation
loss) in the calculation of the loss on disposition of discontinued
operations. Had the Company done so, it would have reported a loss on the
disposition of discontinued operations for Lifestyle of $6.27 million.
The amounts contained herein reflect those changes. The Company intends
to amend and reissue its Form 10K for the year ended June 30, 2000 as
soon as possible.
In the opinion of management, the interim condensed consolidated
financial statements reflect all adjustments necessary for a fair
presentation of the interim periods. All such adjustments are of a normal
recurring nature. The results of operations for the interim period are
not necessarily indicative of the results of operations to be expected
for the full year.
TAXES
The parent Company is registered in Bermuda, where it is not subject to
income tax. Each of the Company's subsidiaries is subject to income taxes
within the jurisdiction in which they operate. The Company's income tax
provision relates to the operations of its subsidiaries.
NET LOSS PER SHARE
Basic net loss per share is computed by dividing net loss by the weighted
average number of common shares outstanding. Diluted net loss per share
is computed by dividing net 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. Potential common shares for all periods presented are
computed utilising the treasury stock method. The
-8-
SILVERSTAR HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
effect of potential common shares is excluded when the effect of their
inclusion would be anti-dilutive.
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 adoption of this statement has not had a
significant impact on the results of operations or financial position of
the Company.
Staff Accounting Bulletin, "SAB" No. 101 "Revenue Recognition in
Financial Statements" provides the Securities and Exchange Commission'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 of the Company.
Reclassifications
Certain reclassifications have been made to previously reported results
to conform to current presentations.
3. ACQUISITION
ACQUISITION
The results of operations of 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.
On November 17, 2000, the Company acquired all of the assets and certain
liabilities of Fantasy Sports from goracing Interactive Services, Inc.
Founded in 1993, Fantasy Sports operates the fantasycup.com,
fantasycup.org, fantasycup.net, fantasystockcar.com and fantasynhra.com
websites and specializes in subscription based NASCAR and college
football fantasy sports games. The acquisition was accounted for as a
purchase. The intangibles recorded in connection with the acquisition,
primarily goodwill, are being amortized over their expected useful lives
between 3 and 15 years.
-9-
SILVERSTAR HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
---------------------------------------------- ------------------- ----------------- -------------------
PERCENTAGE PURCHASE
ACQUIRED CONSIDERATION
SUBSIDIARY/BUSINESS DATE ACQUIRED % $
---------------------------------------------- ------------------- ----------------- -------------------
ACQUISITION:
---------------------------------------------- ------------------- ----------------- -------------------
Fantasy Sports November 15,
2000 100 4,317,905
---------
---------------------------------------------- ------------------- ----------------- -------------------
------------------------------------------------------------------------------------------------- ---------------------
SIX MONTHS
ENDED
DECEMBER 31, 2000
$
------------------------------------------------------------------------------------------------- ---------------------
ACQUISITION COSTS
------------------------------------------------------------------------------------------------- ---------------------
Cash consideration 4, 317,905
----------
------------------------------------------------------------------------------------------------- ---------------------
NET ASSETS ACQUIRED
------------------------------------------------------------------------------------------------- ---------------------
Cash and cash equivalents 863,337
------------------------------------------------------------------------------------------------- ---------------------
Current assets 27,030
------------------------------------------------------------------------------------------------- ---------------------
Property, plant and equipment 193,472
------------------------------------------------------------------------------------------------- ---------------------
Intangibles 3,732,014
---------
------------------------------------------------------------------------------------------------- ---------------------
TOTAL ASSETS 4,815,853
---------
------------------------------------------------------------------------------------------------- ---------------------
Current liabilities 497,948
----------
------------------------------------------------------------------------------------------------- ---------------------
TOTAL LIABILITIES 497,948
----------
------------------------------------------------------------------------------------------------- ---------------------
4,317,905
------------------------------------------------------------------------------------------------- ---------------------
-10-
SILVERSTAR HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4. INVENTORIES
Inventories consist of the following:
----------------------------------------------------------------------- ----------------------- --------------------
DECEMBER 31, JUNE 30, 2000
2000 $
$
----------------------------------------------------------------------- ----------------------- --------------------
Finished goods 15,909 5,147,642
----------------------------------------------------------------------- ----------------------- --------------------
Work in progress - 358,890
----------------------------------------------------------------------- ----------------------- --------------------
Raw materials and ingredients - 2,701,284
----------------------------------------------------------------------- ----------------------- --------------------
Supplies - 1,179,041
---------- ---------
----------------------------------------------------------------------- ----------------------- --------------------
15,909 9,386,857
====== =========
----------------------------------------------------------------------- ----------------------- --------------------
The Company sold substantially all of its inventories in the Lifestyle
sale.
5. INVESTMENTS IN AFFILIATES
A summary of the impact of these investments on the consolidated
financial statements is presented below:
------------------------------------------------------------ ----------------- ---------------------- ------------------
EFFECTIVE DECEMBER 31, 2000 JUNE 30, 2000
PERCENTAGE $ $
OWNERSHIP
------------------------------------------------------------ ----------------- ---------------------- ------------------
Investments in and receivables from unconsolidated
affiliates
------------------------------------------------------------ ----------------- ---------------------- ------------------
HotelSupplyGroup. Com 51% 7,869 183,134
------------------------------------------------------------ ----------------- ---------------------- ------------------
Magnolia Broadband 48% 1,365,581 1,076,338
------------------------------------------------------------ ----------------- ---------------------- ------------------
Hall Lifestyle Products 50% - 24,463
---------------- -----------
------------------------------------------------------------ ----------------- ---------------------- ------------------
1,373,450 1,283,935
--------- ---------
------------------------------------------------------------ ----------------- ---------------------- ------------------
------------------------------------------------------------ ----------------- ---------------------- ------------------
Equity share of losses of unconsolidated affiliates: SIX MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, 2000 JUNE 30, 2000
------------------------------------------------------------ ----------------- ---------------------- ------------------
HotelSupplyGroup. Com 51% (6,163) (37,223)
------------------------------------------------------------ ----------------- ---------------------- ------------------
Magnolia Broadband 48% (920,479) (123,662)
--------- ---------
------------------------------------------------------------ ----------------- ---------------------- ------------------
(926,642) (160,885)
--------- ---------
------------------------------------------------------------ ----------------- ---------------------- ------------------
The Company is amortizing the excess in its investment in Magnolia over
its proportionate share of the book value of the affiliate over a
three-year period as an adjustment to equity in losses of affiliates.
-11-
SILVERSTAR HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
6. DISCONTINUED OPERATIONS
LEISUREPLANET.COM ("LPI")
The Company was unable to obtain additional financing 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 following summarizes the operating results of the LPI segment:
------------------------------------------------------------------- ---------------------- -----------------------
SIX SIX
MONTHS MONTHS
ENDED ENDED
DECEMBER 1, 2000 DECEMBER 31, 1999
------------------------------------------------------------------- ---------------------- -----------------------
Revenue - 115,893
---------- -------
------------------------------------------------------------------- ---------------------- -----------------------
Operating loss - (6,906,397)
---------- -----------
------------------------------------------------------------------- ---------------------- -----------------------
Net loss, net of minority share of loss of $0 and $1,743,783 - (5,157,143)
---------- -----------
------------------------------------------------------------------- ---------------------- -----------------------
FIRST LIFESTYLE HOLDINGS LIMITED ("LIFESTYLE")
The following summarizes the operating results of the Lifestyle
discontinued operation:
------------------------------------------------------------------ ---------------------- ----------------------
SIX SIX
MONTHS MONTHS
ENDED ENDED
DECEMBER 31, 2000 DECEMBER 31, 1999
RESTATED RESTATED
$ $
------------------------------------------------------------------ ---------------------- ----------------------
Revenue 28,819,495 52,715,948
---------- ----------
------------------------------------------------------------------ ---------------------- ----------------------
Operating (loss)/income (1,506,371) 6,359,959
----------- ---------
------------------------------------------------------------------ ---------------------- ----------------------
Net (loss)/income, net of minority interest of
$844,273 and $2,373,898 (2,389,382) 2,209,231
----------- ---------
------------------------------------------------------------------ ---------------------- ----------------------
Lifestyle was sold with effect from November 6, 2000, the date that the
proceeds for the sale were made available to the shareholders. Therefore
the results presented above for the six months ended December 31, 2000
are for a four-month period.
-12-
SILVERSTAR HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
6. DISCONTINUED OPERATIONS (CONTINUED)
SALE OF SOUTH AFRICAN OPERATIONS
The results of operations of disposals are excluded from the consolidated
financial statements subsequent to their sale date prior to such dates:
the results of operations of disposal are reflected within discontinued
operations.
The Company has disposed of First Lifestyle Holdings Limited
("Lifestyle"), the holding company of its last remaining South African
operating subsidiaries. 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. Regulatory approval was obtained from the South
African monopolies commission on October 12, 2000. Proceeds from the sale
were received on November 6, 2000. Excluded from the proceeds below are
R20 million of a R52 million note (denominated in South African Rand)
from Salwin Investments (Pty.) Ltd. (a South African company formed for
the acquisition of Lifestyle). The note accrues interest and contains
provisions for the payment of interest and/or principal, based on the
performance or sale of the Lifestyle assets.
---------------------------------------------- ------------------------------------- -------------------
SALE PROCEEDS
SUBSIDIARY/BUSINESS DATE SOLD $
---------------------------------------------- ------------------------------------- -------------------
DISPOSAL:
---------------------------------------------- ------------------------------------- -------------------
First Lifestyle Holdings Limited November 6, 2000 29,972,391
----------
---------------------------------------------- ------------------------------------- -------------------
-13-
SILVERSTAR HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
----------------------------------------------------------------------------------------- ---------------------
SIX MONTHS
ENDED
DECEMBER 31,2000
$
----------------------------------------------------------------------------------------- ---------------------
Proceeds on disposal (including cash of $24,976,036) 29,972,391
----------
----------------------------------------------------------------------------------------- ---------------------
NET ASSETS SOLD
----------------------------------------------------------------------------------------- ---------------------
Cash and cash equivalents 13,873,487
----------------------------------------------------------------------------------------- ---------------------
Current assets 25,470,455
----------------------------------------------------------------------------------------- ---------------------
Property, plant and equipment 17,230,653
----------------------------------------------------------------------------------------- ---------------------
Other assets 36,655
----------------------------------------------------------------------------------------- ---------------------
Intangibles 17,192,604
----------
----------------------------------------------------------------------------------------- ---------------------
TOTAL ASSETS 73,803,854
----------
----------------------------------------------------------------------------------------- ---------------------
Current liabilities 17,007,032
----------------------------------------------------------------------------------------- ---------------------
Long-term debt 270,742
----------------------------------------------------------------------------------------- ---------------------
Deferred income taxes 3,442,583
---------
----------------------------------------------------------------------------------------- ---------------------
TOTAL LIABILITIES 20,720,357
----------
----------------------------------------------------------------------------------------- ---------------------
53,083,497
----------------------------------------------------------------------------------------- ---------------------
Minority shareholders interest (37,320,516)
----------------------------------------------------------------------------------------- ---------------------
Movement in translation difference related to disposal 14,209,410
----------
----------------------------------------------------------------------------------------- ---------------------
Net value disposed of 29,972,391
-----------
----------------------------------------------------------------------------------------- ---------------------
Gain/(loss) on sale of subsidiary -
=================
----------------------------------------------------------------------------------------- ---------------------
-14-
SILVERSTAR HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
7. CASH FLOWS
The changes in assets and liabilities consist of the following:
---------------------------------------------------------------------- ----------------------- ----------------------
SIX SIX
MONTHS MONTHS
ENDED ENDED
DECEMBER 31, 2000 DECEMBER 31, 1999
RESTATED
$ $
---------------------------------------------------------------------- ----------------------- ----------------------
Increase in inventories (6) -
---------------------------------------------------------------------- ----------------------- ----------------------
(Increase)/decrease in prepaid expenses and other current assets (667,144) 84,522
---------------------------------------------------------------------- ----------------------- ----------------------
Decrease in accounts payable (123,552) (14,081)
---------------------------------------------------------------------- ----------------------- ----------------------
Decrease in other provisions and accruals (701,146) (568,033)
---------------------------------------------------------------------- ----------------------- ----------------------
Increase in other taxes payable - (1,798)
---------------------------------------------------------------------- ----------------------- ----------------------
Increase in income taxes payable - (1,063)
------------- -----------
---------------------------------------------------------------------- ----------------------- ----------------------
(1,491,848) (500,453)
=========== ===========
---------------------------------------------------------------------- ----------------------- ----------------------
NET CASH USED IN DISCONTINUED OPERATIONS CONSISTS OF THE FOLLOWING:
---------------------------------------------------------------------- ----------------------- ----------------------
Net loss from discontinued operations: (2,831,828) (3,281,956)
---------------------------------------------------------------------- ----------------------- ----------------------
Depreciation and amortization 950,388 2,749,611
---------------------------------------------------------------------- ----------------------- ----------------------
Minority share of (losses)/gains 844,273 630,117
---------------------------------------------------------------------- ----------------------- ----------------------
Equity in losses of affiliates 13,579 -
---------------------------------------------------------------------- ----------------------- ----------------------
Net loss on sale of assets 21,278 68,729
---------------------------------------------------------------------- ----------------------- ----------------------
Changes in assets and liabilities (75,620) (6,420,962)
---------------------------------------------------------------------- ----------------------- ----------------------
Movement in deferred income taxes 294,017 753,358
---------------------------------------------------------------------- ----------------------- ----------------------
Shares to be issued - 1,978,379
---------------------------------------------------------------------- ----------------------- ----------------------
Net loss on minority shares issued in Lifestyle - (4,560,698)
------------- -----------
---------------------------------------------------------------------- ----------------------- ----------------------
783,913 (8,083,422)
============= ===========
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8. 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 has guaranteed the banking facilities of certain of its
former subsidiaries. These guarantees amount to $1,580,000.
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SILVERSTAR HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The Future minimum non-cancellable operating lease payments are not
material.
9. PER SHARE DATA
Basic and diluted loss per share from continuing operations was computed
by dividing the loss from continuing operations by the weighted average
number of common shares outstanding during the period. Accordingly, the
Company's presentation of diluted loss per share is the same as that of
basic loss per share.
At December 31, 2000, 1,565,000 stock options and 1,263,158 shares of
Class A common stock were reserved for possible future issuance in
connection with the increasing rate convertible debentures. These
securities that could potentially dilute earnings per share in the future
were not included in the computation of diluted earnings per share
because to do so would have been anti-dilutive for the periods presented.
10. TREASURY STOCK
During the quarter ended December 31, 2000, the Company purchased 268,900
shares of Class A common stock. The Company paid an average of $0.80 per
share. The Company paid a low of $0.69 and a high of $1.01 per share. It
is the Company's intention to cancel the shares.
-16-
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
BACKGROUND AND HISTORY
Silverstar Holdings Limited, formerly Leisureplanet Holdings Limited was
incorporated in September 1995. The Company's intention is to actively pursue
acquisitions fitting a pre defined investment strategy:
o Acquiring controlling stakes in small, high quality, high growth,
technology and internet related businesses with strong management teams.
o Our investments must show an ability to contribute, in the short to medium
term, to earnings per share through operating profit or capital
appreciation.
o 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 disposed of First Lifestyle Holdings Limited ("Lifestyle"), the
holding company of its last remaining South African operating subsidiaries. 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. Regulatory approval was obtained
from the South African monopolies commission on October 12, 2000. Proceeds from
the sale were received on November 6, 2000.
The Company was unable to obtain additional financing to fund the activities of
Leisureplanet.com ("LPI"), the Internet travel related business. On August 2,
2000 LPI was placed under voluntary administration in the United Kingdom. Full
provision was made for the Company's investment in LPI in the accounts for the
year ended June 30, 2000.
On November 17, 2000, the Company acquired all of the assets and certain
liabilities of Fantasy Sports from goracing Interactive Services, Inc. Founded
in 1993, Fantasy Sports operates the fantasycup.com, fantasycup.org,
fantasycup.net, fantasystockcar.com and fantasynhra.com websites and specializes
in subscription based NASCAR and college football fantasy sports games.
RESULTS OF OPERATIONS
The Company has recently become aware of the need to amend and reissue its form
10K for the year ended June 30, 2000 as filed October 14, 2000. The Company
previously disclosed that it would record a profit from the sale of Lifestyle in
footnote 15 of its Form 10K. However, the Company failed to consider the impact
of the write off of the
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Company's related accumulated other comprehensive income balance (accumulated
translation loss) in the calculation of the loss on disposition of discontinued
operations. Had the Company done so, it would have reported a loss on the
disposition of discontinued operations for Lifestyle of $6.27 million. The
amounts contained herein reflect those changes. The Company intends to amend and
reissue its Form 10K for the year ended June 30, 2000 as soon as possible.
The results exclude the operations of Lifestyle and LPI. Discussion of these
results of the operations is given under the heading, discontinued operations,
below.
QUARTER ENDED DECEMBER 31, 2000 AS COMPARED TO QUARTER ENDED DECEMBER 31, 1999
Revenues
The Company discontinued and sold all of its operating companies during
the periods presented in these financial statements. The operations of
Fantasy Sports are seasonal (based on the NASCAR and college football
seasons).
Selling, general and administrative expenses
There was no significant change in selling, general and administrative
expenses for the quarter ended December 31, 2000 as compared to the
quarter ended December 31, 1999.
QUARTER ENDED DECEMBER 31, 2000 AS COMPARED TO QUARTER ENDED DECEMBER 31, 1999
(CONTINUED)
Amortization of intangibles
Amortization of intangibles increased from $0.06 million for the three
months ended December 31, 1999 to $0.21 million in the three months ended
December 31, 2000. This increase is primarily due to the amortization of
goodwill that arose on the investment in Fantasy Sports.
Depreciation
Depreciation charge relates to minor office equipment; furniture and
computer equipment and are not significant.
Foreign currency loss
Foreign currency loss of $0.32 million represents the loss realized on
the translation of the amount owing to the Company from First South
African Holdings (Pty) Ltd
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("FSAH"), the South African investment subsidiary. These amounts
previously were treated as permanent advances to FSAH from the Company
and the translation gain or loss was recognized within stockholders'
equity. Upon acceptance of an offer for Lifestyle, the Company began
recognizing translation gains or losses on the intercompany balance with
FSAH within its results of operations.
Equity in losses of affiliates
The Company acquired a 48% stake in Magnolia Broadband and a 51% stake in
HotelSupplyGroup.com. These companies are start-up ventures, which have
only incurred expenses to date. The charge of $0.57 million represents
the Company's equity accounted share of their operating losses for the
period and amortization of related goodwill.
Preference dividend declared
During the quarter ended December 31, 2000, the preference dividend on
the mandatory redeemable preference shares has been accrued on a time
proportion basis. The agreement to pay preference dividends provides for
two options that the dividend payable must be based on the ordinary
dividend declared by Lifestyle, or the preference dividend 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 dividend was declared during the prior fiscal year and the
mandatory redeemable preference shares were redeemed in November 2000, a
dividend of $0.04 million has been provided for during the current
quarter.
Interest expense/income
Interest income of $0.96 million represents interest earned on the cash
generated from the sale of Lifestyle for $29.97 million. The sale
generated net cash, after giving effect for loan activity and property,
plant and equipment acquisitions, of $8.10 million. The proceeds were
used to pay down debt and the remaining amounts were invested in interest
bearing accounts. Interest expense of $0.32 million decreased from $0.51
million in the prior year due to the repayment of debt in the current
year.
Discontinued operations
During the current quarter, loss on disposal of discontinued operations
of $.84 million was earned as compared to a loss from discontinued
operations of $1.13 million in the prior year December quarter. The prior
year quarter included a loss of $2.39 million relating to LPI. LPI went
into administration on August 2, 2000 and no further operating losses
were recorded as the remaining assets and liabilities were fully provided
for at June 30, 2000. The loss on disposal of discontinued
-19-
operations generated by Lifestyle relates primarily to translation losses
as a result of the decline in South African exchange rates.
Net loss
As a result of the above, the Company had losses of $1.8 million in the
current quarter as compared to a loss of $2.11 million in the quarter
ended December 31, 1999.
SIX MONTHS ENDED DECEMBER 31, 2000 AS COMPARED TO SIX MONTHS ENDED DECEMBER 31,
1999
Revenues
The Company discontinued and sold all of its operating companies during
the periods presented in these financial statements. The operations of
Fantasy Sports are seasonal (based on the NASCAR and college football
seasons).
Selling, general and administrative expenses
There was no significant change in selling, general and administrative
expenses for the six months ended December 31, 2000 as compared to the
six months ended December 31, 1999.
Amortization of intangibles
Amortization of intangibles increased from $0.12 million for the six
months ended December 31, 1999 to $0.24 million in the six months ended
December 31, 2000. This increase is not significant.
Depreciation
Depreciation charges relate to minor office equipment; furniture and
computer equipment and are not significant.
Foreign currency loss
Foreign currency loss of $0.79 million represents the loss realized on
the translation of the amount owing to the Company from FSAH, the South
African investment subsidiary. These amounts previously were treated as
permanent advances to FSAH from the Company and the translation gain or
loss was recognized within stockholders' equity. Upon acceptance of an
offer for Lifestyle, the Company began recognizing translation gains or
losses on the intercompany balance with FSAH within its results of
operations.
-20-
Equity in losses of affiliates
The Company acquired a 48% stake in Magnolia Broadband and a 51% stake in
HotelSupplyGroup.com. These companies are start-up ventures, which have
only incurred expenses to date. The charge of $0.93 million represents
the Company's equity accounted share of their operating losses for the
period and amortization of goodwill..
Preference dividend declared
During the six months ended December 31, 2000, the preference dividend on
the mandatory redeemable preference shares has been accrued on a time
proportion basis. The agreement to pay preference dividends provides for
two options that the dividend payable must be based on the ordinary
dividend declared by Lifestyle, or the preference dividend 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 prior fiscal year
and the mandatory redeemable preference shares were redeemed in November
2000, a dividend of $0.17 million has been provided for during the
current period.
Interest expense/income
Interest income of $0.88 million represents interest earned on the
proceeds realized on the sale of Lifestyle for $29.97 million generated
net cash, after giving effect for loan activity and property, plant and
equipment acquisitions, of $8.10 million. The proceeds were used to pay
down debt and invested in interest bearing accounts. Interest expense of
$0.99 million in the prior year has decreased by $0.59 to $0.40 million
due to the repayment of debt in the current year.
Discontinued operations
During the current period, loss on disposal of discontinued operations of
$2.39 million was recorded as compared to a loss from discontinued
operations of $3.28 million in the prior year period. The prior year
period included a loss of $5.50 million relating to LPI. LPI went into
administration during the current period and no further operating losses
were recorded as the remaining assets and liabilities were fully provided
for at June 30, 2000. The loss on disposal of discontinued operations
generated by Lifestyle relates primarily to translation losses as a
result of the decline in South African exchange rates.
Net loss
As a result of the above, the Company had losses of $4.87 million in the
six months ended December 31, 2000 as compared to a loss of $5.04 million
during the six months ended December 31, 1999.
-21-
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Cash decreased by $10.83 million from $29.85 million to $19.02 million.
The net cash generated from the sale of Lifestyle net of the acquisition
of property plant and equipment by Lifestyle was $9.46 million. The uses
of cash included the redemption of preference shares of $8.15 million,
the acquisition of Fantasy Sports for $3.45 million, the funding of
operations of $3.58 million, repayments of debt of $2.20 million and
other movements of $2.91 million including exchange rate change effects
on cash. In addition to the cash received from the sale of Lifestyle, the
Company received a note for a total of R52 million, a portion of which is
considered contingent consideration (see below).
At June 30, 2000, the Company had borrowings of $18.48 million. This has
decreased to $14.31 million due to the retirement of Lifestyle debt just
prior to the sale of Lifestyle. The amount outstanding at December 31,
2000 is comprised of $12 million face value of increasing rate
subordinated convertible debentures and $2.31 million of related
interest, substantially all of which represents accreted interest on the
debentures. During August 2000, the Company received an option to retire
up to $10.95 million (face value) of increasing rate subordinated
convertible debentures at face plus accrued but not accreted interest. On
January 22, 2001, the Company paid $5 million to retire $5 million face
value of these debentures. As of January 22, 2001, the Company eliminated
$.97 million of previously accrued but unpaid accreted interest. The
Company intends to retire an additional $5.95 million (face value) prior
to the expiration of the option in April 2001. If the Company does
exercise the option on the remaining amount, it will eliminate an
obligation to pay a further $1.33 million of accrued but unpaid accreted
interest as of December 31, 2000.
In connection with its sale of Lifestyle during November 2000, the
Company received as partial consideration three notes denominated in
South African Rand totaling approximately $5.85 million at December 31,
2000. These notes are subject to Foreign currency risk and a portion are
subject to certain performance requirements of the obligee. As a result,
the Company has treated approximately $2.76 million of these notes as
contingent consideration to be recorded when collected. The notes
recorded by the Company upon the sale of Lifestyle bear interest at rates
based on the South African prime rate.
As of February 6, 2001 the Company's cash balance was sufficient to pay
off all liabilities.
FUTURE COMMITMENTS
The Company intends to continue to pursue an acquisition strategy in
companies utilizing Internet and technology platforms to grow their
business and anticipates utilizing a substantial portion of its remaining
cash balances to fund this strategy to the extent that suitable
acquisition candidates can be identified. On November 17,
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2000 the Company acquired all of the assets and certain liabilities of
the Fantasy Sports division of goracing Interactive Services Inc, for a
net purchase price of $3.55 million.
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 recognize market risk from
interest rate and foreign currency exchange exposure. Substantially all
of the company's cash balances are not insured by the Federal Depository
Insurance Corporation. Management has invested the funds in financial
institutions that have strong financial positions.
INTEREST RATE RISK
At December 31, 2000, the Company's cash resources earned 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 Company continues to have investments that are 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. Beginning in
January 2000, a portion of the exposure has been covered by forward exchange
contracts. If not covered, every 1% decline in the Rand/US Dollar exchange rate
will result in a $10,000 loss on a $132,000 investment in South Africa.
Subsequent to the quarter-end the Rand has depreciated against the US Dollar by
approximately 2.5% to February 6, 2000.
-23-
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On December 13, 2000 the Company held its annual meeting of stockholders. At the
annual meeting, the Company's stockholders elected five directors to serve until
the next annual meeting and until their respective successors are elected and
qualified. At the annual meeting, the Company's stockholders also approved and
adopted a proposal to change the Company's name from Leisureplanet Holdings,
Ltd. to Silverstar Holdings, Ltd. The votes for directors were as follows:
Votes
---------------------------------------
For Withheld
------------------ ------------------
Michael Levy 10,530,951 31,411
Clive Kabatznik 10,530,951 31,411
Cornelius J. Roodt 10,530,951 31,411
Chris Matty 10,530,951 31,411
David BenDaniel 10,530,951 31,411
The votes to approve and adopt the change of the Company's name to
Silverstar Holdings, Ltd. were as follows:
For Against Abstain
------------------ ------------------ -----------------
10,532,272 25,440 4,650
-24-
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,
2000:
Report on Form 8-K dated October 12, 2000 regarding the
disposition of the assets of Lifestyle Holdings, Ltd., a
majority-owned subsidiary of the Company (Item 5).
Report on Form 8-K dated November 16, 2000 regarding the
acquisition of certain assets of goracing Interactive
Services, Inc. through a wholly-owned subsidiary of the
Company (Item 2).
-25-
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: May 4, 2001
SILVERSTAR HOLDINGS, LTD.
/s/ Clive Kabatznik
-------------------
Clive Kabatznik
Chief Executive Officer, President and
Chief Financial Officer