SILVERSTAR HOLDINGS LIMITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEE ACCOMPANYING NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
__X__ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
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
------------
---------------------------------------------------------------------
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 May 14, 2001 was
8,184,958.
SILVERSTAR HOLDINGS LIMITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
PART I - FINANCIAL INFORMATION
ITEM 1. Condensed Consolidated Balance Sheets (Unaudited) at March 31, 2001 and June 30, 2000
Condensed Consolidated Statements of Operations (Unaudited) for the three and nine months
ended March 31, 2001 and 2000
Condensed Consolidated Statements of Cash Flows (Unaudited)for the nine months ended March
31, 2001 and 2000
Notes to the Condensed Consolidated Financial Statements (Unaudited)
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
ITEM 3. Quantitative and Qualitative Disclosure 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
- --------------------------------------------------------------------------------- ---------------- -----------------
MARCH JUNE
31, 30,
2001 2000
RESTATED
$ $
- --------------------------------------------------------------------------------- ---------------- -----------------
CURRENT ASSETS
- --------------------------------------------------------------------------------- ---------------- -----------------
Cash and cash equivalents 12,197,191 29,853,067
- --------------------------------------------------------------------------------- ---------------- -----------------
Accounts receivable, net - 10,608,197
- --------------------------------------------------------------------------------- ---------------- -----------------
Inventories 403,715 9,386,857
- --------------------------------------------------------------------------------- ---------------- -----------------
Prepaid expenses and other current assets 899,621 3,631,348
- --------------------------------------------------------------------------------- ---------------- -----------------
Deferred income taxes - 898,280
---------------- -----------
- --------------------------------------------------------------------------------- ---------------- -----------------
TOTAL CURRENT ASSETS 13,500,527 54,377,749
- --------------------------------------------------------------------------------- ---------------- -----------------
Property, plant and equipment, net 201,308 18,215,196
- --------------------------------------------------------------------------------- ---------------- -----------------
Investments in affiliates 1,229,513 1,283,935
- --------------------------------------------------------------------------------- ---------------- -----------------
Long term receivable 5,071,069 -
- --------------------------------------------------------------------------------- ---------------- -----------------
Intangible assets, net 3,602,404 20,130,119
- --------------------------------------------------------------------------------- ---------------- -----------------
Deferred charges 52,652 228,078
- --------------------------------------------------------------------------------- ---------------- -----------------
Other assets - 31,362
---------------- -------------
- --------------------------------------------------------------------------------- ---------------- -----------------
TOTAL ASSETS 23,657,473 94,266,439
========== ==========
- --------------------------------------------------------------------------------- ---------------- -----------------
-3-
- --------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------- ---------------- -----------------
MARCH JUNE
31, 30,
2001 2000
RESTATED
$ $
- --------------------------------------------------------------------------------- ---------------- -----------------
CURRENT LIABILITIES
- --------------------------------------------------------------------------------- ---------------- -----------------
Bank overdraft 12,098 896,860
- --------------------------------------------------------------------------------- ---------------- -----------------
Current portion of long term debt 7,449,765 2,105,153
- --------------------------------------------------------------------------------- ---------------- -----------------
Accounts payable 426,519 13,046,686
- --------------------------------------------------------------------------------- ---------------- -----------------
Other provisions and accruals 652,166 5,754,638
- --------------------------------------------------------------------------------- ---------------- -----------------
Deferred revenue 1,530,430 -
- --------------------------------------------------------------------------------- ---------------- -----------------
Dividends payable - 179,840
- --------------------------------------------------------------------------------- ---------------- -----------------
Income taxes payable - 676,003
- --------------------------------------------------------------------------------- ---------------- -----------------
Other taxes payable - 303,812
----------------- -----------
- --------------------------------------------------------------------------------- ---------------- -----------------
TOTAL CURRENT LIABILITIES 10,070,978 22,962,992
- --------------------------------------------------------------------------------- ---------------- -----------------
Long term debt - 15,473,769
- --------------------------------------------------------------------------------- ---------------- -----------------
Deferred income taxes - 4,402,038
---------------- -----------
- --------------------------------------------------------------------------------- ---------------- -----------------
TOTAL LIABILITIES 10,070,978 42,838,799
------------ ----------
- --------------------------------------------------------------------------------- ---------------- -----------------
Minority interest - 37,059,840
- --------------------------------------------------------------------------------- ---------------- -----------------
FSAH mandatory redeemable preferred stock - 8,771,930
- --------------------------------------------------------------------------------- ---------------- -----------------
Commitments and contingencies (Note 9) - -
- --------------------------------------------------------------------------------- ---------------- -----------------
STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------- ---------------- -----------------
Capital stock:
A class common stock, $0.01 par value - authorized 23,000,000 Shares,
issued and outstanding 7,246,010 shares
(June 30: 8,368,676 shares) 72,460 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 - -
- --------------------------------------------------------------------------------- ---------------- -----------------
Additional paid-in capital 63,408,692 64,307,442
- --------------------------------------------------------------------------------- ---------------- -----------------
Accumulated deficit (49,904,723) (44,595,916)
- --------------------------------------------------------------------------------- ---------------- -----------------
Accumulated Other Comprehensive Income - (14,209,409)
----------------- ------------
- --------------------------------------------------------------------------------- ---------------- -----------------
TOTAL STOCKHOLDERS' EQUITY 13,586,495 5,595,870
---------- -----------
- --------------------------------------------------------------------------------- ---------------- -----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 23,657,473 94,266,439
========== ==========
- --------------------------------------------------------------------------------- ---------------- -----------------
-4-
SILVERSTAR HOLDINGS LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------- ---------------- ----------------
THREE THREE
MONTHS MONTHS
ENDED ENDED
MARCH MARCH
31, 31,
2001 2000
RESTATED
$ $
- --------------------------------------------------------------------------------- ---------------- ----------------
Revenues 511,900 -
------- ---------------
- --------------------------------------------------------------------------------- ---------------- ----------------
Operating expenses
- --------------------------------------------------------------------------------- ---------------- ----------------
Cost of sales 404,107 -
- --------------------------------------------------------------------------------- ---------------- ----------------
Selling, general and administrative costs 1,285,615 455,226
- --------------------------------------------------------------------------------- ---------------- ----------------
Amortization of intangibles 109,788 67,879
- --------------------------------------------------------------------------------- ---------------- ----------------
Depreciation 9,901 1,297
- --------------------------------------------------------------------------------- ---------------- ----------------
Equity in losses of affiliates 393,937 -
------- -------------
- --------------------------------------------------------------------------------- ---------------- ----------------
2,203,348 524,402
--------- --------
- --------------------------------------------------------------------------------- ---------------- ----------------
Operating loss (1,691,448) (524,402)
- --------------------------------------------------------------------------------- ---------------- ----------------
Other income 56,633 -
- --------------------------------------------------------------------------------- ---------------- ----------------
Interest income 395,359 -
- --------------------------------------------------------------------------------- ---------------- ----------------
Foreign currency losses, net (98,235) -
- --------------------------------------------------------------------------------- ---------------- ----------------
Interest expense (132,619) (148,805)
--------- ---------
- --------------------------------------------------------------------------------- ---------------- ----------------
Loss from continuing operations before income taxes (1,470,310) (673,207)
- --------------------------------------------------------------------------------- ---------------- ----------------
Provision for income taxes - 155
---------------- ----------
- --------------------------------------------------------------------------------- ---------------- ----------------
Loss from continuing operations (1,470,310) (673,052)
- --------------------------------------------------------------------------------- ---------------- ----------------
Discontinued operations (Note 6)
Loss from operations, net of income taxes of $0 and ($195,435) - (3,897,866)
--------------- -----------
- --------------------------------------------------------------------------------- ---------------- ----------------
Loss before extraordinary item (1,470,310) (4,570,918)
----------- -----------
- --------------------------------------------------------------------------------- ---------------- ----------------
Extraordinary item-gain on extinguishment of debt, net of taxes of $nil and
$nil (Note 7) 1,026,896 -
--------------- -----------
- --------------------------------------------------------------------------------- ---------------- ----------------
Net loss (443,414) (4,570,918)
--------- -----------
- --------------------------------------------------------------------------------- ---------------- ----------------
Loss per share - basic and diluted
- --------------------------------------------------------------------------------- ---------------- ----------------
Continuing operations ($0.17) ($0.08)
- --------------------------------------------------------------------------------- ---------------- ----------------
Discontinued operations and foreign currency losses ($0.00) ($0.43)
------- -------
- --------------------------------------------------------------------------------- ---------------- ----------------
Loss before extraordinary item ($0.17) ($0.51)
- --------------------------------------------------------------------------------- ---------------- ----------------
Extraordinary item $.12 -
----
- --------------------------------------------------------------------------------- ---------------- ----------------
Net loss ($0.05) ($0.51)
------- -------
- --------------------------------------------------------------------------------- ---------------- ----------------
Weighted average common stock outstanding:
- --------------------------------------------------------------------------------- ---------------- ----------------
Basic 8,680,302 9,002,398
--------- ---------
- --------------------------------------------------------------------------------- ---------------- ----------------
Diluted 8,680,302 9,002,398
--------- ---------
- --------------------------------------------------------------------------------- ---------------- ----------------
-5-
SILVERSTAR HOLDINGS LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
- ----------------------------------------------------------------------------------- --------------- -----------------
NINE NINE
MONTHS MONTHS
ENDED ENDED
MARCH MARCH
31, 31,
2001 2000
RESTATED
$ $
- ----------------------------------------------------------------------------------- --------------- -----------------
Revenues 511,900 -
------- ---------------
- ----------------------------------------------------------------------------------- --------------- -----------------
Operating expenses
- ----------------------------------------------------------------------------------- --------------- -----------------
Cost of sales 404,107 -
- ----------------------------------------------------------------------------------- --------------- -----------------
Selling, general and administrative costs 2,201,092 1,162,240
- ----------------------------------------------------------------------------------- --------------- -----------------
Amortization of intangibles 253,933 184,852
- ----------------------------------------------------------------------------------- --------------- -----------------
Depreciation 17,925 4,366
- ----------------------------------------------------------------------------------- --------------- -----------------
Equity in losses of affiliates 1,320,579 -
--------- ----------------
- ----------------------------------------------------------------------------------- --------------- -----------------
4,197,636 1,351,458
- ----------------------------------------------------------------------------------- --------------- -----------------
Operating loss (3,685,736) (1,351,458)
- ----------------------------------------------------------------------------------- --------------- -----------------
Other income 56,633 56,731
- ----------------------------------------------------------------------------------- --------------- -----------------
Interest income 1,271,326 -
- ----------------------------------------------------------------------------------- --------------- -----------------
Foreign currency losses, net (887,277) -
- ----------------------------------------------------------------------------------- --------------- -----------------
Interest expense (536,157) (1,134,473)
--------- -----------
- ----------------------------------------------------------------------------------- --------------- -----------------
Loss from continuing operations before income taxes (3,781,211) (2,429,200)
- ----------------------------------------------------------------------------------- --------------- -----------------
Provision for income taxes - (642)
---------------- ------------
- ----------------------------------------------------------------------------------- --------------- -----------------
Loss from continuing operations (3,781,211) (2,429,842)
- ----------------------------------------------------------------------------------- --------------- -----------------
Discontinued operations (Note 6)
Loss from operations, net of income taxes of $nil and $2,115,736
Loss on disposal of discontinued operations, net of income taxes of $nil - (7,179,823)
and $nil (2,554,492) -
----------- -----------
- ----------------------------------------------------------------------------------- --------------- -----------------
Loss before extraordinary item (6,335,703) (9,609,665)
- ----------------------------------------------------------------------------------- --------------- -----------------
Extraordinary item-gain on extinguishments of debt, net of taxes $nil and $nil
(Note 7) 1,026,896 -
--------- -----------
- ----------------------------------------------------------------------------------- --------------- -----------------
Net loss (5,308,807) (9,609,665)
----------- -----------
- ----------------------------------------------------------------------------------- --------------- -----------------
Loss per share - basic and diluted
- ----------------------------------------------------------------------------------- --------------- -----------------
Continuing operations ($0.42) ($0.33)
- ----------------------------------------------------------------------------------- --------------- -----------------
Discontinued operations foreign currency losses ($0.28) ($0.98)
------- -------
- ----------------------------------------------------------------------------------- --------------- -----------------
Loss before extraordinary item ($0.70) ($1.31)
- ----------------------------------------------------------------------------------- --------------- -----------------
Extraordinary item $0.12 ($0.0)
----- ------
- ----------------------------------------------------------------------------------- --------------- -----------------
Net loss ($0.58) ($1.31)
------- -------
- ----------------------------------------------------------------------------------- --------------- -----------------
Weighted average common stock outstanding:
- ----------------------------------------------------------------------------------- --------------- -----------------
Basic 9,089,841 7,343,185
--------- ---------
- ----------------------------------------------------------------------------------- --------------- -----------------
Diluted 9,089,841 7,343,185
--------- ---------
- ----------------------------------------------------------------------------------- --------------- -----------------
-6-
SILVERSTAR HOLDINGS LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDUTED)
- --------------------------------------------------------------------------------- ---------------- -----------------
NINE MONTHS NINE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
2001 2000
RESTATED
$ $
- --------------------------------------------------------------------------------- ---------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
- --------------------------------------------------------------------------------- ---------------- -----------------
Net income/(loss) from continuing operations (3,781,211) (2,429,842)
- --------------------------------------------------------------------------------- ---------------- -----------------
ADJUSTMENTS TO RECONCILE NET INCOME/(LOSS) TO NET CASH USED IN OPERATING
ACTIVITIES:
- --------------------------------------------------------------------------------- ---------------- -----------------
Depreciation and amortization 294,867 189,218
- --------------------------------------------------------------------------------- ---------------- -----------------
Issuance of warrants for consulting fees 34,326 -
- --------------------------------------------------------------------------------- ---------------- -----------------
Net loss on sale of assets - 63,167
- --------------------------------------------------------------------------------- ---------------- -----------------
Changes in operating assets and liabilities, net of discontinued
Operations (699,026) (613,931)
- --------------------------------------------------------------------------------- ---------------- -----------------
Creation of debenture redemption reserve fund 262,500 393,750
- --------------------------------------------------------------------------------- ---------------- -----------------
Equity in losses of affiliates 1,320,579 -
- --------------------------------------------------------------------------------- ---------------- -----------------
Net cash used in continuing operations (2,567,965) (2,397,638)
- --------------------------------------------------------------------------------- ---------------- -----------------
Net cash used in discontinued operations (1,114,133) (13,192,732)
- --------------------------------------------------------------------------------- ---------------- -----------------
Net cash used in operating activities (3,682,098) (15,590,370)
- --------------------------------------------------------------------------------- ---------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
- --------------------------------------------------------------------------------- ---------------- -----------------
Acquisition of intangibles (49,332) (1,103,008)
- --------------------------------------------------------------------------------- ---------------- -----------------
Acquisition of property, plant and equipment (1,646,983) (4,447,356)
- --------------------------------------------------------------------------------- ---------------- -----------------
Decrease in long-term receivables 1,188,355 -
- --------------------------------------------------------------------------------- ---------------- -----------------
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 36,445
- --------------------------------------------------------------------------------- ---------------- -----------------
Net proceeds on sale of discontinued operations 11,102,549 -
- --------------------------------------------------------------------------------- ---------------- -----------------
Other assets acquired - (6,190)
- --------------------------------------------------------------------------------- ---------------- -----------------
Proceeds on other assets sold 1,042 -
- --------------------------------------------------------------------------------- ---------------- -----------------
Loan to affiliate (250,000) -
- --------------------------------------------------------------------------------- ---------------- -----------------
Repayment of loan by affiliates 161,500 -
- --------------------------------------------------------------------------------- ---------------- -----------------
Net cash provided by investing activities 7,126,712 15,778,751
- --------------------------------------------------------------------------------- ---------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
- --------------------------------------------------------------------------------- ---------------- -----------------
Short term borrowings, net (999,883) (1,476,108)
- --------------------------------------------------------------------------------- ---------------- -----------------
Repayment of long term debt (7,020,470) (1,516,732)
- --------------------------------------------------------------------------------- ---------------- -----------------
Treasury stock transactions (944,300) -
- --------------------------------------------------------------------------------- ---------------- -----------------
Redemption of preference shares (8,153,928) -
- --------------------------------------------------------------------------------- ---------------- -----------------
Proceeds on issuance of common stock - 21,495,634
- --------------------------------------------------------------------------------- ---------------- -----------------
Net cash (used in)/provided by financing activities (17,118,581) 18,502,794
- --------------------------------------------------------------------------------- ---------------- -----------------
Effect of exchange rate changes on cash (3,981,909) (1,097,684)
- --------------------------------------------------------------------------------- ---------------- -----------------
Net (decrease)/ increase in cash and cash equivalents (17,655,876) 17,593,110
- --------------------------------------------------------------------------------- ---------------- -----------------
Cash and cash equivalents at beginning of period 29,853,067 20,813,301
---------- ----------
- --------------------------------------------------------------------------------- ---------------- -----------------
Cash and cash equivalents at end of period 12,197,191 38,406,792
========== ==========
- --------------------------------------------------------------------------------- ---------------- -----------------
-7-
SILVERSTAR HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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.
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 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.
-8-
SILVERSTAR HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2. BASIS OF PREPARATION (CONTINUED)
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 10 years.
---------------------------- ------------------- -------------- ------------------
PERCENTAGE PURCHASE
ACQUIRED CONSIDERATION
SUBSIDIARY/BUSINESS DATE ACQUIRED % $
---------------------------- ------------------- -------------- ------------------
ACQUISTION:
---------------------------- ------------------- -------------- ------------------
Fantasy Sports November 15,
2000 100 4,317,905
---------------------------- ------------------- -------------- ------------------
------------------------------------------------------------------------------------------------- -----------------
MARCH 31,
2001
$
------------------------------------------------------------------------------------------------- -----------------
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
------------------------------------------------------------------------------------------------- -----------------
-9-
SILVERSTAR HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
4. INVENTORIES
Inventories consist of the following:
----------------------------------------------------------------------- ----------------------- --------------------
MARCH 31, 2001 JUNE 30, 2000
$ $
----------------------------------------------------------------------- ----------------------- --------------------
Finished goods 403,715 5,147,642
----------------------------------------------------------------------- ----------------------- --------------------
Work in progress - 358,890
----------------------------------------------------------------------- ----------------------- --------------------
Raw materials and ingredients - 2,701,284
----------------------------------------------------------------------- ----------------------- --------------------
Supplies - 1,179,041
----------------------------------------------------------------------- ----------------------- --------------------
403,715 9,386,857
======= =========
----------------------------------------------------------------------- ----------------------- --------------------
The Company sold substantially all of its June 30, 2000 inventories in
the Lifestyle sale. The inventories at March 31, 2001 relate to the
Fantasy Sports operations.
5. INVESTMENTS IN AFFILIATES
A summary of the impact of these investments on the consolidated
financial statements is presented below:
------------------------------------------------------------ ----------------- ---------------------- ------------------
EFFECTIVE MARCH 31, 2001 JUNE 30, 2000
PERCENTAGE $ $
OWNERSHIP
------------------------------------------------------------ ----------------- ---------------------- ------------------
Investments in and receivables from unconsolidated
affiliates
------------------------------------------------------------ ----------------- ---------------------- ------------------
HotelSupplyGroup. Com 51% - 183,134
------------------------------------------------------------ ----------------- ---------------------- ------------------
Magnolia Broadband 48% 979,519 1,076,338
------------------------------------------------------------ ----------------- ---------------------- ------------------
Advance to Magnolia Broadband 250,000 -
------------------------------------------------------------ ----------------- ---------------------- ------------------
Hall Lifestyle Products 50% - 24,463
------------------------------------------------------------ ----------------- ---------------------- ------------------
1,229,519 1,283,935
--------- ---------
------------------------------------------------------------ ----------------- ---------------------- ------------------
------------------------------------------------------------ ----------------- ---------------------- ------------------
NINE MONTHS NINE MONTHS
ENDED ENDED
Equity share of losses of unconsolidated affiliates: MARCH 31, 2001 MARCH 31, 2000
------------------------------------------------------------ ----------------- ---------------------- ------------------
HotelSupplyGroup. Com 51% (14,032) -
------------------------------------------------------------ ----------------- ---------------------- ------------------
Magnolia Broadband 48% (1,306,547) -
------------------------------------------------------------ ----------------- ---------------------- ------------------
(1,320,579) -
------------------------------------------------------------ ----------------- ---------------------- ------------------
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.
-10-
SILVERSTAR HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
6. DISCONTINUED OPERATIONS
FIRST LIFESTYLE HOLDINGS LIMITED ("LIFESTYLE")
The following summarizes the operating results of the Lifestyle
discontinued operation:
---------------------------------------------------------------------- ---------------- ----------------
NINE NINE
MONTHS MONTHS
ENDED ENDED
MARCH MARCH
31, 31,
2001 2000
RESTATED
$ $
---------------------------------------------------------------------- ---------------- ----------------
Revenue 28,819,495 73,809,914
---------------------------------------------------------------------- ---------------- ----------------
Operating income (1,506,371) 6,424,809
---------------------------------------------------------------------- ---------------- ----------------
Net income, net of minority interest of
$844,273 and $3,022,320 (2,554,492) 3,148,923
---------------------------------------------------------------------- ---------------- ----------------
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 nine months ended March 31, 2001
are for a four-month period.
LEISUREPLANET.COM ("LPI")
Due to the lack of investor appetite for loss making Internet businesses,
no further funding was available to fund the activities of LPI,
previously Leisureplanet Limited, the Internet travel related business.
On August 2, 2000 LPI was placed under voluntary administration in the
United Kingdom. Subsequent to this date, on August 31, 2000 the
administrator placed LPI into liquidation. The liabilities of LPI exceed
the assets and, where appropriate, provision has been made for any
liabilities, contingent or otherwise, which the Company may incur.
The following summarizes the operating results of the LPI segment:
---------------------------------------------------------------------- ---------------- ----------------
NINE NINE
MONTHS MONTHS
ENDED ENDED
MARCH MARCH
31, 31,
2001 2000
---------------------------------------------------------------------- ---------------- ----------------
Revenue - 67,892
---------------------------------------------------------------------- ---------------- ----------------
Operating loss - (15,243,571)
---------------------------------------------------------------------- ---------------- ----------------
Net loss, net of minority share of loss of $nil and $4,868,243 - (10,328,746)
---------------------------------------------------------------------- ---------------- ----------------
-11-
SILVERSTAR HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
7. EXTRAORDINARY ITEM
During the quarter ended March 31, 2001, in two separate transactions,
the Company purchased and retired $5,750,000 face value of the increasing
rate subordinated convertible for $5,750,000 plus accrued but not
accreted interest. During August 2000, the Company received an option to
retire up to an additional $5.95 million (face value) of the increasing
rate subordinated convertible debentures at face plus accrued but not
accreted interest. As a result of these retirements, the Company
recognized an extraordinary gain of $1.03 million of previously accrued
but unpaid accreted interest.
8. CASH FLOWS
The changes in assets and liabilities consist of the following:
---------------------------------------------------------------------- ---------------- ----------------
NINE NINE
MONTHS MONTHS
ENDED ENDED
MARCH MARCH
31, 31,
2001 2000
RESTATED
$ $
---------------------------------------------------------------------- ---------------- ----------------
CHANGES IN OPERATING ASSETS AND LIABILITIES, NET OF DISCONTINUED
OPERATIONS CONSISTS OF THE FOLLOWING:
---------------------------------------------------------------------- ---------------- ----------------
Increase in inventories (387,812) -
---------------------------------------------------------------------- ---------------- ----------------
(Increase)/decrease in prepaid expenses and other current assets (904,921) 1,747,442
---------------------------------------------------------------------- ---------------- ----------------
Increase/(decrease) in accounts payable and bank overdraft 264,488 (1,729,104)
---------------------------------------------------------------------- ---------------- ----------------
Increase/(decrease) in other provisions and accruals 329,219 (632,495)
---------------------------------------------------------------------- ---------------- ----------------
Increase in other taxes payable - 1,446
---------------------------------------------------------------------- ---------------- ----------------
Increase in income taxes payable - (1,220)
---------------------------------------------------------------------- ---------------- ----------------
(699,026) (613,931)
========= ---------
---------------------------------------------------------------------- ---------------- ----------------
NET CASH USED IN DISCONTINUED OPERATIONS CONSISTS OF THE FOLLOWING:
---------------------------------------------------------------------- ---------------- ----------------
Net income/(loss) of discontinued operations: (2,831,828) (7,179,823)
---------------------------------------------------------------------- ---------------- ----------------
Net gain on transactions with minorities - (4,943,020)
---------------------------------------------------------------------- ---------------- ----------------
Depreciation and amortization 950,388 4,148,716
---------------------------------------------------------------------- ---------------- ----------------
Minority share of (losses)/gains 844,273 (1,845,923)
---------------------------------------------------------------------- ---------------- ----------------
Equity in losses of affiliates 13,579 -
---------------------------------------------------------------------- ---------------- ----------------
Net loss on sale of assets 21,278 -
---------------------------------------------------------------------- ---------------- ----------------
Changes in assets and liabilities (405,840) (7,042,813)
---------------------------------------------------------------------- ---------------- ----------------
Movement in deferred income taxes 294,017 612,609
---------------------------------------------------------------------- ---------------- ----------------
Shares to be issued - 3,057,522
---------------------------------------------------------------------- ---------------- ----------------
(1,114,133) (13,192,732)
---------------------------------------------------------------------- ---------------- ----------------
-12-
SILVERSTAR HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
9. COMMITMENTS AND CONTINGENCIES
The Company has guaranteed the banking facilities of certain of its
former subsidiaries. These guarantees amount to $1,580,000 and expire
March 1, 2003.
The future minimum non-cancellable operating lease payments are not
material.
10. 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 March 31, 2001, 1,615,000 stock options and Warrants were outstanding
and an additional 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.
11. TREASURY STOCK
During the quarter ended March 31, 2001, the Company purchased 853,766
shares of Class A common stock. The Company paid an average of $0.85 per
share. The Company paid a low of $0.70 and a high of $1.01 per share. The
Company is cancelling the shares as it repurchases them
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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, businesses with strong
management teams that are positioned to use technology and Internet related
platforms to fuel above average growth.
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.
Company's management has ceased funding Hotelsupply Goup, Inc. As a result it
discontinued operations in April, 2001. No recovery is expected.
RESULTS OF OPERATIONS
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 MARCH 31, 2001 AS COMPARED TO QUARTER ENDED MARCH 31, 2000
REVENUES
Fantasy Sports generated revenues of $511,900 for the three months ended
March 31, 2001. Its revenues are seasonal (based on the NASCAR and
college football seasons) which stretch from mid February to the end of
November. Fantasy Sports collects its revenues at the beginning and mid
point of the NASCAR and beginning of the college football seasons.
Fantasy Sports defers the receipts and recognizes the revenues pro-rata
over the season. Fantasy Sports was acquired in November 2000. As such,
there are no revenues for the prior year period.
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QUARTER ENDED MARCH 31, 2001 AS COMPARED TO QUARTER ENDED MARCH 31, 2000
(CONTINUED)
COST OF SALES
Cost of sales increased from 0 for the three months ended March 31, 2000
to $404,107 for the comparable period in 2001. This increase was due to
the acquisition of Fantasy Sports. Fantasy Sports accrues certain
expenses that relate to the entire NASCAR and college football season
over the related season.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased to $1.29 million
from $0.46 million during the comparable period in 2000. This increase is
due to the inclusion of Fantasy Sports operations. Fantasy Sports' SG&A
expenses are seasonal with a marked increase in these expenses during the
first 3 months of the calendar year as the company actively promotes and
advertises its new games for the upcoming year.
AMORTIZATION OF INTANGIBLES
Amortization of intangibles increased from $0.07 million for the three
months ended March 31, 2000 to $0.11 million in the three months ended
March 31, 2001. This increase is primarily due to the amortization of
goodwill that arose on the investment in Fantasy Sports.
DEPRECIATION
The depreciation increased to $9,901 for the three months ended March 31,
2001 compared to $1,297 for the period ended March 31, 2000. The primary
reason for the increase in depreciation charge relates to the acquisition
of Fantasy Sports.
EQUITY IN LOSSES OF AFFILIATES
The Company acquired a 48% stake in Magnolia Broadband. This company is a
start-up venture, which has only incurred expenses to date. The charge of
$0.39 million represents the Company's equity accounted share of the
operating losses for the period and amortization of related goodwill.
INTEREST EXPENSE/INCOME
Interest income of $0.40 million represents interest earned on the cash
invested in interest bearing accounts and interest earned on notes
related to the divestiture of the Lifestyles businesses. Interest
expenses decreased to $0.13 million from $0.15 million during the prior
fiscal year. This decrease was primarily due to the retirement of
outstanding debt.
FOREIGN CURRENCY LOSS
Foreign currency loss of $0.98 million represents the loss realized on
the translation of the net assets of First South African Holdings (Pty)
Ltd (FSAH), the South African investment subsidiary offset by realized
currency hedging profits. Prior to June 30, 2000, these amounts were
treated as permanent advances to FSAH from the Company and the
translation gain or loss was recognized within stockholders' equity.
Since the divestiture of Lifestyle, the Company began recognizing
translation gains or losses on the exposure of net assets and liabilities
denominated in South African Rand, within its results of operations.
DISCONTINUED OPERATIONS
The prior year quarter included losses relating to LPI and Lifestyles.
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. Lifestyle was sold during the quarter
ended December 31, 2000, hence all losses were provided for in 2000.
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QUARTER ENDED MARCH 31, 2001 AS COMPARED TO QUARTER ENDED MARCH 31, 2000
(CONTINUED)
EXTRAORDINARY ITEM-GAIN ON EXTINGUISHMENT OF DEBT
The Company negotiated agreements with two lenders to retire $5.75
million of debentures at face plus accrued interest. As a result, the
Company recorded a gain on previously accrued sinking fund interest of
$1.03 million in the quarter ended March 31, 2001. No such transaction
occurred in the quarter ended March 31, 2000.
NET LOSS
As a result of the above, the Company had a loss of $.44 million in the
current quarter as compared to a loss of $4.57 million in the quarter
ended March 31, 2000.
NINE MONTHS ENDED MARCH 31, 2001 AS COMPARED TO NINE MONTHS ENDED MARCH 31, 2000
REVENUES
Fantasy Sports generated revenues of $511,900 for the three months ended
March 31, 2001. Its revenues are seasonal (based on the NASCAR and
college football seasons) which stretch from mid February to the end of
November. Fantasy Sports collects its revenues at the beginning and mid
point of the NASCAR and beginning of the college football seasons.
Fantasy Sports defers the receipts and recognizes the revenue pro-rata
over the season. Fantasy Sports was acquired in November 2000. As such,
there are no revenues for the prior year period.
COST OF SALES
Cost of sales increased from 0 for the three months ended March 31, 2000
to $404,107 for the comparable period in 2001. This increase was due to
the acquisition of Fantasy Sports. Fantasy Sports accrues certain
expenses that relate to the entire NASCAR and college football season
over the related season.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased to $2.2 million
for the nine months ended March 31, 2001 from $1.16 million during the
comparable period in 2000. This increase is due to the inclusion of
Fantasy Sports operation. Fantasy Sports' SG&A expenses are seasonal with
a marked increase in these expenses during the first 3 months of the
calendar year as the company actively promotes and advertises its new
games for the upcoming year.
AMORTIZATION OF INTANGIBLES
Amortization of intangibles increased from $0.18 million for the nine
months ended March 31, 2000 to $0.25 million in the nine months ended
March 31, 2001. This increase is primarily due to the amortization of
goodwill that arose on the investments in Fantasy Sports.
DEPRECIATION
The depreciation increased to $17,925 for the nine months ended March 31,
2001 compared to $4,366 for the period ended March 31, 2000. The primary
reason for the increase in depreciation charge relates to the acquisition
of Fantasy Sports.
EQUITY IN LOSSES OF AFFILIATES
The Company acquired a 48% stake in Magnolia Broadband, which has only
incurred expenses to date. The charge of $1.32 million represents the
Company's equity accounted share of their operating losses for the period
and amortization of goodwill.
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NINE MONTHS ENDED MARCH 31, 2001 AS COMPARED TO NINE MONTHS ENDED MARCH 31, 2000
(CONTINUED)
INTEREST EXPENSE/INCOME
Interest income of $1.27 million represents interest earned on the cash
invested in interest bearing accounts and interest earned on notes
related to the divestiture of the Lifestyles businesses. Interest
expenses decreased to $0.54 million from $1.13 million during the prior
fiscal year. This decrease was primarily due to the retirement of
outstanding debt.
FOREIGN CURRENCY LOSS
Foreign currency loss of $0.89 million represents the loss realized on
the translation of the net assets of First South African Holdings (Pty)
Ltd (FSAH), the South African investment subsidiary netted against
realized currency hedging profits. Prior to June 30, 2000, these amounts
were treated as permanent advances to FSAH from the Company and the
translation gain or loss was recognized within stockholders' equity.
Since the divestiture of Lifestyle, the Company began recognizing
translation gains or losses on the exposure of net assets and liabilities
denominated in South African Rand, within its results of operations.
DISCONTINUED OPERATIONS
The prior year period included losses relating to LPI and Lifestyles. 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
operations generated by Lifestyle relates primarily to translation losses
incurred prior to the final sale that resulted from declines in the South
African Rand.
GAIN ON EXTINGUISHMENT OF DEBT
The Company negotiated agreements with two lenders to retire $5.75 of
debentures at face plus accrued interest. As a result, the Company
recorded a gain on previously accrued sinking fund interest of $1.03
million in the nine months ended March 31, 2001. No such transaction
occurred in the nine months ended March 31, 2000.
NET LOSS
As a result of the above, the Company had losses of $5.31 million in the
nine months ended March 31, 2001 as compared to a loss of $9.61 million
during the nine months ended March 31, 2000.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Cash decreased by $17.66 million from $29.85 million to $12.20 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, repayments of debt
of $7.95 million the repurchase of stock of $.94 and other movements of
$6.63 million including exchange rate change effects on cash and the
funding of operations. 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).
The amount of debt outstanding at December 31, 2000 is comprised of $12
million face value of the 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 the increasing rate subordinated convertible debentures at face
plus accrued but not accreted interest. On January 22, 2001 and February
23, 2001, the Company paid $5.0 and $0.75 respectively to retire $5.75
million face value of these debentures. As a result of these retirements,
the Company recognized an extraordinary gain of $1.03 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 May, 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 March 31,
2001.
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The Company has recorded three notes as receivables (each denominated in
South African Rand) totaling $5.50 million at March 31, 2001. Since these
notes are denominated in South African Rand, they are subject to foreign
currency risk detailed below. These notes are all interest bearing.
Although management believes that these notes are fully collectible, one
of the notes, which was part of the consideration for the sale of
Lifestyle described above, was recorded net of its contingent
consideration of $2.64 million. The contingent portion is subject to
certain performance requirements of the obligee.
As of May 10, 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, 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 $3.45 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 March 31, 2001, 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. The Company does not currently hedge the currency risk. Every
1% decline in the Rand/US Dollar exchange rate will result in a $1,000
loss on a $100,000 investment in South Africa. Subsequent to the
quarter-end the Rand has depreciated against the US Dollar by
approximately 1.0% to May 13, 2000.
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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 March 31, 2001:
None.
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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 15, 2001
SILVERSTAR HOLDINGS, LTD.
/s/ Clive Kabatznik
--------------------------
Clive Kabatznik
Chief Executive Officer, President and
Chief Financial Officer
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