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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to ______________________
Commission file number 0-27494
LEISUREPLANET HOLDINGS, LTD.
(formerly known as First South Africa Corp., Ltd.)
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(Exact name of Registrant as specified in its charter)
Bermuda N/A
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Clarendon House, Church Street, Hamilton HM CX, Bermuda
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(Address of Principal Executive Offices with Zip Code)
Registrant's telephone number, including area code (441) 295-1422
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
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("Common Stock")
Class A Redeemable Warrants
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("Class A Warrants")
Class B Redeemable Warrants
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("Class B Warrants")
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K. [ ]
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates of the Registrant. The aggregate market value shall be
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such common equity, as of a specified date within 60
days prior to the date of filing. (See definition of affiliate in Rule 405, 17
CFR 230.405).
The aggregate market value of the Registrant's Common Stock held by
non-affiliates of the Registrant as of September 17, 1999, was $26,196,480.
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date.
As of September 17, 1999, there were 5,468,447 shares of the Registrant's Common
Stock outstanding and 946,589 shares of the Registrant's Class B Common Stock
outstanding.
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PART 1
ITEM 1. DESCRIPTION OF BUSINESS
We are the parent company of LPI Limited. LPI Limited is a provider of
international online travel services for leisure travelers. We are also the
parent company of First South African Holdings (Pty.) Ltd. which maintains a
majority interest in First Lifestyle Holdings. First Lifestyle Holdings is the
owner of the companies through which we conduct our lifestyle products business.
HISTORY
We were founded in September 1995 to pursue opportunities in South
Africa as an emerging market. We were originally organized to acquire, own and
operate seasoned, closely held companies in South Africa with annual sales in
the range of approximately $5 million to $50 million. Recently, we broadened our
focus to the Internet and e-commerce sectors through our acquisition in February
1999 of an 81% interest in LPI Limited, an international online travel services
company. We are currently engaged in the following industry segments:
o Internet and e-commerce travel services; and
o Lifestyle products.
DESCRIPTION OF OUR CORE INDUSTRY SEGMENTS
INTERNET AND E-COMMERCE TRAVEL SERVICES
Through LPI Limited, our international online travel services company,
we offer our consumers a comprehensive online leisure travel service, including
the ability to shop online for airline tickets, hotel rooms, car rentals and
cruises. We have established a database of over 10,000 independent hotels,
including 60,000 full color photographs of hotels, a series of travel guides
covering 186 destinations in electronic format and a multilingual customer call
center. Our proprietary technology and user-friendly interface enable customers
to easily and quickly access travel information seven days a week. We primarily
target our services to consumers outside of the United States; in particular in
Europe. We do so by offering our services to our customers in their own language
and by offering our users the opportunity to reserve hotel stays in independent
hotels such as owner operated hotels and inns rather than only hotels which
comprise a chain. We also offer users of our web sites in Europe a large volume
of airline fares that have been specially negotiated by our fulfillment partners
in Europe.
We operate our own multilingual web site at WWW.LEISUREPLANET.COM. In
addition, to broaden our online presence and to build brand recognition, we have
entered into various strategic relationships to provide a number of co-branded
web sites. In January 1999, we entered into a three-year agreement with Lycos
Bertelsmann GmbH, a European affiliate of Lycos. We serve as the exclusive
travel retailer within the Lycos Bertelsmann travel web guide in 14 major
European markets, including France, Germany, the United Kingdom, Italy, Sweden,
Norway, Denmark, Switzerland, Austria, Belgium, The Netherlands, Luxembourg,
Spain and Finland. Also, in February 1999, we entered into a two-year agreement
with a subsidiary of Yahoo! Inc., a leading search engine provider. We are
Yahoo!'s exclusive provider of airline flights, hotel reservations and car
rental bookings through a comprehensive list of airlines, hotels and car
rentals, to users in France and Germany of Yahoo!'s travel page and our
co-branded web site with Yahoo!. In addition, in June 1999, we entered into a
three-year agreement with InfoSpace.com, Inc., a leading aggregator of content
on the Internet. We serve as the exclusive integrated booking engine for hotel,
air travel, vacation and cruise packages, accessible through InfoSpace's web
sites.
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For fiscal year ended June 30, 1999, our online travel services
business had revenues of approximately $165,000 which accounted for
approximately 1% of our revenues. Our online travel services business had a loss
from operations of approximately $6.5 million for fiscal 1999.
INDUSTRY BACKGROUND
GROWTH OF THE INTERNET AND ONLINE COMMERCE. The Internet and commercial
online services are emerging as a significant global communications media
enabling millions of people to share information and conduct business
electronically. A number of factors have contributed to the growth of the
Internet and commercial online services usage. These factors include the large
and growing installed base of advanced personal computers in the home and
workplace; improvements in network infrastructure; easier, faster and cheaper
access to the Internet and commercial online services; the introduction of
alternative Internet access devices and increased awareness of the Internet; and
additional commercial online services among consumer and business users.
Computer Industry Almanac, Inc. estimates that the number of World Wide
Web users will grow from approximately 151 million in 1998 to approximately 319
million by 2000. The functionality and accessibility of the Internet and
commercial online services have made them an increasingly attractive commercial
medium by providing features that historically have been unavailable through
traditional channels. The Internet and commercial online services provide users
with convenient access to large volumes of dynamic data to support their
investment, purchase and other decisions. Online retailers are able to
communicate effectively with customers by providing frequent updates of featured
selections, content, pricing and visual presentations and provide tailored
services by capturing valuable data on customer tastes, preferences, shopping
and buying patterns. Online retailers are also able to utilize consumer buying
patterns to more effectively target their audience. Unlike most traditional
distribution channels, online retailers do not have the burden of managing and
maintaining numerous local sales facilities to provide their services on a
global scale. Because of these advantages, online retailers benefit from the
relatively low cost of reaching and electronically serving customers world wide
from a central location. As a result, an increasingly broad base of products and
services are being sold online, including books, brokerage services, computers
and music, as well as travel services. Boston Consulting Group estimates that
online retail revenues will grow from $14.9 billion in 1998 to $36 billion in
1999. Forrester Research estimates that online retail sales will reach $184
billion by 2004. Forrester Research also estimates that online travel revenues
will exceed $29 billion by 2003, representing 12% of total industry revenue.
Moreover, as the number of online content, commerce and service
providers has expanded, strong brand recognition and strategic alliances have
become critical to the success of such providers. Brand development is
especially important for online retailers due to the need to establish trust and
loyalty among consumers in the absence of face-to-face interaction.
THE TRADITIONAL TRAVEL INDUSTRY. The travel industry is large and
growing. Historically, airlines, hotels, rental car agencies, cruise lines and
vacation packagers have relied on internal sales departments and travel agencies
as their primary distribution channels. The traditional travel agency channel is
highly fragmented, with few nationally recognized brands. According to American
Society of Travel Agents, there are over 23,000 travel agencies operating in
more than 33,000 locations in the United States alone, with the average travel
agency generating less than $3 million in annual gross bookings per location.
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Travel agents are compensated primarily through commissions paid by
travel suppliers on services booked. Some travel agencies also charge service
fees to their customers. Traditionally, standard retail base commission rates
paid by travel suppliers to travel agents have been 7% - 10% for airline
tickets, 10% for hotel reservations and car rentals, and 10% to 15% for cruises
and vacation packages. In addition, travel agencies can earn significant
performance-based incentive compensation from travel suppliers that can
substantially impact financial performance. These commission rates and override
commissions are determined by travel suppliers and are subject to frequent
change. In recent years, commission capping has led to a reduction in average
commission rates.
Travel agencies typically book reservations by telephone and fax and
through electronic global distribution services, often referred to as GDS
systems. Two such GDS systems are Galileo International's Apollo system and
SABRE Group Holdings Inc.'s SABRE system. The GDS systems provide real-time
access to voluminous data on fares, availability and other travel information.
The GDS data is constantly changing, with as many as one million airfare changes
being made daily. Customers traditionally have relied on travel agents to access
and interpret such rapidly changing information via complex and proprietary
interfaces to GDS systems. As a result, the ability of customers to obtain the
most favorable schedules and fares has been subject to the skill and experience
of individual travel agents, whose availability may be limited, as well as the
commission offered to travel agents.
THE ONLINE TRAVEL OPPORTUNITY. The online travel opportunity is created
by the trends to drive distribution costs lower in the traditional travel
industry combined with a need for a more effective and efficient means of
purchasing and distributing travel services to address the needs of consumers.
The online market benefits from this drive to lower costs. In addition, at a
time when many traditional travel agencies may be experiencing pressure to
reduce levels of service as a result of recent reductions in commission rates,
many customers are demanding greater convenience and flexibility in how, where
and when they shop for travel services. Customers are also demanding more
control over their travel decisions, including the opportunity to compare prices
and products and review availability. In an effort to reduce their distribution
costs and develop more direct relationships with their customers, travel
suppliers seek ways to distribute their services outside of the traditional
travel agency channel. The Internet provides this and, as a result of these
trends, the Internet and commercial online services have emerged as an
attractive medium through which travel services can be purchased.
According to Jupiter Communications, online travel bookings will grow
from $4.2 billion in 1999 to over $16.6 billion in 2003. The Travel Industry
Association of America estimates that online travel revenues will grow from $827
million in 1997 to $9 billion in 2002. The interactive nature of the online
medium enables consumers to use reservation engines which automate the
processing and confirmation of travel reservations. We believe that this has
increased the consumers' control over the process by providing them with
additional choices, resulting in better service.
The online medium also provides travel suppliers with an effective
advertising and promotional vehicle. Forrester Research estimates that online
advertising will grow to $33 billion by 2004, with approximately $22 billion
spent in the United States and $5.5 billion spent in Europe. According to the
Travel Industry Association of America, online advertising on travel web sites
will grow from $2 million in 1996 to $282 million in 2002.
THE EUROPEAN TRAVEL OPPORTUNITY. The Internet and commercial online
services, including travel services, are emerging rapidly in Europe. According
to IDC Research, there were an estimated 44 million Internet users in Europe in
September 1999. IDC Research also predicts that the online population of Europe
will overtake that of the United States for the first time in 2003. In addition,
according to Computer Industry
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Almanac, there will be 102 million Internet users in Europe by 2000. Also,
according to Datamonitor, online travel spending in Europe is expected to grow
from $7.7 million in 1997 to $1.7 billion by 2002.
Our unique hotel inventory includes a database of over 13,000
independent hotels outside of the GDS systems. We believe that European leisure
travelers prefer independent hotels over chain hotels since, according to
Worldspan, approximately 30% of all hotels in the GDS system are European based
hotels, while over 50% of all hotels in the GDS systems are hotels based in the
United States. In addition, according to Worldspan, approximately 10% of the
hotels in Spain, and approximately 27% of the hotels in France, two of the
largest inbound destination markets in Europe, are included in the GDS systems.
LEISUREPLANET SOLUTION
As consumer spending on online travel services grows in the coming
years, we believe that we are uniquely positioned to satisfy an international
market of consumers who desire a wide selection of travel destinations and
services combined with informative travel content. We intend to include in our
travel service offerings a comprehensive mix of travel products, associated
merchandise, services and content, all brought to our customers in their own
language in a personalized travel community web environment. For example, we
offer our customers the opportunity to reserve hotel stays in independent
hotels, owner operated hotels and inns with an average of 50 beds rather than
only hotels which comprise a chain. Both online and offline travel services
typically book hotel reservations through GDS systems, which typically offer
hotel stays in chain hotels rather than independent hotels. We have established
an inventory of over 10,000 independent hotels where our customers can book
reservations. Also, unlike other online travel service providers, we offer a
large number of airline fares, particularly fares outside North America, that
cannot be found in GDS systems.
BENEFITS TO CUSTOMERS.
EXPANSIVE INVENTORY. As with other travel services, we have complete
access to air, hotel and auto rental information published on the GDS systems.
We distinguish ourselves from other online and offline travel services by adding
a huge selection of inventory outside of the GDS systems, including air, hotel
and cruise information. Our hotel inventory is our most extensive non-GDS
inventory. It currently includes over 10,000 independent hotels with whom we
have contractual relationships to sell reservations and display their content on
our web sites. We also intend to add non-GDS package vacations in the future.
The package vacations will be targeted to the travel needs of the consumers in
each of the markets in which we operate.
EXTENSIVE PHOTO LIBRARY. Most of the over 10,000 independent hotels who
provide us with inventory also provide us with a series of full color photos of
their premises, including their rooms, which are available for viewing on our
web sites. We also display photos of over 3,000 of our GDS hotels. Our full
color photo library currently contains over 60,000 images of our various hotels.
MULTILINGUAL SERVICES. European customers will benefit from our travel
services since our travel services are offered on a variety of web sites in
local languages. For example, our travel services are currently deployed through
Lycos in local languages in France, Germany and the United Kingdom, and will be
similarly deployed in the future in local languages in Sweden, Norway, Denmark,
Switzerland, Austria, Belgium, The Netherlands, Luxembourg, Spain and Finland.
Our travel services are also deployed through Yahoo! in local languages in
France and Germany and our own web site at LEISUREPLANET.COM in English, French
and German.
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CUSTOMER CALL CENTER. Our customer call center assists our customers in
using our web sites and accessing our travel services 7 days a week. Our call
center is staffed by multilingual customer service agents. In addition, our call
center offers an alternative for completing transactions for customers who
prefer to purchase travel services over the telephone.
FULFILLMENT PARTNERS. We currently have relationships with fulfillment
partners in the United States with Uniglobe Travel Online, Australia with
Concorde International, South Africa with Experts in Travel, France with
Reductour, Germany with Aeroworld GmbH, the United Kingdom with Major Travel,
and Italy with Travel United. As we expand our customer base into additional
markets, we plan to establish relationships with fulfillment partners in these
markets as well. By establishing relationships in all of the markets we serve,
we believe we will be able to obtain lower rates as a result of the size and
negotiating position that each of our fulfillment partners has in each of their
respective markets.
EXTENSIVE TRAVEL GUIDES. We offer our guests an extensive travel guide
resource covering 186 international travel destinations, including 125
countries, and all states of the United States and Canada. Eighty of our travel
guides have been translated in English, French, German, Italian, Spanish and
Dutch, and the English, French and German guides are currently available through
our web sites. We intend to offer our travel guides in local languages in all of
the markets we serve. In addition to maps, history and a variety of other travel
information, our guests are also offered a unique slide show for many of the
destinations in our travel guides.
BENEFITS TO HOTELS.
ACCESS TO CUSTOMERS. We offer our independent hotels an opportunity to
market their business to a large, global customer base at no cost. These hotels
have, in the past, missed out on a large part of the leisure travel market
because of their non-affiliation with a GDS system.
BRAND RECOGNITION. Due to the high cost associated with traditional
advertising and their non-affiliation with a GDS system, most of our independent
hotels have struggled with brand recognition and customer awareness in the past.
Our web sites allow our independent hotels to market their facilities and make
full color photos of their facilities available to leisure travelers 24 hours a
day, 7 days a week at the click of a button, all at no cost to the hotel.
RESERVATION PROCESSING SYSTEM. Through our web sites and customer call
center we offer a full service reservation processing system to our independent
hotels.
BENEFITS TO AIRLINES AND AUTO RENTALS
ACCESS TO CUSTOMERS. We offer airlines and auto rentals an additional
platform to access customers. Our access to an international audience makes us a
valuable partner for these suppliers.
LEISUREPLANET STRATEGY
Our objective is to become the leading international online leisure
travel service provider by offering our customers a unique combination of travel
services. The principal elements of our business strategy are to:
EXPAND STRATEGIC RELATIONSHIPS TO ATTRACT NEW CUSTOMERS. We intend to
continue to leverage our strategic relationships with Yahoo!, Lycos and
InfoSpace and seek other strategic relationships with other major
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multinational Internet portals to attract additional customers to our web sites.
We also intend to seek other strategic relationships with national Internet
portals in selected markets.
AGGRESSIVELY DEVELOP BRAND. Our strategy is to promote the value of our
brand through high quality customer service, active marketing and promotional
programs. We intend to broaden our online visibility and expand our customer
base by purchasing inexpensive online banner advertisements on high traffic web
sites and offline advertising in a variety of mediums. We believe that strong
brand recognition is increasingly important in online commerce to attract
customers and promote consumer trust and loyalty in the absence of face to face
relationships.
EXPAND INDEPENDENT HOTEL RELATIONSHIPS AND OTHER OFFERINGS. We plan to
strengthen and expand the number of hotels in our independent hotel database and
to broaden our online travel offerings to include more destinations, cruises and
other travel packages, including last minute travel packages. We also intend to
add to our library of over 60,000 full color photo images of hotels displayed on
our web sites and add to our extensive travel guide resource by adding other
travel related content such as licensed city guides.
INVEST IN LEADING TECHNOLOGY. We intend to continue to invest in the
implementation of technology driven enhancements to our web sites, with the goal
of making our customer's visit easy, intuitive and as pleasant as possible. We
also intend to invest in enhancing our transaction processing systems and our
customer call center.
PURSUE INCREMENTAL REVENUE OPPORTUNITIES. We plan to offer additional
travel services and products to meet our customers' needs at each stage of the
leisure travel process, such as travel insurance, travel financing services and
travel-related merchandise. We also plan to aggressively pursue media sales to
targeted advertisers based on increased traffic to our web sites.
LEISUREPLANET ONLINE SERVICE
Visitors to our web sites can access our vast inventory of travel
services, including airlines, hotels, car rentals and cruises. To access our
inventory of travel services, each customer registers by providing basic
information such as name, street address, e-mail address and telephone number.
This information is stored in our database and is used solely by us to
complement and facilitate our travel services. By registering with us, our
customers can quickly access our reservation system on subsequent visits. Our
registered visitors then enter their travel itinerary or other travel
information, including their profile which holds information such as preferred
seat class for air travel and frequent flyer number. Our search engine will then
display a range of options for the visitor to compare. Through our travel
guides, visitors can review detailed information about desired destination
markets, including maps, historical and sight-seeing information and other
travel related information. Through our customer call center, we answer customer
questions and assist in finding the best travel value for our customers' needs.
Customers can either complete travel purchases in a few easy steps online
through one of our web sites, or call our customer call center for assistance
and information in completing a travel purchase offline.
THE LEISUREPLANET BOOKING PROCESS. Our travel inventory includes our
own inventory of over 10,000 independent hotels and access to a the Worldspan
global distribution service, or GDS system. Access to Worldspan through our web
sites provides our users with access to 650 major international airlines, 30,000
major hotels and all major rental car companies. Once a visitor initiates a
search for a flight reservation, our search engine reviews our GDS and, at our
European web sites, our private fares inventory to locate the best prices
possible for the desired travel. User friendly presentation of available options
that meet the customer's requests
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allow easy comparison shopping. To complete a purchase, customers select the air
reservation of their choice and supply credit card information. Once the order
is submitted, the customer receives instant online confirmation that travel has
been booked and a subsequent e-mail to verify the transaction. Fulfillment is
completed with printed tickets sent to the customer according to the customer's
fulfillment needs, which may include overnight delivery. The process for
purchasing hotel and car rental reservations is similar, although it currently
does not have the capability to search for low fares. When a customer makes a
request for a reservation at one of our independent hotels, the request is sent
automatically by facsimile or e-mail to the hotel to determine availability.
Once the hotel confirms availability, the customer is informed by e-mail and is
offered the opportunity to return to our site and complete the transaction by
submitting credit card details. After we receive the customer's credit card
information, the transaction is confirmed to the customer on-line and by e-mail.
In addition to accessing our inventory of travel services, our
customers can use the following travel services to make better informed travel
purchase decisions:
o HOTEL CONTENT. In addition to rates and availability,
we provide in-depth content on the hotels featured on
our web sites, including over 60,000 full color
pictures of properties and rooms covering our
database of over 10,000 independent hotels and 3,000
GDS hotels, offering our users the chance to look
before they buy.
o TRAVEL GUIDES. We provide our users the opportunity
to review our value-added travel guides. Our travel
guides cover 186 international travel destinations,
including 125 countries and all the states of the
United States and Canada. In addition to maps,
history and a variety of other travel information,
our guests are also offered a unique slide show for
many of the destinations in our travel guides.
o WORLD EVENTS CALENDAR. Our world events calendar
informs our visitors of major leisure events in
various destinations throughout the world and offers
our customers quick access to hotel reservations in
those destinations and our travel guide for those
destinations.
o CURRENCY CONVERTER. Ourcurrency converter covers most
major currencies in the world and informs our
visitors of what to expect when exchanging their
local currency for that of their destination.
o VACATION IDEAS. We are currently developing a library
of vacation ideas which we intend to make available
through our web sites.
o TRAVEL PRODUCT REVIEWS. We are currently developing
a system of rating of destinations and travel
products. We intend to make this system, which will
be based on our customers' experiences, available
through our web sites.
STRATEGIC RELATIONSHIPS
We pursue strategic relationships to increase our access to online
customers, to build brand recognition and to expand our online presence. To
date, we have established the following alliances, among others, for
distribution and product enhancement:
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LYCOS-BERTELSMANN. In January 1999, we entered into an agreement with
Lycos-Bertelsmann, a leading search engine provider in Europe. The agreement is
for a three year term and provides that Lycos and LPI Limited will form a
co-branded version of the LEISUREPLANET.COM web site accessible to users of
various Lycos web sites in Europe. The co-branded site will be promoted
throughout the Lycos web sites. The co-branded site will be deployed on local
Lycos services in the following countries in the languages specified: France
(French), Germany (German), United Kingdom (English), Italy (Italian), Sweden
(Swedish), Norway (Norwegian), Denmark (Danish), Switzerland (German), Austria
(German), Belgium (Dutch and French), The Netherlands (Dutch), Luxembourg
(German and French), Spain (Spanish) and Finland (Finnish). Lycos has agreed to
deliver a minimum number of impressions and banners to promote the co-branded
site.
YAHOO! (DEUTSCHLAND) GMBH AND YAHOO! FRANCE SARL. In February 1999, we
entered into an agreement with Yahoo! (Deutschland) GmbH and Yahoo! France SARL,
leading search engine providers in Germany and France, respectively. The
agreement is for a two year term and provides that Yahoo! and LPI Limited will
form a co-branded version of the LEISUREPLANET.COM web site accessible to users
of the Yahoo! web sites in Germany and France, respectively. The co-branded site
will be promoted through the Yahoo! web sites. The co-branded site will be
deployed on local Yahoo! services in France (in French) and Germany (in German).
Under the agreement, we obtained the right to bid for similar services in
selected European countries, including Spain and Italy. Yahoo! has agreed to
deliver a minimum number of page views and banner advertisements to promote the
co-branded site.
INFOSPACE. In June 1999, we entered into an agreement with
InfoSpace.com, an aggregator of content, including yellow pages, white pages,
maps and classified advertisements, on the Internet. The agreement is for a
three year term and provides that InfoSpace can post promotional banners on its
web site INFOSPACE.COM with links to LEISUREPLANET.COM. InfoSpace agreed to
deliver a minimum number of click-throughs to LEISUREPLANET.COM for each year.
InfoSpace has also agreed to launch a travel service on its home page
incorporating LEISUREPLANET.COM travel content and travel engines, as well as
integrate our travel engine into various aspects of InfoSpace's content.
NOMADE. In June 1999, we entered into an agreement with Nomade, a
leading French portal. The agreement is for a one year term and provides that
Nomade will provide a minimum number of LEISUREPLANET.COM promotional buttons
and banners on its web site and will provide a minimum number of click throughs
to LEISUREPLANET.COM.
M-WEB HOLDINGS LIMITED. In June 1998, we entered into an agreement with
M-Web Holdings Limited, an entity which operates a leading web site in South
Africa. Pursuant to the agreement, we granted M-Web a conditionally exclusive
license to link a co-branded travel services web site incorporating
LEISUREPLANET.COM content to M-Web's web site. For as long as the co-branded
site enjoys certain agreed upon page views and user sessions per month and M-Web
operates the premier family of web sites in South Africa, we agreed not to grant
a similar license to any other South African based web site operator that
targets primarily South African users.
FULFILLMENT PARTNERS. We have entered into agreements with fulfillment
partners in the United States, Australia, South Africa, France, Germany, the
United Kingdom and Italy. Our agreements with our fulfillment partners afford us
with favorable airline fares and holiday packages, as well as fulfillment
services to our customers. Fulfillment services include the processing and
issuance of tickets and other travel documents, handling of customer phone calls
and other correspondence, and collection of commissions.
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There can be no assurance that we will achieve sufficient online
traffic, travel bookings or commissions to realize economies of scale that
justify our significant fixed financial obligations to Yahoo!, Lycos, InfoSpace
and Nomade. There also can be no assurance that we will be able to satisfy the
minimum level of travel service bookings required to maintain certain of our
fulfillment partner agreements. Failure of any of the foregoing will have a
material adverse effect on our business, operating results and financial
condition.
We are aggressively pursuing other strategic relationships for both
distribution, marketing and content that could generate additional significant
financial obligations over the next several years. There can be no assurance
that we will be successful in establishing such additional strategic
relationships.
MARKETING AND SALES
Our marketing strategy is to attract new customers, develop our brand
name and develop loyalty programs to better serve and satisfy our customers. Our
sales strategy is focused in part on generating other revenues from sales of
travel related products and services to our independent hotels and customers and
on generating advertising and promotional revenue from sponsors who seek a
cost-effective way to reach a travel- oriented audience online.
We also employ a variety of traditional media programs and promotional
activities to enhance the effectiveness of our marketing initiatives:
o STRATEGIC RELATIONSHIPS. To broaden our online presence and
build brand recognition, we have entered into strategic
relationships to provide co-branded web sites with leading
Internet portals Yahoo!, Lycos, and Nomade, and with leading
Internet content aggregator, InfoSpace.
o ADVERTISING. We intend to supplement our strategic
relationships with Yahoo!, Lycos, InfoSpace and Nomade by
entering into additional relationship with other Internet
portals as well as investing in online advertising to drive
traffic to our web sites. By purchasing low cost
advertisements on high traffic sites, we will seek to
cost-effectively generate traffic to our web sites. We may
also advertise from time to time in traditional media such as
television, print and broadcast to increase the awareness of
our travel services.
o CO-MARKETING/PROMOTIONS. We intend to establish a number of
co-marketing relationships to promote our travel services and
to sponsor contests that offer travel related prizes,
including online auctions and other sponsored events. These
programs will necessarily involve participation with airlines,
hotels, car rental agencies and other online service
providers.
o LOYALTY AWARDS. We intend to offer various incentives and
awards to our customer base. These incentives are designed to
increase customer loyalty and brand awareness.
o ONLINE TRAVEL RELATED AND ADVERTISING SALES. As the number of
independent hotels on our web sites increases, we intend to
offer our independent hotels a variety of options, including
the ability to upgrade their content and advertise for a fee.
We also intend to offer our customers an assortment of travel
related products and services such as travel insurance, travel
financing and travel supplies. We also believe that the sale
of online advertising will become an increasingly important
source of revenue. Accordingly, we intend to increase our
investment
-11-
in advertising sales that target key advertisers who seek to
reach a travel oriented online audience. Client advertisements
can be incorporated into our online sites in the form of
banners, links and buttons that encourage viewers to click
through for additional information. In addition, we can
develop extensive editorial and marketing content to support
the various marketing initiatives of sponsors.
COMPETITION
The online travel services market is new, rapidly evolving and
intensely competitive, and we expect such competition to intensify in the
future. We currently compete primarily with traditional travel agencies and
online travel reservation services. In the online travel services market, we
compete with other entities that maintain online travel web sites, such as
Expedia, which is operated by Microsoft Corporation, Travelocity, which is
operated by SABRE Group Holdings Inc., a majority owned subsidiary of American
Airlines, PreviewTravel, TravelWeb, which is operated by Pegasus, and Internet
Travel Network.
In the United States, over 75% of online travel commerce is represented
by Expedia, Travelocity, Preview Travel and Internet Travel Network. This
consolidation presents a significant barrier to entry. In the United Kingdom,
Expedia, Travelocity and LASTMINUTE.COM represent our major competitors. In
Germany, Expedia represents our major competitor. Except for the foregoing, our
competition for online travel commerce in Europe is currently limited. However,
many of our other competitors in the United States may increase their efforts in
the international markets. In addition, the leading traditional travel agencies,
such as American Express Travel Related Services Co. Inc., Uniglobe Travel and
Carlson Wagonlit Travel, may in the future establish commercial web sites
offering online travel services. Some of these existing and potential
competitors have significantly greater financial, technical and marketing
resources than we do. We cannot assure you that we will be able to compete
effectively.
In addition to the traditional travel agency, most travel suppliers
also sell their services directly to customers, including by telephone and their
own web sites. Selling their services directly eliminates the need of the travel
suppliers to pay commissions to third parties. As the market for online travel
services grows, we believe that the range of companies involved in the online
travel services industry, including travel suppliers, traditional travel
agencies and travel industry information providers, will increase; with each
offering services that compete with our services.
We believe that the success of companies entering the online travel
services business will be based on the following competitive factors: broad
distribution, quality and exclusivity of content, technological sophistication
and brand awareness. If we fail to establish these competitive factors quickly,
competitors may prevent us from obtaining a leading market share, which would
adversely affect our business. Therefore, we intend to deploy significant
resources and pursue an aggressive implementation of these factors. However, we
cannot assure that we will be able to capture or maintain sufficient market
share in the face of increasing competition.
TECHNOLOGY
Our operations include a multilingual call center facility, a customer
service unit, two electronic publishing units, an information system support
unit, a web site development unit, a hotel recruitment center, and a local
travel agency partner network providing fulfillment services. These operations
utilize a sophisticated infrastructure, including a scalable high capacity web
server infrastructure.
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We provide 24 hour continuous access to our online travel services.
Continuous access is maintained through constant automated server polling and by
ensuring that users are routed to optimal services. We maintain back-up ISDN
lines should parts of the network fail.
We seek to ensure server security, as well as protect user information,
other vital information resources and server infrastructure through the location
of web server farms in secure server rooms and the deployment of sophisticated
firewall software.
PROPRIETARY RIGHTS
We regard our copyrights, service marks, trademarks, trade dress, trade
secrets and similar intellectual property as critical to our success, and rely
on trademark and copyright law, trade secret protection and confidentiality
and/or license agreements with our employees, customers, partners and others to
protect our proprietary rights. We pursue the registration of certain of our key
trademarks and service marks in the United States and internationally. Effective
trademark, service mark, copyright and trade secret protection may not be
available in every country in which our products and services are made available
online. We have licensed in the past, and expect that we may license in the
future, certain of our proprietary rights, such as trademarks or copyrighted
material, to third parties. While we attempt to ensure that the quality of our
brand is maintained by such licensees, there can be no assurance that such
licensees will not take actions that might materially adversely affect the value
of our proprietary rights or reputation, which could have a material adverse
effect on our business, operating results and financial condition. There can be
no assurance that the steps taken by us to protect our proprietary rights will
be adequate or that third parties will not infringe or misappropriate our
copyrights, trademarks, or similar proprietary rights. In addition, there can be
no assurance that other parties will not assert infringement claims against us.
We may be subject to legal proceedings and claims from time to time in the
ordinary course of our business, including claims of alleged infringement of the
trademarks and other intellectual property rights of third parties by us and our
licensees. Such claims, even if not meritorious, could result in the expenditure
of significant financial and managerial resources.
We also intend to continue to strategically license certain content for
our online sites from third parties, including content which is integrated with
internally developed content and used on the online sites to provide key
services. There can be no assurance that these third party content licenses will
be available to us on commercially reasonable terms or that we will be able to
successfully integrate such third party content. Such content licenses may
expose us to increased risks, including risks associated with the assimilation
of new content, the diversion of resources from the development of our content,
the inability to generate revenues from new content sufficient to offset
associated acquisition costs and the maintenance of uniform, appealing content.
The inability to obtain any of these licenses could result in delays in site
development or services until equivalent content can be identified, licensed and
integrated. Any such delays in site development or services could have a
material adverse effect on our business, operating results and financial
condition.
GOVERNMENT REGULATION
We are subject to various United States and foreign laws and
regulations relating to our online travel services business, including United
States Department of Transportation regulations prohibiting unfair and deceptive
practices. Few laws or regulations are currently, direct applicable to access to
the Internet. However, because of the Internet's popularity and increasing use,
new laws and regulations may be adopted. Such laws and regulations may be issued
such as:
-13-
o user privacy;
o pricing;
o content;
o copyrights;
o distribution; and
o characteristics and quality of products and services.
In addition, the growth of the Internet and electronic commerce,
coupled with publicity regarding Internet fraud, may lead to the enactment of
more stringent consumer protection laws. These laws may impose additional
burdens on our online travel services business. The enactment of any additional
laws or regulations may impede the growth of the Internet, which could decrease
our potential revenues from electronic commerce or otherwise adversely affect
our business, financial condition and operating results.
OUR SOUTH AFRICAN LIFESTYLE PRODUCTS OPERATIONS
Our lifestyle products operations consists of nine companies which
operate as wholly owned subsidiaries of First Lifestyle Holdings, a publicly
traded company on the Johannesburg, South Africa Stock Exchange. We own
approximately 51.5% of First Lifestyle Holdings. Of our nine lifestyle products
companies, five are engaged in the manufacture of specialty foods, and four are
engaged in the manufacture and distribution of a wide variety of indoor and
outdoor consumer products.
Piemans Pantry, Gull Foods, Seemanns Meat Products, Astoria Bakery and
Fifers Bakery are engaged in the manufacture of a variety of specialty foods.
Each of our specialty foods companies is characterized by a focus on providing
food products to the upper end of the market, with a significant emphasis on
quality. We sell to South Africa's leading supermarkets and retail chains, a
number of fast food franchises as well as independent bakeries and convenience
stores. Piemans Pantry manufactures, sells and distributes quality meat,
vegetarian and fruit pies, both in the baked and frozen, unbaked form. Gull
Foods manufactures and sells a wide range of prepared food products. Gull's
product line includes over 150 products ranging from hamburger patties, prepared
sandwiches, salads, prepared pastas, pizzas, and flavored breads. Seemanns
manufactures, sells, and distributes a wide range of processed meat products
including products typically found in retail butcheries, as well as high margin
processed and smoked meat products. Astoria Bakery manufactures, sells and
distributes high margin specialty breads such as special rye breads from its
bakery in Randburg, South Africa. In addition, Astoria Bakery Lesotho
manufactures, sells and distributes staple bread to the Lesotho market, from its
bakers in Maseru, the capital of Lesotho. Fifers Bakery manufactures and
distributes high quality long life baked confectionary products and filo pastry.
SA Leisure, Republic Umbrella, Galactex and Tradewinds Parasol are
engaged in the manufacture and distribution of a variety of indoor and outdoor
consumer products. Each of our indoor and outdoor consumer products companies is
characterized by a focus on providing a broad spectrum of products to the South
African retail market, with an increasing emphasis on exports as well. We sell
to South Africa's leading retail chains. SA Leisure manufactures a wide range of
injection molded consumer items. SA Leisure's product line includes over 100
products ranging from injection molded household products such as containers,
waste and laundry baskets, garden chairs and tables, do-it-yourself tool kits
and luggage, as well as a range of office shelving and filing systems. Republic
Umbrella specializes in the assembly and distribution of a wide variety of
umbrellas and other related outdoor products. Republic Umbrella is the largest
distributor of SA Leisure products. Galactex Outdoor is the largest broad range
distributor of barbecues and barbecue accessories in South Africa, and is the
exclusive Southern Africa distributor of Weber-Stephen barbeque products. The
distribution agreement with
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Weber was entered into in 1984 and has been renewed until December 1999.
Tradewinds Parasol is South Africa's leading manufacturer of large outdoor
wooden parasols. Tradewinds Parasol is an export oriented producer and has
established an international reputation as a leading manufacturer of
high-quality canvas and wooden parasols.
We source our raw materials and products for all of our lifestyle
products businesses from both local and foreign suppliers. We have adequate
alternative suppliers and to date have had no difficulty obtaining adequate
supplies of all our requirements. Our specialty foods business is slightly
stronger in the months of July through October as well as December. However,
these increases are not significant enough to make it a seasonal business. Our
indoor and outdoor consumer products business is seasonal, with business
increasing significantly from September to January paralleling the South African
summer.
During fiscal year ended June 30, 1999, the following customers
accounted for approximately the following percentage of our sales revenue:
Woolworths, 15%; Pick n Pay, 11.5%; and Massmart, 10%. Our lifestyle products
businesses had revenues of approximately $84.9 million which accounted for
approximately 99% of our revenues for fiscal year ended June 30, 1999. Our
lifestyle products business had income from operations of approximately $7.7
million for fiscal 1999.
During fiscal year ended June 30, 1999, we decided to focus our
operations on our newly acquired online travel services business and our
lifestyle products businesses. In order to accomplish the foregoing, we have
disposed of or closed our operations in our industrial products and packaging
businesses, including L.S. Pressings, Europair and First Strut in the industrial
products business, and Starpak, Pacmatic and Pacforce in the packaging business.
GOVERNMENT REGULATION
Our South African specialty food and lifestyle product business
operations are subject to a number of laws and regulations governing the use and
disposition of hazardous substances, air and water pollution and other
activities that effect the environment. Our management believes that each of our
subsidiaries is in substantial compliance with applicable South African law and
regulations and that no violation of any such law or regulation has occurred
which would have a material adverse effect on our financial condition.
EMPLOYEES
In addition to our President, Clive Kabatznik, who devotes
substantially all of his business time to our various businesses, Leisureplanet
Holdings, Ltd. has only one full-time salaried employee. Our subsidiary, First
South African Holdings (Pty.) Ltd. has only three full-time salaried employees.
Our operating subsidiaries currently employ approximately 2,300 people. We
intend to add employees as necessary to meet management and other requirements
from time to time.
Our success will depend on our ability to attract and retain highly
qualified employees. We provide performance based and equity based compensation
programs to reward and motivate significant contributors among our employees.
Competition for qualified personnel in the industry is intense. There can be no
assurance that our current and planned staffing will be adequate to support our
future operations or that management will be able to hire, train, retain,
motivate, and manage required personnel. Although none of our employees is
represented by a labor union, there can be no assurance that our employees will
not join or form a labor union. We have not experienced any work stoppages and
consider our relations with our employees to be good.
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ITEM 2. PROPERTIES
Our principal executive offices are located at Clarendon House, Church
Street, Hamilton, HM CX, Bermuda, which space is made available to us pursuant
to a corporate services agreement entered into with a corporate services company
in Bermuda. The principal executive offices of First South African Holdings
(Pty.) Ltd. are located in the facilities of Galactex in South Africa.
LPI Limited, our online travel services subsidiary, has two offices,
one in Cape Town, South Africa and one in Hassrode, Belgium. Our web servers are
located in Atlanta, Georgia and Hassrode, Belgium. Our lease in Cape Town covers
10,000 square feet, costs approximately $120,000 annually and expires in October
2004. Our lease in Hassrode, Belgium covers approximately 17,750 square feet,
costs approximately $230,000 annually and expires in April 2009.
Piemans Pantry operates from premises and facilities that it owns in
Krugersdorp, South Africa. The facility has two floors with a total size of
38,000 square feet.
Astoria Bakery leases approximately 20,000 square feet of space in
Randburg, South Africa for which it pays an annual rent of approximately
$100,000 pursuant to a lease expiring in 2006.
Seemanns Meat Products operates from premises and facilities that it
owns in Randburg, South Africa. These premises include a retail outlet and
comprise approximately 44,000 square feet.
Gull Foods operates from premises and facilities that it rents in
Bronkhorstspruit, South Africa. Such premises include approximately 52,000
square feet of space. Rental cost is approximately $62,000 per annum with a
lease term of five years expiring in June 2003.
Fifers Bakery leases approximately 18,840 square feet in Isando, South
Africa for which it pays an annual rent of approximately $288,000 pursuant to a
lease expiring in June 2006.
Republic Umbrella leases approximately 16,000 square feet in
Springfield Park, Kwa Zulu-Natal, South Africa for which it pays an annual rent
of approximately $322,000 pursuant to a lease expiring in November 2003.
Galactex Outdoor leases approximately 10,000 square feet in Route 24,
Meadowdale, Gauteng, South Africa for which it pays an annual rent of
approximately $131,000 pursuant to a lease expiring in September 2008.
SA Leisure operates out of an administration building in Gardens,
Gauteng, South Africa which it owns and which includes approximately 2,100
square feet of space. S.A. Leisure also operates out of a 30,000 square foot
leased facility in Isithebe, Kwa Zulu-Natal, South Africa for which it pays an
annual rent of approximately $361,000 pursuant to a lease expiring in October
2000.
Our United States subsidiary, First South Africa Management Corp., a
Delaware corporation incorporated in 1995, has its principal executive offices
at 1348 Washington Avenue, Suite 155, Miami, Florida 33139. The lease is on a
month to month basis and costs us approximately $2,500 per year.
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ITEM 3. LEGAL PROCEEDINGS
Neither we nor any of our subsidiaries is subject to any material legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On April 29, 1999, we held our annual meeting of shareholders. At the
annual meeting, our shareholders elected four directors to serve until the next
annual meeting and until their respective successors are elected and qualified.
At the annual meeting, our shareholders also approved a change in our corporate
name from First South Africa Corp., Ltd. to Leisureplanet Holdings, Ltd and
approved the appointment of PricewaterhouseCoopers Inc as our independent public
accountants. The votes for directors were as follows:
Votes
-------------------------------------
For Withheld
--------- --------
Michael Levy 8,341,711 7,600
Clive Kabatznik 8,341,711 7,600
Cornelius Roodt 8,341,711 7,600
George Garrick 8,341,711 7,600
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The votes with respect to our name change were as follows:
For Against Abstain
- --------------- -------------- --------------
8,336,511 12,800 -0-
The votes with respect to the appointment of our independent public accountants
were as follows:
For Against Abstain
- --------------- -------------- --------------
8,338,843 8,468 2,000
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock is listed for quotation on the National Market on the
Nasdaq System under the symbol LPHL. Our units, redeemable Class A warrants and
redeemable Class B warrants are listed for quotation on the Nasdaq SmallCap
Market under the symbols LPHLU, LPHLW and LPHLZ, respectively. The following
table sets forth, for the periods indicated the high and low closing sales
prices for our common stock, units, redeemable Class A warrants and redeemable
Class B warrants as reported by Nasdaq.
High Low
---- ---
Common Stock
Fiscal 1998
1st Quarter.........................................$8.875 $7.125
2nd Quarter.........................................$9.00 $6.00
3rd Quarter.........................................$7.6875 $5.50
4th Quarter.........................................$8.55 $4.00
Fiscal 1999
1st Quarter.........................................$4.75 $.75
2nd Quarter.........................................$1.6875 $.75
3rd Quarter.........................................$3.25 $1.3125
4th Quarter.........................................$11.875 $1.1875
Fiscal 2000
1st Quarter (through September 17, 1999)............$7.9375 $3.625
Units
Fiscal 1998
1st Quarter.........................................$14.625 $10.00
2nd Quarter.........................................$14.75 $8.625
3rd Quarter.........................................$14.50 $8.25
4th Quarter.........................................$14.00 $6.50
Fiscal 1999
1st Quarter.........................................$8.75 $1.25
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High Low
---- ---
2nd Quarter.........................................$2.625 $.75
3rd Quarter.........................................$5.25 $1.00
4th Quarter.........................................$23.5 $2.50
Fiscal 2000
1st Quarter (through September 17, 1999)............$15.00 $7.00
Class A Warrants
Fiscal 1998
1st Quarter.........................................$4.00 $2.00
2nd Quarter.........................................$4.0625 $1.9375
3rd Quarter.........................................$3.40625 $1.75
4th Quarter.........................................$3.6875 $1.03125
Fiscal 1999
1st Quarter.........................................$1.375 $.375
2nd Quarter.........................................$0.625 $0.0625
3rd Quarter.........................................$0.75 $0.0625
4th Quarter.........................................$9.00 $0.4375
Fiscal 2000
1st Quarter (through September 17, 1999)............$4.75 $2.00
Class B Warrants
Fiscal 1998
1st Quarter.........................................$1.9375 $1.00
2nd Quarter.........................................$1.9375 $1.25
3rd Quarter.........................................$1.625 $1.25
4th Quarter.........................................$1.8125 $.9375
Fiscal 1999
1st Quarter.........................................$1.125 $0.625
2nd Quarter.........................................$0.625 $0.125
3rd Quarter.........................................$0.625 $0.125
4th Quarter.........................................$0.3125 $0.125
Fiscal 2000
1st Quarter (through September 17, 1999)............$2.00 $.75
As of September 17, 1999, there were approximately 29 holders of our
common stock, exclusive of holders whose shares were held by brokerage firms,
depositaries and other institutional firms in "street name" for their customers.
As of September 17, 1999, there were approximately 8 holders of our Class A
warrants and 5 holders of our Class B warrants.
We have never declared or paid any cash dividends on our common stock
or our Class B common stock. We do not intend to declare or pay any dividends on
our common stock or our Class B common stock in the foreseeable future. We
currently intend to retain future earnings, if any, to finance the expansion of
our business.
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In connection with our agreement with InfoSpace.com, Inc., on June 30,
1999, we issued a warrant to purchase 720,000 shares of our common stock at an
exercise price of $.01 which warrant will vest in six consecutive quarters.
ITEM 6. SELECTED FINANCIAL DATA
SELECTED CONDENSED COMBINED FINANCIAL DATA
The results of our predecessor set forth below represent the combined
results of Starpak and L.S. Pressings, which are deemed to be our predecessor
due to the common ownership and control of such entities. The data presented for
Starpak and L.S. Pressings was derived from the combined audited financial
statements of such entities. We disposed of each of Starpak and L.S. Pressings
during fiscal year ended June 30, 1999.
The results from March 1, 1995 to June 30, 1995 represent unaudited
financial data, which data, in the opinion of management, contains all
adjustments, consisting only of normal and recurring adjustments, necessary for
a fair presentation. The results of such interim period are not necessarily
indicative of the results of a full year.
Our net income after tax for the fiscal year ended June 30, 1997
includes a net gain of $3,327,478 on the sale of our investment in First SA Food
Holdings, Ltd., as well as a minority interest of $135,224.
Our net income after tax for the fiscal year ended June 30, 1998
includes a net gain of $2,608,834 on the sale of our investment in First SA Food
Holdings, Ltd., as well as a minority interest of $2,016,791.
Our net loss after tax for the fiscal year ended June 30, 1999 includes
a net gain of $701,913 on the sale of our investment in First Lifestyle Holdings
Limited, formerly known as First SA Food Holdings Limited, and a net loss on
disposal of First SA Lifestyle Holdings Limited of $409,040. First SA Lifestyle
Holdings Limited was sold to First Lifestyle Holdings Limited during the fiscal
year ended June 30, 1999. The minority shareholders' interest for such fiscal
year amounted to $3,292,802.
All of the financial data set forth below should be read in conjunction
with the information appearing under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
-20-
STATEMENT OF OPERATIONS DATA PREDECESSOR LEISUREPLANET HOLDINGS, LTD.
YEARS ENDED MARCH 1 TO YEARS ENDED JUNE 30,
FEBRUARY 28, JUNE 30,
1995 1995 1996 1997 1998 1999
$ $ $ $ $ $
Revenues - - 1,570,888 41,885,913 82,759,698 85,108,795
Total operating expenses - - (8,198,079) (38,559,968) (75,328,804) (86,806,538)
Operating (loss)/income - - (6,627,191) 3,325,945 7,430,894 (1,697,743)
Interest (expense)/income - - (351,793) 26,016 98,458 (1,298,438)
Net (loss)/income before tax and
minority interests from
continuing operations - - (6,965,556) 7,149,970 10,609,251 (1,302,630)
Net (loss)/income from
continuing operations (222,558) (145,216) (6,743,363) 5,832,922 6,022,885 (7,298,238)
(Loss)/gain from discontinued
operations 536,440 359,045 1,005,803 850,243 (2,178,473) (2,433,939)
Net (loss)/income after tax 313,882 213,829 (5,737,560) 6,683,165 3,844,412 (9,732,177)
(Loss)/income per share (Basic)
- - from continuing operations ($0.40) ($0.26) ($3.56) $1.13 $0.94 ($1.11)
(Loss)/income per share
(Diluted)-from continuing ($0.40) ($0.26) ($3.56) $1.07 $0.80 ($1.11)
operations
PREDECESSOR LEISUREPLANET HOLDINGS, LTD.
BALANCE SHEET DATA FEBRUARY 28, JUNE 30,
1995 1996 1997 1998 1999
$ $ $ $ $
Total assets 5,161,709 23,604,994 64,197,149 89,561,459 102,903,830
Long term liabilities 1,123,665 2,361,372 13,341,758 29,507,926 33,598,244
Net working capital 1,366,602 4,624,417 25,357,584 25,648,684 28,278,287
Stockholders'equity 1,828,656 12,792,376 23,220,014 17,299,673 5,254,902
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
BACKGROUND AND HISTORY
Leisureplanet Holdings, Ltd. (formerly known as First South Africa
Corp., Ltd.) was incorporated in September 1995 with the intention of actively
pursuing acquisitions fitting a pre-defined investment strategy. Prior to our
acquisition of LPI Limited, an online travel services company, in February 1999,
the broad strategy followed by us in all of our investment decisions was as
follows:
o Turnover must be within the range of $5 million - $50 million;
o Net income must yield a sustainable above average return on investment;
o Growth in turnover must be above average and must be sustainable over the
medium term; and
o The target must operate in one of the pre-defined industry sectors identified
by management.
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We currently hold, through our South African subsidiary, First South
African Holdings (Pty.) Ltd., nine South African subsidiaries which met the
acquisition criteria identified above. In addition, in February 1999, we
acquired an 81% stake in LPI Limited, an online travel services company. Also,
during fiscal 1999, we disposed of our interests in the industrial products and
packaging industry segments. Our remaining subsidiaries are listed below and are
engaged in the following industry segments:
INTERNET AND E-COMMERCE RELATED BUSINESSES
o LPI Limited
LIFESTYLE PRODUCTS
FOOD DIVISION
o Piemans Pantry
o Astoria Bakery
o Seemanns Meat Products
o Gull Foods
o Fifers Bakery
LEISURE DIVISION
o SA Leisure
o Galactex
o Republic Umbrella
o Tradewinds Parasol
SOUTH AFRICAN OPERATIONS
As our results are reported in US Dollars, but our revenues are
primarily generated in South African Rand, the South African inflation rate and
the depreciation of the South African Rand against the US Dollar are important
to an understanding of our results. In broad terms, if the depreciation of the
South African Rand against the US Dollar is in excess of the South African
inflation rate, then we would need to generate South African revenue in excess
of the South African inflation rate to maintain U.S. Dollar parity. The average
rate for the South African Rand against the US Dollar for the periods presented
in this report are as follows:
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, 1999 JUNE 30, 1998 JUNE 30, 1997
Rate of exchange vs $1 6.05 4.97 4.53
Depreciation 21.7% 9.7% 17.7%
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, 1999 JUNE 30, 1998 JUNE 30, 1997
South African Rand annual rate of inflation 4.9% 7.2% 8.8%
RESULTS OF OPERATIONS
-22-
FISCAL 1999 COMPARED TO FISCAL 1998
REVENUES. Revenues increased by $2.3 million, or 2.8%, from $82.8
million in fiscal 1998 to $85.1 million in fiscal 1999. Our revenues for fiscal
1999 are disclosed net of rebates, discounts and allowances of $4.7 million,
which amounts were not accounted for in the previous years due to the lack of
adequate information. Our increase in revenues resulted primarily from growth in
revenues in our lifestyle business segment, which grew by 2.4% in U.S. Dollar
terms, representing a growth in South African Rand of 24%, which is
significantly better than inflation. The increase is also attributable to the
fact that our fiscal 1998 revenues only include the leisure division of our
lifestyle products business for a nine month period. Finally, fiscal 1999 has
also seen an increase in exports of South African manufactured products to
European and American destinations.
COST OF GOODS SOLD. Cost of goods sold increased as a percentage of
revenues from 54% to 69%. This increase primarily resulted from the
reclassification of certain manufacturing overhead costs to cost of goods sold
during fiscal 1999. Two of our lifestyle products subsidiaries, one in the
leisure division and one in the food division, experienced difficulties arising
from poor inventory control during fiscal 1999, resulting in a significant
charge to cost of goods sold. The percentage of cost of goods sold to revenues
for fiscal 1999 was increased by the reduction of revenues for rebates,
discounts and allowances of $4.7 million, discussed above. Cost of goods sold as
a percentage of revenues for fiscal 1999 excluding this reduction amounts to
66%.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased by $3.6 million, or 13%, from $27.6 million
during fiscal 1998 to $24.0 million during fiscal 1999. This decrease takes into
account the selling, general and administrative expenses of our online travel
services business. This decrease is primarily attributable to the set off of
rebates, discounts and allowances against revenues, discussed above.
AMORTIZATION OF INTANGIBLES. Amortization of intangibles increased from
$1.0 million in fiscal 1998 to $1.5 million in fiscal 1999. This increase is due
primarily to the fact that the additional purchase price payments incurred under
various of our acquisition agreements have been allocated to intangibles and
therefore have been amortized.
DEPRECIATION. Depreciation increased from $1.7 million in fiscal 1998
to $2.1 million in fiscal 1999. This increase is due primarily to the fact that
we made various additions to property, plant and equipment in our lifestyle
products business to promote our growth. In addition, our fiscal 1999 numbers
include the leisure division of our lifestyle products business for 12 months,
while our fiscal 1998 numbers only include our leisure division for 9 months.
FOREIGN CURRENCY LOSS. Foreign currency loss decreased from $415,000 in
fiscal 1998 to $282,000 in fiscal 1999. This decrease is due primarily to a
lower depreciation of the South African Rand against the U.S.
Dollar during fiscal 1999 than during fiscal 1998.
GAIN ON DISPOSAL OF SUBSIDIARY STOCK. Gain on disposal of subsidiary
stock decreased from $2.6 million in fiscal 1998 to $702,000 in fiscal 1999.
This decrease is due primarily to the fact that we realized lower proceeds from
the sale of shares in our subsidiaries due to the depressed state of the South
African market
-23-
in fiscal 1999, and the fact that the shares of our subsidiary which we sold
during fiscal 1999 had a higher carrying cost than those sold during fiscal
1998.
OTHER INCOME. Other income increased from $471,000 in fiscal 1998 to
$992,000 in fiscal 1999. This increase is due primarily to the fact that our
fiscal 1999 numbers include the leisure division of our lifestyle products
business for 12 months, while our fiscal 1998 numbers only include our leisure
division for 9 months.
INTEREST EXPENSE. Interest expense increased from net interest income
of $98,000 in fiscal 1998 to net interest expense of $1.3 million in fiscal
1999. This increase was primarily due to the establishment of a capital
redemption reserve fund during the fiscal 1999 for our outstanding increasing
rate debentures, combined with the redemption of various debentures during
fiscal 1999, each of which utilized a substantial portion of our surplus
reserves and caused a reduction in interest income earned on our reserves. The
reserve fund was established because the increasing rate debentures are required
to be redeemed at a premium if certain specified share prices are not attained.
In addition, we accrued interest expense on our increasing rate debentures for a
full year during fiscal 1999, compared to eight months in fiscal 1998.
PROVISION FOR TAXES ON INCOME. Our income tax provision decreased from
$2.6 million in fiscal 1998 to $2.2 million in fiscal 1999. This decrease was
primarily due to a decrease in the South African tax rate from 35% to 30% during
fiscal 1999.
LOSS FROM DISCONTINUED OPERATIONS. Our loss from discontinued
operations increased from $2.2 million in fiscal 1998 to $2.4 million in fiscal
1999. Our loss in fiscal 1999 resulted from the discontinuance of our industrial
products and packaging business segments. We decided to discontinue these
segments since their performance was below average.
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY COMPANIES. The minority
interest in our subsidiaries increased from $2.0 million in fiscal 1998 to $3.3
million in fiscal 1999. This increase was primarily due to a decrease in our
share holdings of First Lifestyle Holdings Limited during fiscal 1999 from 67%
to approximately 51.5%.
PREFERENCE DIVIDEND DECLARED. During fiscal 1999, our South African
subsidiary, First South African Holdings (Pty.) Ltd., declared a preferred
dividend of $496,000. No such dividend was declared or paid during fiscal 1998.
This dividend was declared for the benefit of the holders of preferred stock of
First South African Holdings (Pty.) Ltd. The preferred stock was issued during
fiscal 1999 to fund our acquisition of LPI Limited.
NET (LOSS)/ INCOME. As a result of the above, we achieved a loss of
$9.7 million as compared to a profit of $3.8 in fiscal 1998.
FISCAL 1998 COMPARED TO FISCAL 1997
REVENUES. Revenues for the fiscal 1998 increased $40.9 million, or 98%,
from $41.9 million to $82.8 million. This increase is primarily attributable to
the acquisition of various companies making up the leisure division, and the
acquisition of two companies in the food division. The sales from these
companies for fiscal 1998 total $30.8 million.
-24-
COST OF SALES. Cost of goods sold for fiscal 1998 increased to 53.8% of
revenues from 53.6% of revenues for the comparative period in the prior year.
SELLING, GENERAL AND ADMINISTRATIVE COSTS. Selling, general and
administrative costs of $27.6 million for fiscal 1998 has increased from $14.7
million for the comparative period in fiscal 1997. This increase is due to the
addition of the leisure division companies and two additional food subsidiaries
during the 1998 fiscal year.
GAIN ON DISPOSAL OF SUBSIDIARY STOCK ON DISPOSAL OF SUBSIDIARY STOCK.
The gain on disposal of subsidiary stock decreased to $2.6 million from $3.3
million. During fiscal 1998, 3.2% of our investment in First SA Food Holdings
Limited shares was sold to minorities, realizing a profit of $2.6 million. In
fiscal 1997, the profit was realized on the disposal of an effective 30%
interest in First SA Food Holdings Limited.
INTEREST EXPENSE. Interest income of $98,000 has increased from $26,000
for the comparative period in fiscal 1997. Interest for fiscal 1998 consists
primarily of interest income earned on cash balances and surplus funds in the
processed foods business.
PROVISION FOR TAXES ON INCOME. Our income tax provision increased from
$1.2 million in fiscal 1997 to $2.6 million in fiscal 1998. This increase was
due primarily to an increase in the effective corporate tax rate from 16.5% to
24.2%, combined with an increase in taxable income while maintaining a relative
constant base of non-taxable income in US Dollar terms.
LOSS FROM DISCONTINUED OPERATIONS. The discontinued industry segments
contributed income of $850,000 during fiscal 1997, compared to a loss of $2.2
million in fiscal 1998. The loss in fiscal 1998 was primarily due to the
acquisition of a loss generating subsidiary which we were unable to make
profitable.
NET INCOME. Net income of $3.9 million has decreased from $6.7 million,
a decrease of 42.5% over the comparative period in fiscal 1997. The decrease is
primarily attributable to the factors set forth above combined with a general
depreciation of the South African Rand against the US Dollar during fiscal 1998.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Our cash increased $2.9 million to $20.8 million at June 30, 1999, from
$17.9 million at June 30, 1998. This increase was due primarily to funds raised
on the issuance of preferred shares of our South African subsidiary, First South
African Holdings (Pty.) Ltd., and the discontinuance of the industrial products
and packaging businesses, which were largely cash negative.
Our working capital increased $2.6 million to $28.3 million at June 30,
1999 from $25.7 million at June 30, 1998. The working capital increase was due
primarily to an increase in other current assets and a decrease in trade
accounts payable and other payables.
At June 30, 1999, we had $36.7 million in borrowings, an increase from
$31.8 million at June 30, 1998. Our borrowings at June 30, 1999 include $10
million owed to the minority shareholder of our on-line travel services
subsidiary, LPI Limited. Excluding the amount owing to the minority shareholder
of LPI Limited, we reduced our borrowings by $5.1 million during fiscal 1999. We
did so by redeeming approximately 55% of our 9% convertible debentures and
through the normal repayment of other loan funds.
-25-
Our operations for fiscal 1999, excluding non-cash charges, resulted in
the net utilization of cash of $4.6 million. That cash was used primarily to
fund our online travel services business. Investing activities resulted in the
net utilization of an additional $5.9 million of cash during fiscal 1999,
including the acquisition of property, plant and equipment of $6.0 million,
additional purchase price payments of $3.6 million and the acquisition of LPI
Limited for $2.4 million. Our investing activities were financed primarily by
the disposal of an additional 8.9% of our ownership of First Lifestyle Holdings
Limited for $5.7 million and the issuance of mandatory redeemable preferred
shares of our South African subsidiary, First South African Holdings (Pty.)
Ltd., for $9.9 million. Net cash provided from financing activities amounted to
$9.8 million in fiscal 1999, which was primarily raised by the issuance of
preferred shares in our South African subsidiary, First South African Holdings
(Pty.) Ltd. for $9.9 million.
FUTURE COMMITMENTS
Under the various acquisition agreements we entered into acquiring
certain of our businesses, we anticipate spending approximately $750,000 in cash
on contingent payments over the next 12 months, as well as approximately
$600,000 in stock. We anticipate that our cash on hand at June 30, 1999 and our
operating cash flows will be sufficient to fully fund these payments. We also
anticipate that any longer term contingent acquisition payments will be funded
out of operating cash flows of our acquired entities.
Our operating subsidiaries generally collect their receivable within
65-90 days and reserve approximately 5% for doubtful accounts. Historically, our
operating and capital needs have been met by internal cash flow and outside bank
borrowing. We anticipate that capital expenditures for the foreseeable future
can continue to be met by internal cash flow and bank borrowing. Our operating
subsidiaries engage in certain foreign exchange contracts with respect to
certain overseas purchases in order to lock in a specified exchange rate.
Due to the nature and stage of growth of our online travel services
business, our online travel services subsidiary, LPI Limited, incurs operational
losses of approximately $1.0 million per month with minimal revenues. These
costs are expected to increase over the coming months. For example, under
certain of our strategic agreements such as Lycos, Yahoo!, InfoSpace and Nomade,
we are required to make payments aggregating approximately $6 million over the
next 12 months. We anticipate paying for these expenses, as well as the
anticipated operating losses of our online travel services business, through
equity financing and/or additional indebtedness. However, there is no assurance
that we will be able to raise any additional equity financing or incur
additional indebtedness.
We intend to continue to pursue an aggressive acquisition strategy of
Internet related businesses and in South Africa. We anticipate utilizing a
substantial portion of our excess cash balances and operating cash flows to fund
this strategy to the extent that suitable acquisition candidates can be
identified. In addition, we may be required to incur additional indebtedness or
raise equity financing in connection with future acquisitions. There is no
assurance that we will be able to incur additional indebtedness or raise
additional equity to finance future acquisitions on acceptable terms, if at all.
RECENTLY ISSUED FINANCIAL STANDARDS
We believe that recently issued financial standards will not have a
significant impact on our results of operations, financial position or cash
flows.
-26-
YEAR 2000
Many currently installed computer systems and software products are
coded to accept or recognize only two digit entries in the date code field.
These systems and software products will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. As a result, computer
systems and/or software used by many companies and governmental agencies may
need to be upgraded to comply with such Year 2000 requirements or risk system
failure or miscalculations causing disruptions of normal business activities.
We made a preliminary assessment of the Year 2000 readiness of our
operating, financial and administrative systems, including the hardware and
software that comprise our systems. Based on our preliminary assessment, we
believe that the significant risk that faces us regarding the Year 2000
readiness of our systems relates to the Year 2000 compliance of our utility
suppliers, major suppliers, customers, and bankers. We are currently confirming
the Year 2000 compliance of each of the foregoing. Based on the responses we
have received, we believe that our risks have been adequately addressed. In
addition, where possible, we have identified alternative sources of supply where
available. However, certain of our existing suppliers are sole suppliers. In
addition, there can be no assurance that such third party systems will be Year
2000 compliant. A failure to be Year 2000 compliant could result in lost
revenues, increased costs or loss of customers and other business interruptions,
all of which could have a material adverse effect on our business, financial
condition and results of operations.
The costs incurred by us to date on Year 2000 readiness have typically
been to replace aging hardware and to upgrade existing purchased software. In
each case where upgraded software was required, the upgrade was available from
software suppliers and those suppliers certified Year 2000 compliance of such
software. Our costs incurred to date have not been material. However, there can
be no guarantee that the costs to be incurred will not be material should a
significant Year 2000 compliance problem be subsequently discovered.
We are developing a contingency plan which will ensure that the
production and distribution and the recording of transactions will continue
should we have a significant Year 2000 compliance problem. For example, we are
able to temporarily support a manual recording keeping system should our IT
system fail. However, we cannot guarantee that our contingency plans will be
sufficient to prevent significant disruption.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We do not ordinarily hold market risk sensitive instruments for trading
purposes. We do however recognize market risk from interest rate, foreign
currency exchange and commodity price exposure.
INTEREST RATE RISK
At June 30, 1999, approximately $4.3 million of our long term debt,
specifically the borrowings in First Lifestyle Holdings Limited, was subject to
interest at variable rates. Similarly, our cash resources earn interest at
variable rates. Accordingly, our net income and after tax cash flows are
affected by fluctuations in interest rates. Assuming the current level of cash
resources and borrowings at variable interest rates and assuming a two
percentage point decrease in the average interest rate under these borrowings
and cash resources, it is estimated that the net effect on interest would be a
reduction in interest earned of $330,000, resulting in a reduction in our net
income and after tax cash flow of $231,000. Any adverse changes in interest
rates would likely result in our taking action to mitigate our exposure.
However, due to the uncertainty of the actions that we would take and
-27-
their possible effects, this analysis assumes no action is taken. There can be
no assurance that decreases or increases in interest rates will not exceed
possible projections.
FOREIGN CURRENCY RISK
Our primary operations are based in South Africa and most of our
economic activity is denominated in South African Rands. This exposes us to
market risk with respect to fluctuations in the relative value of the South
African Rand against the US Dollar. Certain of this risk is covered through our
purchase of foreign exchange contracts.
COMMODITY PRICE RISK
The lifestyle products segment of our business makes use of several
commodity products.
PROCESSED FOODS
The main ingredient in many of our processed food products includes raw
produce such as meat, potatoes, vegetables and other staple products. These food
groups are commodities whose prices are largely dependent on supply and demand.
The supply of these products is also dependent on environmental factors such as
weather conditions and rainfall patterns. While these price fluctuations will
impact on the input cost of the products produced, these are not expected to
have a material impact on our profitability due to the pass through of commodity
price increases to customers.
LEISURE PRODUCTS
The leisure products side of our business make use of processed raw
materials such as polypropylene, as well as natural resources such as timber.
The price of polypropylene is determined on an import parity basis in South
Africa, which means that worldwide surpluses and shortages are factored into the
product pricing. This results in fluctuations of the price of this material from
time to time. These price fluctuations impact on the per unit input cost of the
products produced. We, therefore, mitigate this risk by entering into pricing
agreements with suppliers to limit the effects of any adverse movements in the
commodity price.
Timber as a natural resource is subject to sustainability requirements
and is also dependent on environmental factors such as weather conditions and
rainfall patterns. The price of timber may fluctuate depending on supply and
demand which has an impact on the input price of our products produced. In order
to mitigate this risk we enter into supply arrangements with suppliers wherever
possible, including arrangements covering pricing terms. In addition, raw
material input prices may be passed onto customers where the factors governing
such price fluctuations are outside of our control.
-28-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
LEISURE PLANET HOLDINGS LIMITED
Report of the Independent Auditors
Consolidated Balance Sheets at June 30, 1999 and 1998
Consolidated Statements of (Loss)/Income and Comprehensive
(Loss)/Income for the years ended June 30, 1999, 1998 and 1997
Consolidated Statements of Cash Flows for the years ended June
30, 1999, 1998 and 1997
Consolidated Statement of Changes in Stockholders' Investment for
the period June 30, 1996 to June 30, 1999
Notes to the Consolidated Financial Statements for the years
ended June 30, 1999, 1998 and 1997
-29-
LEISUREPLANET HOLDINGS, LIMITED
REPORT OF THE INDEPENDENT AUDITORS
To the Board of Directors
of Leisure Planet Holdings Limited
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of (loss)/income and comprehensive (loss)/income, of
cash flows and of changes in stockholders' investment after the restatement
described in note 12, present fairly, in all material respects, the financial
position of Leisure Planet Holdings Limited and its subsidiaries at June 30,
1999 and 1998, and the results of their operations and their cash flows for each
of the three years in the period ended June 30, 1999 in conformity with
generally accepted accounting principles in the United States. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards in the United States which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
/s/ PricewaterhouseCoopers Inc
- ------------------------------------
PricewaterhouseCoopers Inc
Registered Accountants and Auditors
Chartered Accountants (SA)
Sandton, South Africa
October 12, 1999
-30-
LEISURE PLANET HOLDINGS LIMITED
CONSOLIDATED BALANCE SHEETS
ASSETS
JUNE 30, JUNE 30,
1999 1998
RESTATED
$ $
CURRENT ASSETS
Cash on hand 20,813,301 17,948,991
Trade accounts receivable 13,388,561 16,871,292
Less: Allowances for bad debts (443,172) (833,785)
----------- -----------
12,945,389 16,037,507
Inventories (net) 9,152,575 11,742,613
Prepaid expenses and other current assets 5,236,587 1,711,428
Deferred income taxes 539,884 377,738
----------- -----------
TOTAL CURRENT ASSETS 48,687,736 47,818,277
Property, plant and equipment 30,777,399 31,410,837
Less: Accumulated depreciation (11,488,982) (11,423,572)
----------- -----------
19,288,417 19,987,265
Intangible assets (net) 34,024,745 20,045,983
Deferred charges (net) 868,944 1,448,199
Other assets 33,988 261,735
----------- -----------
102,903,830 89,561,459
=========== ==========
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
-31-
LEISURE PLANET HOLDINGS LIMITED
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' INVESTMENT
JUNE 30,
JUNE 30, 1998
1999 RESTATED
$ $
CURRENT LIABILITIES
Bank overdraft payable - 2,787,965
Current portion of long term debt 3,088,435 2,256,275
Trade accounts payable 9,058,811 9,205,092
Other provisions and accruals 4,618,283 4,506,770
Dividends payable 1,870,959 558,185
Other taxes payable 558,669 1,064,432
Income taxes payable 1,214,292 1,790,874
----------- ---------
TOTAL CURRENT LIABILITIES 20,409,449 22,169,593
Long term debt 33,598,244 29,507,926
Deferred income taxes 1,551,724 907,143
---------- ------------
55,559,417 52,584,662
---------- ----------
Minority stockholders' investment 32,198,314 19,677,124
FSAH mandatory redeemable preferred stock 9,891,197 -
STOCKHOLDERS' INVESTMENT
Capital stock:
A class common stock, $0.01 par value - authorized 23,000,000 shares,
issued
and outstanding 5,383,142 shares (1998: 5,649,224 shares) 53,832 56,492
B class common stock, $0.01 par value - authorized 2,000,000 shares, issued
and
outstanding 946,589 shares (1998: 1,822,500 shares) 9,466 18,225
FSAH B class common stock, R0,001 par value - authorized 10,000,000 shares,
issued and outstanding 2,550,466 shares (1998: 2,307,782 shares) 580 537
Preferred stock, $0.01 par value - authorized 5,000,000 shares, issued and
outstanding nil shares - -
Capital in excess of par 22,971,261 28,288,404
Retained (loss)/earnings (3,084,700) 6,647,477
---------- -----------
19,950,439 35,011,135
Foreign currency translation adjustments (14,695,537) (17,711,462)
------------ -----------
5,254,902 17,299,673
----------- ----------
102,903,830 89,561,459
=========== ==========
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
-32-
LEISUREPLANET HOLDINGS, LTD.
CONSOLIDATED STATEMENTS OF (LOSS)/INCOME AND
COMPREHENSIVE (LOSS)/INCOME
YEAR ENDED
YEAR ENDED JUNE 30, YEAR ENDED
JUNE 30, 1998 JUNE 30,
1999 RESTATED 1997
$ $ $
Revenues 85,108,795 82,759,698 41,885,913
---------- ---------- ----------
Operating expenses
Cost of sales 58,874,284 44,525,217 22,438,793
Selling, general and administrative costs 24,038,714 27,606,151 14,651,996
Amortization of intangibles 1,515,773 1,042,263 371,635
Depreciation 2,095,416 1,739,952 1,097,544
Foreign currency loss 282,351 415,221 -
---------- ---------- ----------
86,806,538 75,328,804 38,559,968
---------- ---------- ----------
Operating (loss)/income (1,697,743) 7,430,894 3,325,945
Gain on disposal of subsidiary stock 701,913 2,608,834 3,327,478
Other income 991,638 471,065 468,531
Interest (expense)/income (1,298,438) 98,458 26,016
---------- ---------- ----------
(Loss)/income from consolidated companies before income taxes
and minority interests (1,302,630) 10,609,251 7,149,970
Provision for taxes on income (2,206,815) (2,570,111) (1,181,602)
---------- ---------- ----------
(Loss)/income from continuing operations before minority
interests and preference dividends (3,509,445) 8,039,140 5,966,368
Minority interest in consolidated subsidiary companies (3,292,802) (2,016,255) (133,446)
Preference dividend (495,991) - -
---------- ---------- ----------
(Loss)/income from continuing operations (7,298,238) 6,022,885 5,832,922
(Loss)/gain from discontinued operations (2,433,939) (2,178,473) 850,243
---------- ---------- ----------
Net (loss)/income (9,732,177) 3,844,412 6,683,165
Other comprehensive income/(loss):
Foreign currency translation adjustments 3,015,925 (15,183,266) (639,985)
----------- ------------ ----------
Comprehensive (loss)/income (6,716,252) (11,338,854) 6,043,180
=========== ============ =========
Basic (loss)/earnings per share from continuing operations ($1.11) $0.94 $1.13
Basic (loss)/earnings per share from discontinued operations ($0.37) ($0.34) $0.17
------- ------- -----
Total basic (loss)/earnings per share ($1.48) $0.60 $1.30
------- ----- -----
Diluted (loss)/earnings per share from continuing operations ($1.11)* $0.80 $1.07
Diluted (loss)/earnings per share from discontinued operations ($0.37)* ($0.23) $0.15
-------- ------- -----
Total diluted (loss)/earnings per share ($1.48)* $0.57 $1.22
-------- ----- -----
* Additional shares were not considered as the result would be anti-dilutive
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
-33-
LEISURE PLANET HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30,
1999 1998 1997
RESTATED
$ $ $
>
Cash flows from operating activities:
Net (loss)/income (9,732,177) 3,844,412 6,683,165
Loss/(income) from discontinued operations 2,433,939 2,178,473 (850,243)
----------- --------- ----------
(Loss)/income from continuing operations (7,298,238) 6,022,885 5,832,922
Adjustments to reconcile (loss)/income to net cash
(utilized)/generated by operating activities:
Depreciation and amortization 3,611,189 2,782,215 1,469,179
Deferred income taxes 506,679 255,637 349,543
Net loss/(gain) on sale of assets 303,752 (200,408) (198,473)
Net gain on sale of investment in subsidiaries (701,913) (2,608,834) (3,327,478)
Net loss/(gain) on minority shares issued in First
Lifestyle Holdings Limited 409,040 (557) -
Vendor earnout settlement (4,527,209) - -
Effect of changes in current assets and current 421,084
liabilities 1,855,235 (2,922,764)
Minority interest in consolidated subsidiary companies 3,292,802 2,016,255 133,446
FSAH preference dividends declared 495,991 - -
Change in minorities on capitalization dividend (1,076,804) - -
Creation of debenture redemption reserve fund 843,750 562,500 -
Loss on other assets 362,090 - -
----------- ---------------- -----------------
Net cash (utilized)/generated by continuing operating activities (1,923,636) 9,250,777 1,336,375
Net cash (utilized)/generated by discontinued operations (2,686,810) (1,321,483) 1,394,196
-----------
Net cash (utilized)/generated by operating activities (4,610,446) 7,929,294 2,730,571
----------- --------- ---------
Cash flows from investing activities:
Proceeds on disposal of investment in First Lifestyle
Holdings Limited 5,712,671 4,358,027 16,479,827
Proceeds on disposal of discontinued operations 91,718 - -
Proceeds on minority shares issued in First SA Food
Holdings Limited - 6,054 -
Additional shares in First Lifestyle Holdings Limited
acquired (143,025) - -
Additional intangibles acquired (177,398) - -
Additions to property, plant and equipment (5,968,074) (5,346,671) (3,325,153)
Proceeds on disposal of property, plant and equipment 740,482 1,226,083 1,182,199
Additional purchase price payments (3,585,065) (5,410,628) (2,023,835)
Other assets acquired (171,322) (229,857) (42,676)
Decrease in loans to related companies - - 80,969
Acquisitions of subsidiaries (net of cash of $430,556, 1998:
$347,052, 1997: $985,410) (2,438,376) (17,881,676) (7,073,641)
----------- ------------ -----------
Net cash (used in)/realized by investing activities (5,938,389) (23,278,668) 5,277,690
----------- ------------ ---------
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS