Consolidated Balance Sheet for Starnet

18 September 2000
Starnet Communications International Inc.
Consolidated Balance Sheets
As at July 31, 2000 and April 30, 2000
(in thousands of US dollars)

July 31 April 30
2000 2000

ASSETS

Current Cash and cash equivalents
3,235 5,984
Reserves and deposits with credit card processors
4,072 3,857
Accounts receivable
2,235 2,022
Prepaid expenses and deposits
644 616
Current portion of long-term receivable
38 514
Other current assets
1,042 1,349
Total current assets
11,266 14,342
Restricted cash
7,276 7,234
Capital assets (net)
5,958 4,868
Long-term receivable
1,537 1,539

26,037 27,983

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
Accounts payable and accrued liabilities
4,332 5,223
Funds held on deposit
1,890 2,118
Deferred revenue
372 287
Loan payable
500 0
Current portion of capital lease obligations
585 476
Total current liabilities
7,679 8,104
Non-current portion of capital lease obligations
727 503
Total liabilities
8,406 8,607

Shareholders' equity
Capital stock
22,205 22,143
Subscription receivable
(299) (381)
Retained earnings (deficit)
(4,193) (2,371)
Accumulated other comprehensive loss
(82) (15)
Total shareholders' equity
17,631 19,376

26,037 27,983

Starnet Communications International Inc.
Consolidated Statements of Operations
For the Periods Ending July 31
(in thousands of US dollars except per share information)
(Unaudited)
Three Months Ended
July 31

2000 1999

REVENUE

Sales Royalties and fees
3,624 2,365
Licensing
405 1,250
Total sales
4,029 3,615
Cost of sales
1,296 866
Gross profit
2,733 2,749

EXPENSES

Sales
120 168
Marketing
755 244
Development
846 367
Operations
1,080 359
General and administrative
1,214 643
Provision for bad debts
0 250
Legal
73 37
Depreciation and amortization
553 268
Total operating expenses
4,641 2,336

Income (loss) from operations
(1,908) 413

Other income (expenses)
86 29

Income (loss) from continuing operations before income taxes
(1,822) 442

Income tax expense (recovery)
current
0 0
deferred
0 0
Income taxes
0 0

Income (loss) from continuing operations
(1,822) 442

Income (loss) from discontinued operations of the on-line interactive media division (less applicable income taxes)
0 171

Net income (loss) for the period
(1,822) 613

Retained earnings (deficit), beginning of period
(2,371) 884
Retained earnings (deficit), end of period
(4,193) 1,497

Basic earnings (loss) per share from continuing operations
$(0.06) $0.02
Basic earnings (loss) per share
$(0.06) $0.02
Weighted average number of common shares outstanding
32,094,150 27,639,450

Diluted earnings per share from continuing operations
n/a $0.01
Diluted earnings per share
n/a $0.02
Weighted average number of common shares outstanding for diluted earnings per share
n/a 33,103,494

Starnet Communications International Inc.
Consolidated Statements of Cash Flows
For the Periods Ending July 31
(in thousands of US dollars)

Three Months Ended
July 31

2000 1999

Cash flows from operating activities
Net income (loss)
(1,822) 613
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation
553 262
Amortization of deferred website costs
0 36
Amortization of software development costs
0 69
Changes in current assets and liabilities:
Decrease (increase) in reserves and deposits with credit card processors
(215) (55)
Decrease (increase) in accounts receivable
(132) (2,106)
Decrease (increase) in prepaid expenses and deposits
(28) (171)
Decrease (increase) in other assets
306 (735)
Increase (decrease) in accounts payable and accrued liabilities
(891) 620
Increase in income taxes payable
0 44
Increase (decrease) in funds held on deposit
(227) 436
Increase (decrease) in deferred revenue
85 (6)
Net cash provided by (used in) operating activities
(2,371) (993)

Cash flows from investing activities
Purchase of capital assets
(1,181) (528)
Transfer to restricted cash
(42) 0
Net cash provided by (used in) investing activities
(1,223) (528)

Cash flows from financing activities
Payments received on long-term receivable
471 0
Proceeds from loan
500 0
Proceeds from issuance of shares
62 8,893
Principal repayments under capital lease obligations
(148) (151)
Net cash provided by financing activities
885 8,742

Effect of exchange rate changes on cash
(40) 63

Net increase (decrease) in cash during the period
(2,749) 7,284
Cash, beginning of period
5,984 5,866
Cash, end of period
3,235 13,150
Other non-cash transactions
Leased assets acquired
487 282

Supplemental cash flow information
Interest paid
17 10
Income tax paid
0 0