HERE IS THE EARNINGS RELEASE.......
$.04 for the quarter....excellent progress!!!
March 11, 1999
STARNET COMMUNICATIONS INTERNATIONAL INC/ FA (SNMM)
Quarterly Report (SEC form 10QSB)
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
-
General -
Until the end of fiscal 1998, the Company derived its revenues principally from its Internet web sites namely Sizzle and Chisel.
Through substantial research and exploration in the past two years, the Company has identified the opportunity of offering gaming
services over the Internet and has successfully launched its gaming products in March 1998. The Company's Internet casino, which
targets only customers outside North America, is operated by its subsidiary, World Gaming Services Inc, in Antigua. Softec System
Caribbean Inc., another Antigua subsidiary, licenses its gaming software to third parties for a set up fee and monthly royalty. Since
the beginning of fiscal 1999, revenues from all components of the gaming business, which include licensing, casino operations and
financial transactions processing, have undergone a tremendous growth and have become the major source of revenues. Revenues
generated from the gaming business amounted to $3,368,801 representing 56.3% of the total revenues for the nine months ended
January 31, 1999 and $1,718,336 representing 64.5% of the total revenues for the three months ended January 31, 1999.
The following tables set forth statements of operations data for the three months ended January 31, 1999 and 1998, nine months
ended January 31, 1999 and 1998 and balance sheet data as at January 31, 1999 and April 30, 1998.
A. Statement of Operations Data
For the three months ended January 31, 1999 and 1998
For the three months ended
January 31, 1999 January 31, 1998
---------------- ----------------
Net Sales 2,665,559 812,177
Gross Margin 2,021,588 482,626
Operating expenses 1,116,606 1,036,257
Operating Income (Loss) 904,982 (553,631)
Net Income (Loss) 888,421 (569,256)
For the nine months ended January 31, 1999 and 1998 -
For the nine months ended
January 31, 1999 January 31, 1998
---------------- ----------------
Net Sales 5,984,175 2,242,246
Gross Margin 4,199,727 1,261,259
Operating expenses 2,985,250 2,111,811
Operating Income (Loss) 1,214,477 (850,552)
Net Income (Loss) 1,238,684 (897,434)
B. Balance Sheet Data -
At January 31, 1999 At April 30, 1998
------------------- -----------------
Working Capital (Deficiency) 1,229,431 (329,060)
Total Assets 5,065,938 3,274,931
Long Term Debt 126,082 258,298
Stockholders' Equity (Deficit) 3,019,718 1,297,892
Accumulated Earnings (Deficit) 80,813 (1,157,871)
The Company's revenues increased 167% to $5,984,175 for the nine months ended January 31, 1999 compared to $2,242,246 for
the nine months ended January 31, 1998. Revenues for the quarter ended January 31, 1999 amounted to $2,665,559 which
represents a growth of 49.6% compared to the previous quarter and 228.2% compared to the prior year quarter. The growth is
primarily due to additional revenues generated from licensing, gaming operations and financial transactions processing for licensees.
Revenue from software licensing, which has become a major income source, accounts for 56.3% and 45.2% of the total revenues
for the three months and nine months ended January 31, 1999 respectively. The Company currently has a total of 21 licensees and
at January 31, 1999, ten licensees were in operation generating aggregate monthly revenue of around 2 million dollars. The
Company expects all
licensees signed before January 31, 1999 to be operational within 2 months, which will bring in revenues of approximately 1 million
dollars from set up fees.
Along with the growth in sales, gross margin increased to $2,021,588 for the quarter ended January 31, 1999 from $482,626 for
the prior year quarter. Gross margin increased from 59.4% for the quarter ended January 31, 1998 to 75.8% for the quarter ended
January 31, 1999 due to the relatively higher gross margin of the software licensing business and efficiencies gained from increased
number of licensees.
Operating expenses increased by 7.8% to $1,116,606 (41.9% of sales) for the three months ended January 31, 1999 from
$1,036,257 (127.6% of sales) for the prior year quarter. The decrease in these expenses from 127.6% to 41.9% was the result of
substantial revenue growth following the completion of software development and efficiencies gained as the Company handled a
greater level of activity.
Interest expense increased to $54,821 for the nine months ended January 31, 1999 from $44,621 for the nine months ended
January 31, 1998, and to $16,561 for the quarter ended January 31, 1999 from $15,625 for the prior year quarter. The increase
was mainly resulted from interest cost due to bank borrowing. As the Company chose to terminate the loan facilities with its bank in
January 1999, interest cost is expected to decrease in the next quarter.
Net income from operations for the three months ended January 31, 1999 was $904,982 compared to operating profit of $186,726
for the previous quarter and operating loss of $553,631 for the prior year quarter. The continuous growth was mainly the result of
increase in revenues from software licensing. The Company expects revenues from licensing continue to grow as more licensees
commence operations and revenues of their casino operations increase.
LIQUIDITY AND CAPITAL RESOURCES
-
At January 31, 1999, the Company had $860,372 in cash and cash equivalents compared to $140,462 at April 30, 1998. In
January 1999, the Company paid off the outstanding bank loan with the restricted cash equivalent of $500,000.
Working capital at January 31, 1999 increased significantly to $1,229,431 from a deficit of $329,060 at April 30, 1998. The
increase was the result of increased accounts receivable following the surge in sales.
Net cash (used for) generated from operations for the nine months ended January 31, 1999 increased to $1,215,474 from
($451,403) for the nine months ended January 31, 1998. The increase in cashflow from operations was mainly due to increase in
revenues and customers' deposits received by the Company.
Net cash used for investing activities for the nine months ended January 31, 1999 was $514,442 compared to $1,566,277 for the
nine months ended January 31, 1998. The decrease in cashflow used for investing activities was resulted from the release of the
restricted cash.
Net cash provided by financing activities for the nine months ended January 31, 1999 was $18,878 compared to $2,413,731 for
the nine months ended January 31, 1998. The decrease resulted from the voluntary termination of the bank loans and the share
offering for the nine month ended January 31, 1998.
Impact of Inflation -
The Company believes that inflation has not had a material effect on its past business. |
