<Page>
Exhibit 1
WORLD GAMING PLC
(FORMERLY STARNET COMMUNICATIONS INTERNATIONAL INC.)
CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2001
<Page>
C O N T E N T S
<Table>
Independent Auditors' Report..................................................................... 3
Consolidated Balance Sheets...................................................................... 4
Consolidated Statements of Operations and Other Comprehensive Income (Loss)...................... 6
Consolidated Statements of Stockholders' Equity.................................................. 8
Consolidated Statements of Cash Flows............................................................ 9
Notes to the Consolidated Financial Statements.................................................. 11
</Table>
2
<Page>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
World Gaming Plc
(Formerly Starnet Communications International Inc.)
We have audited the accompanying consolidated balance sheets of World Gaming Plc
(formerly Starnet Communications International Inc.) as of April 30, 2001 and
2000 and the related consolidated statements of operations and other
comprehensive income (loss), stockholders' equity and cash flows for the years
then ended. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. The consolidated
financial statements for the year ended April 30, 1999 were audited by other
auditors, whose report dated June 30, 1999, expressed an unqualified opinion.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of World
Gaming Plc (formerly Starnet Communications International Inc.) at April 30,
2001 and 2000 and the consolidated results of their operations and their cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
HJ & Associates, LLC
Salt Lake City, Utah
July 20, 2001, except for Note 18 which is August 24, 2001.
3
<Page>
WORLD GAMING PLC
(Formerly Starnet Communications International Inc.)
Consolidated Balance Sheets
(In Thousands of US $)
ASSETS
<Table>
<Caption>
APRIL 30,
---------------------------------------
2001 2000
----------------- -----------------
CURRENT ASSETS
Cash and cash equivalents $ 4,518 $ 5,984
Reserves and deposits with credit card processors (Note 3) 3,763 3,857
Accounts receivable (Note 4) 1,476 2,008
Employee advances - current portion 59 14
Prepaid expenses and deposits 576 616
Deferred gaming license costs (Note 5) 300 1,349
Current portion of long-term receivables (Note 14) - 514
Restricted cash (Note 6) 3,925 -
----------------- -----------------
Total Current Assets 14,617 14,342
----------------- -----------------
CAPITAL ASSETS - NET (Note 7) 5,239 4,868
----------------- -----------------
OTHER ASSETS
Long-term receivables (Note 14) - 1,539
Restricted cash (Note 6) - 7,024
Deposits 289 210
Employee advances - long-term portion 43 -
----------------- -----------------
Total Other Assets 332 8,773
----------------- -----------------
TOTAL ASSETS $ 20,188 $ 27,983
================= =================
</Table>
The accompanying notes are an integral part of
these consolidated financial statements.
4
<Page>
WORLD GAMING PLC
(Formerly Starnet Communications International Inc.)
Consolidated Balance Sheets (Continued)
(In Thousands of US $)
LIABILITIES AND STOCKHOLDERS' EQUITY
<Table>
<Caption>
APRIL 30,
---------------------------------------
2001 2000
----------------- -----------------
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 6,182 $ 5,223
Accrued settlement of legal issues (Notes 12 and 18) 5,409 -
Funds held on deposit (Note 9) 3,452 2,118
Deferred revenue 150 287
Current portion of capital lease obligations (Note 10) 677 476
----------------- -----------------
Total Current Liabilities 15,870 8,104
----------------- -----------------
LONG-TERM LIABILITIES
Non-current portion of capital lease obligations (Note 10) 607 503
Note payable (Note 16) 1,500 -
----------------- -----------------
Total Long-Term Liabilities 2,107 503
----------------- -----------------
Total Liabilities 17,977 8,607
----------------- -----------------
COMMITMENTS AND CONTINGENCIES (Note 12)
STOCKHOLDERS' EQUITY
Common stock (Note 11) 22,394 22,143
Subscription receivable (310) (381)
Deferred compensation (38) -
Accumulated other comprehensive income (loss) (708) (15)
Accumulated deficit (19,127) (2,371)
----------------- -----------------
Total Stockholders' Equity 2,211 19,376
----------------- -----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 20,188 $ 27,983
================= =================
</Table>
The accompanying notes are an integral part of
these consolidated financial statements.
5
<Page>
WORLD GAMING PLC
(Formerly Starnet Communications International Inc.)
Consolidated Statements of Operations and
Other Comprehensive Income (Loss)
(In Thousands of US $)
<Table>
<Caption>
FOR THE YEARS ENDED
APRIL 30,
---------------------------------------------------------
2001 2000 1999
------------------ ------------------ -----------------
REVENUE
Sales
Royalties and fees $ 18,376 $ 13,853 $ 4,645
Licensing 1,777 4,028 1,610
------------------ ------------------ -----------------
Total Sales 20,153 17,881 6,255
------------------ ------------------ -----------------
Cost of sales 5,929 5,143 875
------------------ ------------------ -----------------
Gross Profit 14,224 12,738 5,380
------------------ ------------------ -----------------
OPERATING EXPENSES
Development, selling, general
and administrative 18,074 11,704 2,891
Provision for bad debts 3,290 1,734 250
Legal 974 2,082 198
Restructuring of operations (Note 15) 1,536 - -
Accrued settlement of legal issues (Note 12) 4,524 - -
Depreciation 2,610 2,011 997
Interest and bank charges 235 93 40
------------------ ------------------ -----------------
Total Operating Expenses 31,243 17,624 4,376
------------------ ------------------ -----------------
INCOME (LOSS) FROM OPERATIONS (17,019) (4,886) 1,004
OTHER INCOME 263 308 27
------------------ ------------------ -----------------
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES (16,756) (4,578) 1,031
------------------ ------------------ -----------------
INCOME TAX EXPENSE (RECOVERY)
Current (Note 8) - (266) -
Deferred (Note 8) - 150 -
------------------ ------------------ -----------------
Total Income Taxes - (116) -
------------------ ------------------ -----------------
INCOME (LOSS) FROM CONTINUING OPERATIONS $ (16,756) $ (4,462) $ 1,031
------------------ ------------------ -----------------
</Table>
The accompanying notes are an integral part of
these consolidated financial statements.
6
<Page>
WORLD GAMING PLC
(Formerly Starnet Communications International Inc.)
Consolidated Statements of Operations and
Other Comprehensive Income (Loss) (Continued)
(In Thousands of US $)
<Table>
<Caption>
FOR THE YEARS ENDED
APRIL 30,
---------------------------------------------------------
2001 2000 1999
------------------ ------------------ -----------------
INCOME (LOSS) FROM DISCONTINUED
OPERATIONS OF THE ON-LINE INTER-
ACTIVE MEDIA DIVISION (LESS
APPLICABLE INCOME TAXES) (Note 13) $ - $ (355) $ 1,011
GAIN ON SALE OF THE ON-LINE
INTERACTIVE MEDIA DIVISION
(INCLUDING APPLICABLE INCOME
TAXES OF $-0-) (Note 13) - 1,562 -
------------------ ------------------ -----------------
NET INCOME (LOSS) FOR THE YEAR (16,756) (3,255) 2,042
OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation (693) 33 (83)
------------------ ------------------ -----------------
Total Other Comprehensive Income
(Loss) (693) 33 (83)
------------------ ------------------ -----------------
NET COMPREHENSIVE INCOME (LOSS) $ (17,449) $ (3,222) $ 1,959
================== ================== =================
BASIC EARNINGS (LOSS) PER SHARE
FROM CONTINUING OPERATIONS $ (0.52) $ (0.16) $ 0.04
================== ================== =================
BASIC EARNINGS (LOSS) PER SHARE $ (0.52) $ (0.12) $ 0.09
================== ================== =================
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 32,201,181 29,625,460 22,951,546
================== ================== =================
DILUTED EARNINGS PER SHARE FROM
CONTINUING OPERATIONS $ - $ - $ 0.04
================== ================== =================
DILUTED EARNINGS PER SHARE $ - $ - $ 0.08
================== ================== =================
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING FOR
DILUTED EARNINGS PER SHARE - - 25,960,005
================== ================== =================
</Table>
The accompanying notes are an integral part of
these consolidated financial statements.
7
<Page>
WORLD GAMING PLC
(Formerly Starnet Communications International Inc.)
Consolidated Statements of Stockholders' Equity
For the Years Ended April 30, 1999, 2000 and 2001
(In Thousands of US $)
<Table>
<Caption>
ACCUMULATED
COMMON STOCK OTHER RETAINED
---------------------------- SUBSCRIPTION DEFERRED COMPREHENSIVE EARNINGS
SHARES AMOUNT RECEIVABLE COMPENSATION INCOME (LOSS) (DEFICIT)
------------- ------------ ------------- --------------- -------------- ---------
Balance, April 30, 1998 22,450,000 $ 2,421 $ - $ - $ 35 $ (1,158)
Shares issued for cash
pursuant to exercise of options 1,602,434 1,263 - - - -
Shares issued for cash
pursuant to exercise of
warrants 2,450,000 4,900 - - - -
Movement in other comprehensive
income (loss) - foreign currency
translation adjustments - - - - (83) -
Net income for the year ended
April 30, 1999 - - - - - 2,042
------------- ------------ ------------- --------------- -------------- ------------
Balance, April 30, 1999 26,502,434 8,584 - - (48) 884
Shares issued for cash pursuant
to exercise of options 3,109,692 3,759 (381) - - -
Shares issued for cash pursuant
to exercise of warrants 2,450,000 9,800 - - - -
Movement in other comprehensive
income (loss) - foreign currency
translation adjustments - - - - 33 -
Net loss for the year
ended April 30, 2000 - - - - - (3,255)
------------- ------------ ------------- --------------- -------------- ------------
Balance, April 30, 2000 32,062,126 22,143 (381) - (15) (2,371)
Shares issued for cash pursuant
to exercise of options 131,055 192 - - - -
Options issued below market value - 59 - (38) - -
Cash received on subscription
receivable - - 71 - - -
Movement in other comprehensive
income (loss) - foreign currency
translation adjustments - - - - (693) -
Net loss for the year ended
April 30, 2001 - - - - - (16,756)
------------- ------------ ------------- --------------- -------------- ------------
Balance, April 30, 2001 32,193,181 $ 22,394 $ (310) $ (38) $ (708) $ (19,127)
============= ============ ============= =============== ============== ============
</Table>
The accompanying notes are an integral part
of these consolidated financial statements.
8
<Page>
WORLD GAMING PLC
(Formerly Starnet Communications International Inc.)
Consolidated Statements of Cash Flows
(In Thousands of US $)
<Table>
<Caption>
FOR THE YEARS ENDED
APRIL 30,
---------------------------------------------------------
2001 2000 1999
----------------- --------------- --------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (16,756) $ (3,255) $ 2,042
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 2,610 1,665 706
Amortization of deferred website costs - 159 394
Amortization of software development costs - 611 189
Option based compensation expense 22 - -
Deferred income tax - 150 -
Write-off of long-term receivable 1,512 - -
Gain on disposal of fixed assets - (1,562) -
Changes in current assets and liabilities:
Decrease (increase) in reserves and deposits
with credit card processors 94 (2,520) (1,141)
Decrease (increase) in accounts receivable and employee
advances 515 242 (2,537)
Decrease (increase) in prepaid expenses and deposits (39) (384) (87)
Decrease (increase) in other assets 1,049 75 (1,410)
Increase in accounts payable and accrued liabilities 6,368 3,687 851
Increase (decrease) in income taxes payable - (268) 193
Increase in funds held on deposit 1,334 1,129 1,043
Increase (decrease) in deferred revenue (137) (286) 48
----------------- --------------- ------------------
Net Cash Provided by (Used In) Operating Activities (3,428) (557) 291
----------------- --------------- ------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of capital assets (2,205) (4,428) (570)
Transfer from (to) restricted cash 3,040 (7,173) 500
Proceeds from sale of on-line entertainment assets - 1,944 -
Proceeds from sale of marketing assets - 109 -
Deferred website costs - - (423)
Software development costs - - (334)
----------------- --------------- ------------------
Net Cash Provided by (Used in) Investing Activities $ 835 $ (9,548) $ (827)
----------------- --------------- ------------------
</Table>
9
<Page>
WORLD GAMING PLC
(Formerly Starnet Communications International Inc.)
Consolidated Statements of Cash Flows (Continued)
(In Thousands of US $)
<Table>
<Caption>
FOR THE YEARS ENDED
APRIL 30,
-------------------------------------------------------
2001 2000 1999
----------------- --------------- ------------------
CASH FLOWS FROM FINANCING ACTIVITIES
(Increase) decrease in bank indebtedness $ - $ - $ (466)
Increase in long-term receivable - (2,053) -
Payments received on long-term receivable 493 - -
Proceeds from issuance of shares 192 13,559 6,163
Proceeds from note payable 1,500 - -
Principal repayments under capital lease obligations (625) (471) (281)
----------------- --------------- ------------------
Net Cash Provided by Financing Activities 1,560 11,035 5,416
----------------- --------------- ------------------
EFFECT OF EXCHANGE RATES ON CASH (433) 54 (21)
----------------- --------------- ------------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS DURING THE YEAR (1,466) 984 4,859
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 5,984 5,000 141
----------------- --------------- ------------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 4,518 $ 5,984 $ 5,000
================= =============== ==================
Other non-cash transactions:
Leased assets acquired $ 1,001 $ 732 $ 685
Compensation from options issued below market value $ 59 $ - $ -
Supplemental cash flow information:
Interest paid $ 158 $ 84 $ 93
Income tax paid $ - $ 128 $ -
</Table>
The accompanying notes are an integral part of
these consolidated financial statements.
10
<Page>
WORLD GAMING PLC
(Formerly Starnet Communications International Inc.)
Notes to Consolidated Financial Statements
April 30, 2001, 2000 and 1999
NOTE 1 - NATURE OF BUSINESS AND BASIS OF PRESENTATION
World Gaming Plc (formerly Starnet Communications International
Inc.) (the "Company") (Note 18) develops, operates and markets
proprietary software that is currently being used for on-line
gaming. The Company's revenues are earned from licensing fees,
service fees and royalties from licensees located outside North
America.
The Company also provided software for interactive media but the
division was sold in 2000 enabling the Company to focus on on-line
gaming. The results from the interactive media division are
classified as discontinued operations (Note 13).
NOTE 2 - ACCOUNTING POLICIES
The consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the
United States of America. A summary of significant accounting
policies is set out below:
a. Basis of Presentation
The consolidated financial statements include the accounts of the
Company and all its wholly-owned subsidiaries. All significant
intercompany balances and transactions have been eliminated.
Unless otherwise stated, all amounts are in thousands of US
Dollars.
b. Revenue Recognition
Initial license fees of gaming software are recognized as revenue
upon the completion of the license sale transactions. Before the
revenues are recognized, deposits from licensees are recorded as
deferred revenue.
Gaming and monthly licensing royalty revenues and other fees are
recognized over the period services are provided.
Revenues from the resale of Antigua government issued gaming
licenses are recognized when collection is assured.
Gaming revenues, which represent less than 1% of total revenues,
are presented net of customer winnings.
c. Capital Assets
Property and equipment are recorded at cost and are depreciated or
amortized using the straight-line method over the estimated useful
life of the assets at the following rates:
<Table>
Furniture and fixtures 3 years
Computer hardware and equipment 3 years
Computer software 3 years
Automobiles 4 years
</Table>
11
<Page>
WORLD GAMING PLC
(Formerly Starnet Communications International Inc.)
Notes to Consolidated Financial Statements
April 30, 2001, 2000 and 1999
NOTE 2 - ACCOUNTING POLICIES (Continued)
c. Capital Assets (Continued)
Leasehold improvements are amortized over the term of the related
lease using the straight-line method.
One-half of the normal depreciation rate is applied in the year of
acquisition or capitalization of the capital assets.
d. Cash and Cash Equivalents
For the purposes of the statement of cash flows, cash and cash
equivalents consist of cash on hand, balances with banks,
available balances with credit card processors and investments in
money market instruments.
e. Foreign Currency Translation
All transactions in currencies other than the United States dollar
during the year are translated at the exchange rates on the
transaction dates. Monetary assets and liabilities denominated in
a foreign currency are translated at the prevailing year-end rates
of exchange. Exchange gains or losses are included in the
consolidated statements of income (loss) and retained earnings
(deficit).
The financial statements of all subsidiaries expressed in
currencies other than the United States dollar are translated. All
assets and liabilities are translated at the exchange rate on the
balance sheet date and all revenues and expenditures are
translated at the average rate for the year. Translation
adjustments are reflected as a separate component of stockholders'
equity.
f. Leases
Leases which transfer substantially all of the benefits and risks
of ownership are recorded as the acquisition of assets and
incurrence of obligations. Under this method of accounting, both
assets and obligations, including interest thereon, are amortized
over the life of the lease.
g. Advertising
The Company expenses the costs of advertising as incurred.
h. Net Earnings Per Common Share
The Company has adopted Statement of Financial Accounting
Standards No. 128 ("FAS 128") regarding the determination and
disclosure of earnings per share for the purpose of preparing its
financial statements. The calculations of net earnings per common
share are based upon the weighted average number of common shares
of the Company outstanding during each year.
The adoption of FAS 128 has no impact on previously reported
information.
12
<Page>
WORLD GAMING PLC
(Formerly Starnet Communications International Inc.)
Notes to Consolidated Financial Statements
April 30, 2001, 2000 and 1999
NOTE 2 - ACCOUNTING POLICIES (Continued)
i. Stock Options
The Company has elected to follow Accounting Principles Board
Opinion No. 25 in accounting for stock based awards and
consequently has not recognized compensation expense for these
awards made during the year.
j. Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires the Company's
management to make estimates and assumptions that affect the
amounts reported in the consolidated financial statements and
related notes to the consolidated financial statements. Actual
results may differ from those estimates.
k. Recent Accounting Pronouncements
The Company has adopted the provisions of FASB Statement No. 138
"Accounting for Certain Derivative Instruments and Hedging
Activities, (an amendment of FASB Statement No. 133.)" Because the
Company had adopted the provisions of FASB Statement No. 133,
prior to June 15, 2000, this statement is effective for all fiscal
quarters beginning after June 15, 2000. The adoption of this
principal had no material effect on the Company's consolidated
financial statements.
The Company has adopted the provisions of FASB Statement No. 140
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities (a replacement of FASB Statement
No. 125.)" This statement provides accounting and reporting
standard for transfers and servicing of financial assets and
extinguishments of liabilities. Those standards are based on
consistent application of a financial-components approach that
focuses on control. Under that approach, the transfer of financial
assets, the Company recognized the financial and servicing assets
it controls and the liabilities it has incurred, derecognizes
financial assets when control has been surrendered, and
derecognizes liabilities when extinguished. This statement
provides consistent standards for distinguishing transfers of
financial assets that are sales from transfers that are secured
borrowings. This statement is effective for transfers and
servicing of financial assets and extinguishments of liabilities
occurring after March 31, 2001. This statement is effective for
recognition and reclassification of collateral and for disclosures
relating to securitization transactions and collateral for fiscal
years ending after December 15, 2000. The adoption of this
principal had no material effect on the Company's consolidated
financial statements.
13
<Page>
WORLD GAMING PLC
(Formerly Starnet Communications International Inc.)
Notes to Consolidated Financial Statements
April 30, 2001, 2000 and 1999
NOTE 2 - ACCOUNTING POLICIES (Continued)
k. Recent Accounting Pronouncements (Continued)
The Company has adopted the provisions of FIN 44 "Accounting for
Certain Transactions Involving Stock Compensation (an
interpretation of APB Opinion No. 25.)" This interpretation is
effective July 1, 2000. FIN 44 clarifies the application of
Opinion No. 25 for only certain issues. It does not address any
issues related to the application of the fair value method in
Statement No. 123. Among other issues, FIN 44 clarifies the
definition of employee for purposes of applying Opinion 25, the
criteria for determining whether a plan qualifies as a
noncompensatory plan, the accounting consequence of various
modifications to the terms of a previously fixed stock option or
award, and accounting for an exchange of stock compensation awards
in a business combination. The adoption of this principal had no
material effect on the Company's consolidated financial
statements.
l. Pronouncements Issued Not Yet Adopted
In July, 2001, the Financial Accounting Standards Board issued two
statements - Statement 141, BUSINESS COMBINATIONS, and Statement
142, GOODWILL AND OTHER INTANGIBLE ASSETS, which will potentially
impact the Company's accounting for its intangible assets.
Statement 141:
o Eliminates the pooling method for accounting for business
combinations.
o Requires that intangible assets that meet certain criteria
be reported separately from goodwill.
o Requires negative goodwill arising from a business
combination to be recorded as an extraordinary gain.
Statement 142:
o Eliminates the amortization of goodwill and other
intangibles that are determined to have an indefinite life.
o Requires, at a minimum, annual impairment tests for goodwill
an other intangible assets that are determined to have an
indefinite life.
Upon adoption of these Statements, the Company is required to:
o Re-evaluate goodwill and other intangible assets that arose
from business combinations entered into before July 1, 2001.
If the recorded other intangibles assets do not meet the
criteria for recognition, they should be reclassified to
goodwill. Similarly, if there are other intangible assets
that meet the criteria for recognition but were not
separately recorded from goodwill, they should be
reclassified from goodwill.
14
<Page>
WORLD GAMING PLC
(Formerly Starnet Communications International Inc.)
Notes to Consolidated Financial Statements
April 30, 2001, 2000 and 1999
NOTE 2 - ACCOUNTING POLICIES (Continued)
l. Pronouncements Issued Not Yet Adopted (Continued)
o Reassess the useful lives of intangible assets and adjust
the remaining amortization periods accordingly.
o Write-off any remaining negative goodwill.
The Company has not yet completed its full assessment of the
effects of these new pronouncements on its financial statements
and so is uncertain as to the impact. The standards generally are
required to be implemented by the Company in its 2002 financial
statements.
m. Reclassifications
Certain prior year amounts have been reclassified to conform to
2001 presentations.
NOTE 3 - RESERVES AND DEPOSITS WITH CREDIT CARD PROCESSORS
Reserves and deposits with credit card processors consist of
rolling reserves held by merchant banks and funds for transactions
processed and awaiting transfer to the Company's bank accounts. At
April 30, 2001 and 2000, the balance of these reserves and
deposits were $3,763 and $3,857, respectively.
NOTE 4 - ACCOUNTS RECEIVABLE
Accounts receivable consist of the following:
<Table>
<Caption>
APRIL 30,
--------------------------------------
2001 2000
------------------ ------------------
Amounts due from licensees $ 1,596 $ 3,174
Income tax receivable (Note 8) 123 128
Other 648 413
Less: allowance for bad debts (891) (1,707)
------------------ ------------------
$ 1,476 $ 2,008
================== ==================
</Table>
The Company incurred significant credit losses during the year as
a result of the ongoing investigation into the business operations
of the Company by the Canadian authorities. These amounts have
been fully reserved for.
NOTE 5 - DEFERRED GAMING LICENSE COSTS
Deferred gaming license costs of $300 (2000 - $1,349) relate to
amounts paid to the Antiguan government for the purchase of casino
licenses. These licenses are held for sale to prospective
licensees.
15
<Page>
WORLD GAMING PLC
(Formerly Starnet Communications International Inc.)
Notes to Consolidated Financial Statements
April 30, 2001, 2000 and 1999
NOTE 6 - RESTRICTED CASH
<Table>
<Caption>
APRIL 30,
---------------------------------------
2001 2000
----------------- -----------------
Funds restricted by Canadian Authorities (Note 17) $ 3,925 $ 7,024
================= =================
</Table>
The balance is classified as current at April 30, 2001 because the
lawsuit was settled and the funds were used to pay off a current
liability.
Subsequent to year end, $3,602 of the funds previously restricted
by the Canadian authorities was released and is included in cash
and cash equivalents.
NOTE 7 - CAPITAL ASSETS
Capital assets are recorded at cost less accumulated depreciation
and consist of the following:
<Table>
<Caption>
ACCUMULATED NET BOOK
COST DEPRECIATION VALUE
--------------- ------------- -------------------
APRIL 30, 2001
Computer hardware and equipment $ 5,246 $ 2,911 $ 2,335
Computer hardware under capital leases 1,626 487 1,139
Automobiles under capital leases 114 42 72
Leasehold improvements 459 100 359
Furniture and fixtures 352 160 192
Computer software 2,176 1,061 1,115
Domain name 45 18 27
--------------- --------------- -----------------
$ 10,018 $ 4,779 $ 5,239
=============== =============== =================
APRIL 30, 2000
Computer hardware and equipment $ 3,298 $ 1,140 $ 2,158
Computer hardware under capital leases 1,174 734 440
Automobiles 202 44 158
Leasehold improvements 509 220 289
Furniture and fixtures 203 97 106
Computer software 2,074 393 1,681
Domain name 45 9 36
--------------- --------------- -----------------
$ 7,505 $ 2,637 $ 4,868
=============== =============== =================
</Table>
16
<Page>
WORLD GAMING PLC
(Formerly Starnet Communications International Inc.)
Notes to Consolidated Financial Statements
April 30, 2001, 2000 and 1999
NOTE 8 - INCOME TAXES
The Company's operations located in Canada are subject to tax to
the extent that income is generated in the country. In 2001 and
2000, the losses related to development activities allow a
recovery of tax previously paid:
<Table>
<Caption>
FOR THE YEARS ENDED
APRIL 30,
--------------------------------------
2001 2000
------------------ ------------------
Tax payable (receivable) - beginning of year $ (128) $ 268
Provision for (recovery of) current income tax - (266)
Payments of tax - (128)
Difference due to exchange rate 5 (2)
------------------ ------------------
Tax receivable - end of year (Note 4) $ (123) $ (128)
================== ==================
Deferred asset - beginning of year $ - $ (146)
Deferred income tax expense - 150
Difference due to exchange rate - (4)
------------------ ------------------
Deferred income tax asset, end of year $ - $ -
================== ==================
</Table>
At April 30, 2001, the Company had net operating loss
carryforwards in its Canadian companies of approximately
$4,940,000 that may be offset against future taxable income in
Canada through 2008. No tax benefit has been reported in the
consolidated financial statements as the Company believes that the
carryforwards will expire unused. Accordingly, the potential tax
benefits fo the net operating loss carryforwards are offset by a
valuation allowance of the same amount.
The income tax benefit differs from the amount computed at income
tax rates of approximately 45% as follows:
<Table>
<Caption>
FOR THE YEARS ENDED
APRIL 30,
--------------------------------------
2001 2000
------------------ ------------------
Income tax benefit at statutory rate $ 1,465,145 $ 759,733
Change in valuation allowance (1,465,145) (759,733)
------------------ ------------------
$ - $ -
================== ==================
</Table>
Deferred tax assets (liabilities) are comprised of the following:
<Table>
<Caption>
FOR THE YEARS ENDED
APRIL 30,
--------------------------------------
2001 2000
------------------ ------------------
Income tax benefit at statutory rate $ 2,224,878 $ 759,733
Change in valuation allowance (2,224,878) (759,733)
------------------ ------------------
$ - $ -
================== ==================
</Table>
NOTE 9 - FUNDS HELD ON DEPOSIT
As of April 30, 2001, the Company held $3,452 (2000 - $2,118) in
cash representing funds held on deposit in the form of e-cash
balances. These deposits are non-interest bearing and
repayable on demand.
17
<Page>
WORLD GAMING PLC
(Formerly Starnet Communications International Inc.)
Notes to Consolidated Financial Statements
April 30, 2001, 2000 and 1999
NOTE 10 - CAPITAL LEASE OBLIGATIONS
At April 30, 2001, the Company had entered into capital leases
for equipment and automobiles. The future payments for the 12
months ended April 30 are:
<Table>
2002 $ 808
2003 502
2004 143
2005 13
2006 6
------------------
Total minimum lease payments 1,472
Less amounts representing interest at rates varying
from 65 to 18% (188)
------------------
Present value of minimum lease payments 1,284
Current portion of capital lease obligations (677)
------------------
$ 607
==================
</Table>
Some of the equipment leases require the Company to pledge term
deposits for $89 (2000 - $210). The term deposits will be
returned upon the expiration of the leases and are interest
bearing.
NOTE 11 - CAPITAL STOCK
Authorized
<Table>
100,000,000 Class A voting common shares, par value $0.001
50,000,000 Class B nonvoting common shares, par value $0.001
50,000,000 Preferred shares, par value $0.001
</Table>
(a) The Company had the following shares and warrants issued
and outstanding:
<Table>
<Caption>
2001 2000
--------------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------- --------------- --------------- ----------------
Outstanding Class A
shares, beginning of year 32,062,126 $ 22,143 26,502,434 $ 8,584
Options issued below
market value - 59 - -
Shares issued for cash
pursuant to exercise
of options 131,055 192 3,109,692 3,759
Shares issued for cash
pursuant to exercise
of warrants - - 2,450,000 9,800
---------------- --------------- --------------- ----------------
Outstanding Class A
shares, end of year 32,193,181 $ 22,394 32,062,126 $ 22,143
================ =============== =============== ================
</Table>
18
<Page>
WORLD GAMING PLC
(Formerly Starnet Communications International Inc.)
Notes to Consolidated Financial Statements
April 30, 2001, 2000 and 1999
NOTE 11 - CAPITAL STOCK (Continued)
On December 2, 1997, the Company completed an offering of
2,450,000 units at $1.00 per unit. Each unit consisted of one
Class A voting common share and a single warrant exercisable at
$2.00. Each warrant exercised at $2.00 entitled the purchaser to
one Class A voting common share and a second warrant (the
"Piggyback Warrant"). Each Piggyback Warrant was exercisable,
within one year of the Piggyback Warrant being issued, at $4.00.
The exercising of the Piggyback Warrant entitled the purchaser to
one share of common stock.
During the year ended April 30, 1999, all 2.45 million warrants
at $2.00 had been exercised. During the year ended April 30,
2000, all of the 2.45 million Piggyback Warrants were exercised
at $4.00 for total proceeds of $9.8 million.
(b) Stock Options
On March 12, 1998, the Board of Directors approved a stock option
plan, which authorized the issuance of 3,000,000 options to
employees of the Company and its subsidiaries at an exercise
price of $0.74. The options expire on January 1, 2008. On
December 31, 1998, the Board of Directors authorized the issuance
of up to 4,000,000 additional options at an exercise price to be
determined based on the trading price of the Company's shares on
the grant date. On December 23, 1999, the Board of Directors
authorized the issuance of up to 5,000,000 additional options at
an exercise price to be determined based on the trading price of
the Company's shares on the grant date.
Options issued to employees generally vest straight-line on a
monthly basis over two years while options issued to directors
vest one-half immediately and one-half after one year. Options
expire ten years after the date granted. As at April 30, 2001,
7,128,995 shares were reserved for issuance pursuant to the
exercise of options.
A summary of the Company's stock option activity and related
information follows:
<Table>
<Caption>
2000 2000
--------------------------------- ---------------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
NUMBER OF EXERCISE NUMBER OF EXERCISE
OPTIONS PRICE OPTIONS PRICE
---------------- --------------- --------------- ----------------
Outstanding at May 1 5,244,724 $ 2.99 5,136,795 $ 1.45
Granted 4,296,371 2.47 3,719,900 3.67
Exercised (131,055) 1.47 (3,109,692) 1.21
Forfeited (1,610,583) 3.19 (502,279) 3.04
---------------- --------------- --------------- ----------------
Outstanding at April 30, 7,799,457 $ 2.64 5,244,724 $ 2.99
================ =============== =============== ================
</Table>
19
<Page>
WORLD GAMING PLC
(Formerly Starnet Communications International Inc.)
Notes to Consolidated Financial Statements
April 30, 2001, 2000 and 1999
NOTE 11 - CAPITAL STOCK (Continued)
At April 30, 2001, options outstanding were as follows:
<Table>
<Caption>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------------- -------------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
RANGE OF NUMBER REMAINING AVERAGE NUMBER AVERAGE
EXERCISE OF CONTRACTUAL EXERCISE OF EXERCISE
PRICES OPTIONS LIFE (YEARS) PRICE OPTIONS PRICE
-------------------- ------------- ------------- ---------------- --------------- ---------------
$0.31 - $1.43 1,708,893 9.8 $ 0.49 714,908 $ 0.38
$1.44 - $2.50 1,241,116 8.1 1.74 1,058,356 1.65
$2.51 - $5.99 4,336,884 8.9 3.13 3,196,244 3.09
$6.00 - $11.00 469,696 9.7 7.36 83,044 7.86
$11.01 - $23.06 42,868 8.1 13.73 40,222 13.70
-------------------- ------------- --------------- ---------------- --------------- ---------------
$0.31 - $23.06 7,799,457 9.5 $ 3.14 5,092,774 $ 3.07
==================== ============= =============== ================ =============== ===============
</Table>
c. Accounting for Stock Based Compensation
The Company has adopted the disclosure-only provisions of FAS
123, Accounting for "Stock-Based Compensation". Accordingly, no
compensation cost has been recognized for the stock option plan.
Had compensation cost for the Company's stock option plan been
determined based on the fair value at the grant date for awards
in 2001 and 2000 consistent with the provisions of SFAS No. 123,
the Company's loss and loss per share would have been increased
to the pro forma amounts indicated below:
<Table>
<Caption>
APRIL 30,
--------------------------------------
2001 2000
------------------ ------------------
Net income (loss) as reported $ (16,756) $ (3,255)
Pro forma net income (loss) under FAS 123 (19,455) (3,255)
Net income (loss) per share - basic, as reported (0.52) (0.16)
Pro forma net income (loss) per share - basic,
under FAS 123 (0.60) (0.16)
Net income (loss) per share - diluted, as reported - -
Pro forma net income (loss) per share - diluted,
under FAS 123 - -
</Table>
For purposes of pro forma disclosures, the estimated fair value
of options granted is amortized to expense over a 2 year period.
The fair value of option grants is estimated on the date of grant
using the Black-Scholes option-pricing model discounted for lack
of liquidity with the following weighted-average assumptions.
<Table>
<Caption>
APRIL 30,
--------------------------------------
2001 2000
------------------ ------------------
Dividend yield 0% 0%
Expected volatility 171% 219%
Risk-free interest rate 5.98% 5.08%
Expected lives 2 years 2 years
</Table>
20
<Page>
WORLD GAMING PLC
(Formerly Starnet Communications International Inc.)
Notes to Consolidated Financial Statements
April 30, 2001, 2000 and 1999
NOTE 12 - COMMITMENTS AND CONTINGENCIES
At April 30, 2001, the Company has entered into commitments for
leases for premises and equipment. The future payments for the 12
months ended April 30 are:
<Table>
2002 $ 386
2003 386
2004 386
2005 379
2006 32
------------
$ 1,569
============
</Table>
On August 20, 1999, the Royal Canadian Mounted Police (RCMP)
obtained a search warrant and searched the Vancouver, Canada
offices of Starnet Communications Canada, Inc., a subsidiary of
the company. The basis for the search and continuing
investigation ("the Investigation") was the allegation of the
RCMP that the Company and some of its officers, directors and
employees were breaching certain gaming provisions contained in
the Criminal Code of Canada.
On August 25, 1999, the RCMP obtained an ex parte restraint order
pursuant to the provisions of the Criminal Code of Canada. This
order prevents the Company and Starnet Systems International Inc.
from accessing certain funds located in their Canadian bank
accounts. In September 1999, the Company brought an application
to have the restraint order revoked. This application was
unsuccessful. On February 24, 2000, the restraint order was
renewed for a further six months.
As of April 30, 2001, the Company has accrued a liability of
$4,000 for the settlement of the Investigation and is included in
the accrued settlement of legal issues account on the balance
sheet. The Investigation was settled and completed subsequent to
year end (see Note 18).
Between October 15, 1999 and December 9, 1999, ten class action
claims were commenced in the United States against the Company
and some of its directors and officers. These class action
lawsuits allege that material misrepresentations regarding the
nature and inherent risks of the Company's business were
knowingly made in filings to the United States Securities and
Exchange Commission, press releases and other public statements.
The amount of the damages claimed is unspecified. These actions
have now been consolidated in a single proceeding.
On June 20, 2001, the parties signed a Memorandum of
Understanding (MOU) containing the essential terms of a
settlement between the Company and the Plaintiffs. Under the MOU,
the Plaintiffs will receive 1,050,000 shares of the Company's
common stock. In addition, the Company will pay certain
administrative expenses and expenses incurred by Plaintiff's
co-lead counsel up to $100. As of April 30, 2001, the Company has
accrued a liability for this class action lawsuit in the amount
of $1,409 consisting of the value of the shares on June 20, 2001
(1,050,000 shares at $1.21 per share), the additional expenses up
to $100 and an estimated $39 of additional legal expense. The
amount is included in the accrued settlement of legal issues
account. See Note 18 for additional explanations.
21
<Page>
WORLD GAMING PLC
(Formerly Starnet Communications International Inc.)
Notes to Consolidated Financial Statements
April 30, 2001, 2000 and 1999
NOTE 12 - COMMITMENTS AND CONTINGENCIES (Continued)
On September 16, 1999, Las Vegas Casino Inc. ("LVC") commenced an
action against the Company, a number of its subsidiaries and
various employees of the Company and its subsidiaries. LVC
alleges that the Company breached and wrongfully terminated its
license agreement and misappropriated $15 million from LVC, and
that LVC lost gambling revenues in the amount of $1 billion as a
result of the breach and wrongful termination. LVC had previously
entered into a license agreement with Starnet Systems
International Inc. ("Starnet Systems"). Starnet Systems
terminated the license agreement because of LVC's non-payment of
its royalty fees.
On July 12, 2000, the Supreme Court of British Columbia granted a
stay of the lawsuit as against Starnet Systems only. Should LVC
wish to proceed with its claim against Starnet Systems, it must
do so through the arbitration process provided for in the
software license agreement. LVC has not yet taken any steps to do
so. The Company filed a motion with the Supreme Court of British
Columbia to require LVC to post security for costs sought against
the Company. The court denied the Company's motion on February
22, 2001, while allowing the Company the opportunity to reapply
as it may wish. At the present time, the Company believes that
these allegations are without merit and management has been
unable to determine the likely outcome. Consequently, no
provision for loss has been made.
NOTE 13 - SALE OF BUSINESS SEGMENTS
a. Marketing Department
On February 18, 2000, the Company sold certain assets to a group
of former employees who were previously employed in the marketing
department. The Company also entered into an agreement whereby
the new company would employ a number of employees comprising the
marketing department of the Company and provide marketing
services to the Company for a period of three years.
The assets with a net book value of $109 were sold for total
consideration of $109 consisting of a promissory note. The amount
is subject to interest at a rate of 5% per annum and is repayable
in 36 installments of $3 per month, ending February 2003. There
was no gain or loss recorded on the transaction.
<Table>
Total consideration $ 109
Net book value of assets sold $ 109
Net gain or loss $ -
</Table>
22
<Page>
WORLD GAMING PLC
(Formerly Starnet Communications International Inc.)
Notes to Consolidated Financial Statements
April 30, 2001, 2000 and 1999
NOTE 13 - SALE OF BUSINESS SEGMENTS (Continued)
b. On-line Entertainment Division
On March 31, 2000, the Company sold certain assets, consisting
primarily of computer equipment, furniture, and website URL
domain names, for total consideration of $2,300. The amount is
payable over a three year period, including a down payment upon
closing of $460, and is non-interest bearing. The Company has
recorded an 8% discount on the total amount receivable amounting
to $356. The minimum monthly payment is $10 but at such time that
the cumulative net profit of the business, before tax, amounts to
$460, the remaining amount, less a $700 final payment due on July
1, 2003, will be paid in equal monthly installments from that
date until July 1, 2003 at which time any remaining amount will
be due. The parties have also entered into an escrow agreement
whereby the URL domains will be used as security until the
purchase price is paid in full.
The gain of $1,562 during the year ended April 30, 2000 is
calculated as follows:
<Table>
Total sale price $ 2,300
Discount at 8% (356)
------------------
1,944
Exchange rate difference 16
Net book value of assets sold (398)
------------------
Net gain on sale $ 1,562
==================
</Table>
The following is a summary of the discontinued operations for the
years ended April 30.
<Table>
<Caption>
2001 2000 1999
------------------ ------------------ ------------------
Sales $ - $ 2,705 $ 3,518
Cost of sales - 1,586 1,321
General and administrative - 1,175 860
Depreciation and amortization - 299 224
Interest and bank charges - - 69
Income tax - - 33
------------------ ------------------ ------------------
Income (loss) from discontinued
operations $ - $ (355) $ 1,011
================== ================== ==================
</Table>
No income tax expense or benefit has been attributed to the
discontinued operations.
23
<Page>
WORLD GAMING PLC
(Formerly Starnet Communications International Inc.)
Notes to Consolidated Financial Statements
April 30, 2001, 2000 and 1999
NOTE 14 - LONG-TERM RECEIVABLES
Payments due to the Company under the long-term receivables for
the twelve months ended April 30 are:
<Table>
<Caption>
2001
------------------
2002 $ 259
2003 170
2004 1,444
2005 -
------------------
Total minimum payments 1,873
Less: interest portion (341)
------------------
Present value of minimum payments 1,532
Less: allowance for bad debts (1,532)
------------------
Total $ -
==================
</Table>
The long-term receivables related to the sale of business
segments (Note 13).
NOTE 15 - RESTRUCTURING OF OPERATIONS
The restructuring expense consists of:
<Table>
Termination benefits - January 2001 $ 299
Termination benefits - April 2001 1,179
Other restructuring costs - April 2001 58
------------------
$ 1,536
==================
</Table>
In January 2001, the Company terminated 26 employees at a cost of
$299 at its development office in Vancouver, Canada. The
employees affected were in the areas of management,
administration, and operational support.
In April 2001, the Company restructured its operations in both
St. John's, Antigua and Vancouver, Canada to decrease its costs
by reducing inefficiencies and eliminating duplicated functions.
Reductions in staff were made throughout the organization and
included management and administration, sales, marketing,
development, and operations. A total of 29 staff were terminated,
11 in Antigua and 18 in Canada, for a total cost of $1,179.
The Company has accrued a further $58 for costs associated with
downsizing the physical requirements of the reduced staffing
levels.
Of the total amount expensed, $1,276 remains accrued at April 30,
2001 and is included in the accounts payable and accrued
liabilities.
24
<Page>
WORLD GAMING PLC
(Formerly Starnet Communications International Inc.)
Notes to Consolidated Financial Statements
April 30, 2001, 2000 and 1999
NOTE 16 - NOTE PAYABLE
Note payable consists of the following:
<Table>
<Caption>
APRIL 30,
2001
------------------
Note payable to a company, interest at 8.0% per annum, payable
monthly; principal balance due December 31, 2001 and is
convertible into common shares of the Company at the option of
the note holder; secured by equipment
of the Company. $ 1,500
------------------
Total Note Payable $ 1,500
==================
</Table>
The note payable is classified as long-term because it was
converted to equity subsequent to the year end (see Note 18).
NOTE 17 - MAJOR CUSTOMERS
Pertinent details of the gross sales to major customers during
the year ended April 30, 2001 are as follows:
<Table>
<Caption>
PERCENT
CUSTOMER GROSS SALES GROSS SALES
--------------------------------- ------------------ ------------------
Customer A $ 6,338 31%
Customer B 2,786 14%
Customer C 1,973 10%
------------------ ------------------
$ 11,097 55%
================== ==================
</Table>
NOTE 18 - SUBSEQUENT EVENTS
CORPORATE REORGANIZATION
On May 25, 2001, pursuant to an Agreement and Plan of
Reorganization executed on May 17, 2001 ("Reorganization
Agreement"), Starnet Communications International Inc.
("Starnet") became a direct, wholly-owned subsidiary of World
Gaming Plc ("World Gaming"), a company organized in England and
Wales for the purpose of facilitating the reorganization of
Starnet into a new holding company structure ("Reorganization").
In the Reorganization, each share of Class A common stock of
Starnet issued and outstanding was converted into one American
Depositary Share of World Gaming ("ADS"), where each ADS
represents one ordinary share of World Gaming. The Reorganization
was effected by merging a newly-formed direct, wholly-owned
Delaware subsidiary of World Gaming with and into Starnet with
Starnet surviving. As part of the reorganization, World Gaming
established December 31 as its year end.
25
<Page>
WORLD GAMING PLC
(Formerly Starnet Communications International Inc.)
Notes to Consolidated Financial Statements
April 30, 2001, 2000 and 1999
NOTE 18 - SUBSEQUENT EVENTS (Continued)
CONVERSION OF NOTE PAYABLE
On May 17, 2001, the holder of the note payable (Note 16) agreed
to convert the principal balance of $1,500 into 2,000,000 shares
of the Company. Consequently, the note is deemed to have been
repaid in all respects, and the Company has no further obligation
with respect to the note, including any interest that may have
been payable under the original terms of the note.
SETTLEMENT OF INVESTIGATION
On August 17, 2001, the Company reached a settlement with
Canadian authorities whereby a subsidiary of the Company plead
guilty to a single charge under the Criminal Code of Canada. The
subsidiary was fined $100 CDN plus $15 CDN victim surcharge. As
well, the Company consented to a forfeiture of restricted cash
(Note 6) in the amount of $3,925 US. The amount of the settlement
is included in the accrued settlement of legal issues liability
on the balance sheet at April 30, 2001.
MEMORANDUM OF UNDERSTANDING IN CLASS ACTION LAWSUIT
On June 20, 2001, the parties signed a Memorandum of
Understanding (MOU) containing the essential terms of a
settlement between the Company and the Class Action Plaintiffs
(Class) (see Note 12). Under the MOU, the Class will receive
1,050,000 shares of ADRs of World Gaming Plc ("Settlement
Shares") with a minimum value of $1,050,000. If in the 10 trading
days preceding the effective date of the settlement the weighted
mean trading price (as calculated by a formula in the MOU) of the
shares of ADRs of World Gaming is less than $1.00 per share, the
Class will receive additional shares so that the value of the
Settlement Shares equals $1,050,000. Also under the Settlement,
the Company will pay certain administrative expenses, up to
$50,000, and certain expenses incurred by Plaintiffs' Co-Lead
Counsel, up to $50,000. The Plaintiffs have the right to conduct
limited confirmatory discovery of the Company.
The Settlement is conditioned upon the occurrence of several
events. The parties must draft a mutually acceptable Stipulation
of Settlement to be filed with the Court. The Court must give
preliminary approval to the terms of the Settlement. Notice must
be sent to the class members advising them of the terms of the
Settlement and of their right to opt out or object to the terms
of the Settlement. Finally, the Court must approve the Settlement
after holding a hearing on its terms. In addition, the Settlement
is conditioned on the issuance of the ordinary shares of World
Gaming Plc underlying the Settlement Shares. The Company has the
right under the MOU to withdraw from the Settlement in the event
that members of the Class holding more than 3% of the outstanding
shares of ADRs of World Gaming Plc outstanding as of the date the
settlement is filed determine to opt out of the Settlement.
26
<Page>
WORLD GAMING PLC
(Formerly Starnet Communications International Inc.)
Notes to Consolidated Financial Statements
April 30, 2001, 2000 and 1999
NOTE 19 - FOURTH QUARTER LOSS RECONCILIATION
Pursuant to APB 28, "Interim Financial Reporting", the following
is a reconciliation of the net loss as reported in the Company's
January 31, 2000 consolidated financial statements to the net
loss as recorded at April 30, 2001.
<Table>
Net loss reported January 31, 2001 $ (3,284)
4th quarter accrual for settlement of RCMP Investigation (3,482)
4th quarter accrual for memorandum of understanding for
settlement of the class action lawsuit (1,042)
4th quarter accrual for restructuring charges (1,237)
Adjustment to funds held on deposit (1,097)
Provision for bad debts (3,150)
Other 4th quarter adjustments made by management to write off bad
debts, redomiciling costs paid and general
loss from operations in the 4th quarter. (3,464)
------------------
Net loss reported April 30, 2001 $ (16,756)
==================
</Table>
27