-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, T+DKt16xdI4qc5/wHgeczEtyXtD56cDopgMiKHI0C/aXMEVHkCHoIFZahoSWOsWn /K/JyUmIotAq9gjD2BuaEw== 0001047469-99-030732.txt : 20020916 0001047469-99-030732.hdr.sgml : 20020916 19990810171100 ACCESSION NUMBER: 0001047469-99-030732 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990413 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19990810 DATE AS OF CHANGE: 20020916 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STARMEDIA NETWORK INC CENTRAL INDEX KEY: 0001057334 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374] IRS NUMBER: 061461770 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-31138 FILM NUMBER: 99683079 BUSINESS ADDRESS: STREET 1: 29 WEST 36TH STREET 5TH FL CITY: NEW YORK STATE: NY ZIP: 10018 BUSINESS PHONE: 2125489600 MAIL ADDRESS: STREET 1: 29 WEST 36TH STREET FIFTH FLOOR CITY: NEW YORK STATE: NY ZIP: 10018 8-K 1 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): May 26, 1999 StarMedia Network, Inc. ------------------------------------------------------------------------------ (Exact Name of Registrant as Specified in its Charter) Delaware ------------------------------------------------------------------------------ (State or Other Jurisdiction of Incorporation) 1-15015 06-1461770 --------------------------------------- ------------------------------------- (Commission File Number) (I.R.S. Employer Identification No.) 29 WEST 36TH STREET, NEW YORK, NY 10018 ----------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) (212) 548-9600 ------------------------------------------------------------------------------ (Registrant's Telephone Number, Including Area Code) N.A. ------------------------------------------------------------------------------ (Former Name or Former Address, if Changed Since Last Report) ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. On May 26, 1999, StarMedia Network, Inc., a Delaware corporation ("StarMedia" or the "Company"), acquired all of the outstanding stock of Wass Net, S.L., a company organized under the laws of Spain ("Wass Net"). The acquisition was completed pursuant to the terms of a Share Purchase Agreement, dated as of May 4, 1999, by and among Starmedia, Wass Net, Geradons, S.L., Salvador Porte and Eduardo Kawas. Wass Net is a Spanish-language online service with extensive community applications. Prior to the acquisition, all of the outstanding stock of Wass Net was owned by Geradons, S.L. The consideration for the acquisition consisted of an aggregate of 1,133,334 shares of StarMedia common stock, par value $0.001 per share. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA CONSOLIDATED FINANCIAL INFORMATION AND EXHIBITS StarMedia hereby files this Form 8-K to file the financial statements and related pro forma consolidated financial statements required pursuant to Item 7 of Form 8-K with respect to the Wass Net merger. (a) Financial Statements of Business Acquired (b) Pro Forma Consolidated Financial Information The Pro Forma Consolidated Financial Statements are based on the historical financial statements of the Company, adjusted to give effect to the following transactions: a) the sale of 3,727,272 shares of common stock at $11 per share to six strategic investors between April 30, 1999 and May 5, 1999, net of costs; b) the issuance of 8,050,000 shares of common stock in connection with the Company's initial public offering at $15 per share, less related costs, on May 25, 1999 and the conversion of 31,996,667 shares of redeemable convertible preferred stock in connection therewith; c) the Wass Net Merger; and d) the acquisition of KD Sistemas de Informacao, Ltda ("KD Acquisition") on April 13, 1999 The Pro Forma Consolidated Balance Sheet at March 31, 1999 assumes that the four transactions noted above occurred on March 31, 1999. The Pro Forma Consolidated Statements of Operations for the three months ended March 31, 1999 and for the year ended December 31, 1998 assume that the KD Acquisition occurred on January 1, 1998. Additionally, the Pro Forma Consolidated Statements of Operations for the three months ended March 31, 1999 and 1998 and for the years ended December 31, 1998 and 1997, reflect the Wass Net Merger which was accounted for as a pooling of interests. Accordingly, the Pro Forma Consolidated Financial Statements include the results of Wass Net for all periods presented. The Pro Forma Consolidated Financial Statements should be read in conjunction with the audited consolidated financial statements of the Company and the related notes thereto which are included in the Company's Registration Statement on Form S-1, as amended, dated May 25, 1999, and the Company's Form 8-K filed on June 25, 1999 (each as filed with the Securities and Exchange Commission) and the audited financial statements of Wass Net that are filed herewith. The Pro Forma Consolidated Financial Information does not purport to present what the Company's results of operations would actually have been if the strategic investors, initial public offering, the KD Acquisition, and Wass Net Merger had occurred on the assumed dates, as specified above, or to project the Company's financial condition or results of operations for any future period. (c) Exhibits Exhibit Number Description 2.1 Share Purchase Agreement, dated as of May 4, 1999, by and among StarMedia, Wass Net and the shareholders of Wass Net (Incorporated by reference to Exhibit 10.19 of the Company's Registration Statement, Form S-1, No. 333-74659) 23.1 Consent of Lavinia Auditors, S.L. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. 2 REPORT OF INDEPENDENT PUBLIC AUDITORS Board of Directors and Stockholders Wass Net, S.L. We have audited the accompanying balance sheets of Wass Net, S.L. (the "Company") as of December 31, 1998 and 1997, and the related statements of operations and comprehensive income (loss), changes in stockholders' equity and cash flows for the year ended December 31, 1998 and the period from August 29 to December 31, 1997. 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 in accordance with generally accepted auditing standards in the United States. Those standards 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Wass Net, S.L. at December 31, 1998 and 1997 and its results of operations and cash flows for the year ended December 31, 1998 and the period from August 29 to December 31, 1997, in conformity with generally accepted accounting principles in the United States. Barcelona July 23, 1999 LAVINIA AUDITORS, S.L. Numero del R.O.A.C. SO998 --------------------- Fdo.: Jaume Pigem Jutglar 3 WASS NET, S.L. BALANCE SHEETS (Amounts expressed in U.S. dollars, except as indicated)
December 31, December 1998 31,1997 ---------------- --------------- ASSETS Current assets: Cash $ 7 - Short-term investments 172 6,816 Accounts receivable 2,789 11,005 Other 1,333 2,887 ---------------- --------------- Total current assets 4,301 20,708 Equipment and other fixed assets, net 54,029 3,364 Deposits and other assets 274 258 ---------------- --------------- TOTAL ASSETS $ 58,604 24,330 ---------------- --------------- ---------------- ---------------
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 12,940 6,134 Obligations under bank credit facilities 12,096 11,704 ---------------- -------------- Total liabilities 25,036 17,838 --------------- --------------
Shareholders' equity: Capital stock, 7,000 and 500 ordinary shares authorized, issued and outstanding, respectively, par value 1,000pesetas 45,840 3,356 Additional paid-in capital 51,367 Accumulated comprehensive income (loss) currency translation adjustment 5,511 (66) Retained earnings (accumulated deficit) (69,150) 3,202 -------- -------- Total shareholders' equity 33,568 6,492 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $58,604 24,330 -------- -------- -------- --------
The accompanying notes are an integral part of these financial statements. 4 WASS NET, S.L. STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (Amounts expressed in U.S. dollars)
For the period For the year from August 29 Ended December to December 31, 1998 31, 1997 --------------------- ------------------ REVENUES $ 20,541 12,225 OPERATING COSTS AND EXPENSES Product and technology development, sales and marketing, general and administrative (84,292) (7,731) Depreciation (7,008) (117) --------------------- ------------------ INCOME (LOSS) FROM OPERATIONS (70,759) 4,377 OTHER INCOME (EXPENSE) Interest expense (2,669) - Interest income 1,076 197 --------------------- ------------------ (1,593) 197 --------------------- ------------------ INCOME (LOSS) BEFORE INCOME TAXES (72,352) 4,574 PROVISION FOR INCOME TAXES - 1,372 --------------------- ------------------ NET INCOME (LOSS) $ (72,352) 3,202 --------------------- ------------------ --------------------- ------------------ COMPREHENSIVE INCOME (LOSS) Net income (loss) $ (72,352) 3,202 Change in foreign currency translation adjustment 5,577 (66) --------------------- ------------------ Comprehensive income (loss) $ (66,775) 3,136 --------------------- ------------------ --------------------- ------------------
The accompanying notes are an integral part of these financial statements. 5 WASS NET, S.L. STATEMENTS OF CASH FLOWS (Amounts expressed in U.S. dollars)
For the period For the year from August 29 ended December to December 31, 31, 1998 1997 --------------------- ------------------- Cash flows from operating activities Net income (loss) (72,352) 3,202 Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation 7,008 117 Changes in operating assets and liabilities Accounts receivable 8,438 (11,078) Accounts payable 6,075 6,175 Other 1,644 (2,906) --------------------- ------------------- Net cash used in operating activities (49,187) (4,490) --------------------- ------------------- Cash flows from investing activities Additions to equipment (54,768) (3,503) Purchases of short-term investments - (6,862) Sales of short-term investments 6,699 - Other - (260) --------------------- ------------------- Net cash used in investing activities (48,069) (10,625) --------------------- ------------------- Cash flows from financing activities Capital contributions 42,484 3,356 Loan from shareholders (subsequently contributed to capital) 54,261 - Proceeds from credit facilities, net (331) 11,782 --------------------- ------------------- Net cash provided by financing activities 96,414 15,138 --------------------- ------------------- Effects of foreign exchange rate changes on cash 849 (23) --------------------- ------------------- Increase in cash 7 - Cash at beginning of the year - - --------------------- ------------------- Cash at end of the year 7 - --------------------- ------------------- --------------------- ------------------- Cash paid during the year for taxes - - --------------------- ------------------- --------------------- ------------------- Cash paid during the year for interest 2,669 - --------------------- ------------------- --------------------- -------------------
The accompanying notes are an integral part of these financial statements. 6 WASS NET, S.L. STATEMENTS OF SHAREHOLDERS' EQUITY (Amounts expressed in U.S. dollars) For the period For the year from August 29 ended December to December 31, 1998 31,1997 -------------------- ------------------- SHARES Initial balance as of January 1 500 - Capital increase 6,500 500 -------------------- ------------------- Balance December 31 7,000 500 -------------------- ------------------- -------------------- ------------------- CAPITAL STOCK: Initial balance as of January 1 $ 3,356 $ - Capital increase 42,484 3,356 -------------------- ------------------- Balance December 31 45,840 3,356 -------------------- ------------------- ADDITIONAL PAID-IN CAPITAL Initial balance as of January 1 - - Contribution to capital 51,367 - -------------------- ------------------- Balance December 31 51,367 - -------------------- ------------------- ACCUMULATED COMPREHENSIVE INCOME: Cumulative translation adjustments- Initial balance as of January 1 (66) - Change in the year 5,577 (66) -------------------- ------------------- Balance December 31 5,511 (66) -------------------- ------------------- RETAINED EARNINGS (ACCUMULATED DEFICIT) Initial balance as of January 1 3,202 - Net income (loss) for the year (72,352) 3,202 -------------------- ------------------- Balance December 31 (69,150) 3,202 -------------------- ------------------- Total shareholders' equity $ 33,568 $ 6,492 -------------------- ------------------- -------------------- -------------------
The accompanying notes are an integral part of these financial statements. 7 WASS NET, S.L. NOTES TO FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS, EXCEPT AS OTHERWISE INDICATED) As of and for the year ended December 31, 1998 and the period from August 29 to December 31, 1997 1. BACKGROUND Wass Net, S.L. (the "Company") was incorporated in Spain on August 29, 1997. The Company developed and maintains WWW.Latinmail.com, a branded Internet on-line network (the "Network") located in the World Wide Web. The Network is organized around interest specific channels, community features and search capabilities targeted to Latin America. 2. BASIS OF PRESENTATION The Company maintains its statutory accounting records and prepares its underlying statutory annual accounts in pesetas and in the Spanish language, in accordance with accounting principles and criteria generally accepted in Spain. The Company's financial statements as of December 31, 1998 and 1997 were originally prepared in local currency and in the Spanish language. The accompanying financial statements herein presented have been translated into U.S. dollars and adjusted to be in conformity with generally accepted accounting principles in the United States ("U.S. GAAP"), in accordance with the criteria set forth in Statement of Financial Accounting Standards ("SFAS") No.52, "Foreign Currency Translation". The accompanying financial statements stated in U.S. dollars have been translated at the official exchange rate prevailing at December 31, 1998 (Pesetas 142 to US$1.00) and December 31, 1997 (Pesetas 151 to US$1.00). The criteria for translating the revenue and expense accounts are the average rates prevailing during the period. The gain or loss resulting from this translation process is included in the Cumulative Translation Adjustment component of shareholders' equity. 3. SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies applied in the preparation and presentation of the financial statements are summarized as follows: USE OF ESTIMATES The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. 8 FOREIGN CURRENCY TRANSACTIONS Accounts receivable and payable denominated in foreign currencies are recorded at the exchange rates in effect on the relevant transaction dates. Such receivables and payables are adjusted to current exchange rates as of the balance sheet date. .. SHORT-TERM INVESTMENTS Short-term investments are stated at cost plus income accrued to the balance sheet date, amounting to $190, and are comprised of investment funds. ACCOUNTS RECEIVABLE Accounts receivable are stated at their estimated net realizable value. EQUIPMENT AND OTHER FIXED ASSETS Equipment and other fixed assets are stated at cost of purchase less accumulated depreciation. Depreciation is calculated using the straight-line method. The annual rates used take into consideration the estimated useful lives of the assets as follows: Software 5 years Furniture and fixtures 10 years Computer equipment 4 years Vehicles 3 years REVENUES, COSTS AND EXPENSES Revenues, costs and expenses are recognized on the accrual basis. The Company's revenues are derived from the sale of advertisements. Advertising revenues are recognized ratably in the period in which the advertisement is displayed, provided that no significant Company obligations remain outstanding and collection of the resulting receivable is probable. COMPREHENSIVE INCOME The Company reports comprehensive income in accordance with SFAS No. 130, "Reporting Comprehensive Income". SFAS No. 130 established rules for the reporting and display of comprehensive income and its components. SFAS No. 130 requires foreign currency translation adjustments to be included in comprehensive income. 9 INCOME TAXES The Company accounts for income taxes pursuant to the asset and liability method which requires deferred income tax assets and liabilities to be computed annually for temporary differences between the financial statement and the tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to effect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The income tax provision or credit is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities. 4. ACCOUNTS RECEIVABLE Accounts receivable as of December 31, 1998 and 1997 were comprised of:
December 31, 1998 December 31, 1997 --------------------- ------------------- Media Contacts, S.A. $ -- $ 6,856 StarMedia Network, Inc (see Note 11) 2,789 -- Other -- 4,149 --------------------- ------------------- $ 2,789 $ 11,005 --------------------- ------------------- --------------------- -------------------
5. EQUIPMENT AND OTHER FIXED ASSETS Equipment and other fixed assets were comprised of:
December 31, 1998 December 31, 1997 -------------------- ------------------- Software $ 22,822 169 Furniture and fixtures 1,690 1,589 Computer equipment 1,831 1,722 Vehicles 35,211 -- -------------------- ------------------- 61,554 3,480 Accumulated depreciation (7,525) (116) -------------------- ------------------- Net $ 54,029 3,364 -------------------- ------------------- -------------------- -------------------
10 6. ACCOUNTS PAYABLE AND BANK LOANS Accounts payable and bank loans as of December 31, 1998 and 1997 were comprised of:
December 31, 1998 December 31, 1997 --------------------- -------------------- Suppliers $ 10,249 3,473 V.A.T. and other taxes payable 2,691 2,661 Obligations under bank credit facilities 12,096 11,704 --------------------- -------------------- $ 25,036 17,838 --------------------- -------------------- --------------------- --------------------
Short-term obligations under bank credit revolving loans cannot exceed $12,500 and bear interest at 8.5%. 7. INCOME TAXES As of December 31, 1998, the Company had net operating loss carry-forwards available for income tax reporting purposes of approximately $18,100 expiring in 2008 through 2009 which upon recognition based on current tax regulations would generate tax benefits of approximately $5,400. There were no other material temporary differences. Therefore, the Company had deferred tax assets of approximately $5,400 at December 31, 1998, related to the net operating loss carry-forwards. The Company has fully provided for these assets through a valuation allowance due to uncertainties surrounding their realization. The reconciliation between the net loss for the year ended December 31, 1998 and the net loss for corporate income tax purposes is as follows:
Net loss $ (72,352) Permanent difference 54,261 ---------------- Net loss for income tax purposes $ (18,091) ---------------- ----------------
11 The Company had a current income tax provision of $0 and $1,372 for the year ended December 31, 1998 and the period from August 29, 1997 to December 31, 1997. The reconciliation of the effective income tax rate to the statutory rate is as follows:
For the period For the year from August ended December 29,1997 to 31, 1998 December 31, 1997 -------------------- --------------------- Statutory income tax rate 30.0% 30.0% Permanent difference (22.5%) -- Effect of valuation allowance (7.5%) -- -------------------- --------------------- Effective income tax rate -- 30.0% -------------------- --------------------- -------------------- ---------------------
The permanent difference related to extraordinary income recorded for Spanish statutory and income tax purposes for shareholder loans which were forgiven during the year (see Note 9). For US GAAP purposes these amounts have been recorded as additional paid-in capital. The Company is open to tax inspection for the period since it was incorporated. 8. CAPITAL STOCK Capital stock is comprised of 7,000 and 500 shares as of December 31, 1998 and 1997, respectively, and owned as follows:
December 31,1998 December 31, 1997 -------------------------------------- -------------------------------------------- Number Amount Number Amount ------------ ----------------------- -------------- ----------------------- Salvador Porte Llinas 5,600 $ 36,672 $ -- Eduardo Kawas Pino 1,400 9,168 -- Roberto E. Ortiz de Zeballos -- 400 2,685 Juan Rafael Fernandez Calero -- 100 671 ------------ ----------------------- -------------- ----------------------- 7,000 $ 45,840 500 $ 3,356 ------------ ----------------------- -------------- ----------------------- ------------ ----------------------- -------------- -----------------------
12 To the Stockholders of Wass Net, S.L. (1) We have reviewed the accompanying balance sheets of WASS NET, S.L.(a Spanish corporation), translated into U.S. dollars, as of March 31, 1999 and 1998, and the related translated statements of income and comprehensive income changes in shareholders' equity and cash flows for the three-month periods then ended. These financial statements are the responsibility of the Company's management. (2) We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of person responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. (3) These translated financial statements have been prepared as the basis for application of the equity method by its shareholders and, accordingly, they translate the assets, liabilities, shareholders' equity, revenues and expenses of Wass Net, S.L. for that purpose, as explained in Note 2. (4) Based on our reviews, we are not aware of any material modification that should be made to the financial statements referred to above for them to be in conformity with generally accepted accounting principles in the United States. Barcelona, July 23, 1999. LAVINIA AUDITORS, S.L. Numero del R.O.A.C. SO998 --------------------- Fdo.: Jaume Pigem Jutglar 13 WASS NET, S.L. BALANCE SHEETS (Amounts expressed in U.S. dollars, except as indicated) (Unaudited)
March 31, 1999 March 31, 1998 --------------------- -------------------- ASSETS Current assets: Cash $ 30 2,837 Short-term investments 158 6,556 Accounts receivable 2,697 5,652 Due from shareholders -- 3,603 Other 8 465 --------------------- -------------------- Total current assets 2,893 19,113 Equipment and other fixed assets, net 45,508 3,086 Deposits and other assets 252 248 --------------------- -------------------- TOTAL ASSETS $ 48,653 22,447 --------------------- -------------------- --------------------- -------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 4,760 3,580 Due to shareholders 22,714 -- Obligations under bank credit facilities 2,873 11,575 ---------------------- --------------------- Total current liabilities 30,347 15,155 ---------------------- --------------------- Shareholders' equity: Capital stock, 7,000 and 500 ordinary shares authorized, issued and outstanding, respectively, par value 1,000 pesetas 45,840 3,356 Additional paid-in capital 51,367 -- Accumulated comprehensive income (loss)- currency translation adjustment 3,026 (328) Retained earnings (accumulated deficit) (81,927) 4,264 ---------------------- --------------------- Total shareholders' equity 18,306 7,292 --------------------- -------------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 48,653 22,447 --------------------- -------------------- --------------------- --------------------
The accompanying notes are an integral part of these financial statements. 14 WASS NET, S.L. STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (Amounts expressed in U.S. dollars) (Unaudited)
For the three For the three months ended months ended March 31, 1999 March 31, 1998 -------------------- ------------------ REVENUES $ 11,571 4,753 OPERATING COSTS AND EXPENSES Product and technology development, sales and marketing, general and administrative (19,874) (2,555) Depreciation (4,095) (152) -------------------- ------------------ INCOME (LOSS) FROM OPERATIONS (12,398) 2,046 OTHER EXPENSE Interest expense (379) (529) -------------------- ------------------ INCOME (LOSS) BEFORE INCOME TAXES (12,777) 1,517 PROVISION FOR INCOME TAXES -- 455 -------------------- ------------------ NET INCOME (LOSS ) $ (12,777) 1,062 -------------------- ------------------ -------------------- ------------------ COMPREHENSIVE INCOME (LOSS) $ Net income (loss) (12,777) 1,062 Change in foreign currency translation adjustment (2,485) (328) -------------------- ------------------ Comprehensive income (loss) $ (15,262) 734 -------------------- ------------------ -------------------- ------------------
The accompanying notes are an integral part of these financial statements. 15 WASS NET, S.L. STATEMENTS OF CASH FLOWS (Amounts expressed in U.S. dollars) (Unaudited)
For the three For the three months ended months ended March 31, 1999 March 31, 1998 -------------------- -------------------- Cash flows from operating activities Net income (loss) $ (12,777) 1,062 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation 4,095 152 Changes in operating assets and liabilities Accounts and other receivables (146) 1,346 Accounts payable (7,283) (2,349) Other 1,245 2,341 -------------------- -------------------- Net cash (used in) provided by operating activities (14,866) 2,552 -------------------- -------------------- Cash flows from financing activities Proceeds from credit facilities, net (8,425) 322 Proceeds from shareholders 23,316 -- -------------------- -------------------- Net cash provided by financing activities 14,891 322 -------------------- -------------------- Effects of foreign exchange rate changes on cash (2) (37) -------------------- -------------------- Increase in cash 23 2,837 Cash at beginning of the period 7 -- -------------------- -------------------- Cash at end of the period $ 30 2,837 -------------------- -------------------- -------------------- -------------------- Cash paid during the period for taxes -- -- -------------------- -------------------- -------------------- -------------------- Cash paid during the period for interest $ 379 529 -------------------- -------------------- -------------------- --------------------
The accompanying notes are an integral part of these financial statements. 16 WASS NET, S.L. STATEMENTS OF SHAREHOLDERS' EQUITY (Amounts expressed in U.S. dollars) (Unaudited) For the three For the three months ended months ended March 31, 1999 March 31, 1998 -------------------- ------------------- SHARES Initial balance as of January 1 7,000 500 Change in the period -- -- -------------------- ------------------- Balance March 31 7,000 500 -------------------- ------------------- -------------------- ------------------- CAPITAL STOCK: Initial balance as of January 1 $ 45,840 $ 3,356 Change in the period -- -- -------------------- ------------------- Balance March 31 45,840 3,356 -------------------- ------------------- ADDITIONAL PAID-IN CAPITAL Initial balance as of January 1 51,367 -- Change in the period -- -- -------------------- ------------------- Balance March 31 51,367 - -------------------- ------------------- ACCUMULATED COMPREHENSIVE INCOME: Cumulative translation adjustments- Initial balance as of January 1 5,577 (66) Change in the period (2,551) (262) -------------------- ------------------- Balance March 31 3,026 (328) -------------------- ------------------- RETAINED EARNINGS (ACCUMULATED DEFICIT): Initial balance as of January 1 (69,150) 3,202 Net income (loss) for the period (12,777) 1,062 -------------------- ------------------- Balance March 31 (81,927) 4,264 -------------------- ------------------- Total shareholders' equity $ 18,306 $ 7,292 -------------------- ------------------- -------------------- -------------------
The accompanying notes are an integral part of these financial statements. 17 WASS NET, S.L. NOTES TO FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS, EXCEPT AS OTHERWISE INDICATED) AS OF AND FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1999 AND 1998 (Unaudited) 1. BACKGROUND Wass Net, S.L. (the "Company") was incorporated in Spain on August 29, 1997. The Company developed and maintains WWW.Latinmail.com, a branded Internet on-line network (the "Network") located in the World Wide Web. The Network is organized around interest specific channels, community features and search capabilities targeted to Latin America. 2. BASIS OF PRESENTATION The Company maintains its statutory accounting records and prepares its underlying statutory annual accounts in pesetas and in the Spanish language, in accordance with accounting principles and criteria generally accepted in Spain. The Company's financial statements as of March 31, 1999 and 1998 were originally prepared in local currency and in the Spanish language. The accompanying financial statements herein presented have been translated into U.S. dollars and adjusted to be in conformity with generally accepted accounting principles in the United States ("U.S. GAAP"), in accordance with the criteria set forth in Statement of Financial Accounting Standards ("SFAS") No.52, "Foreign Currency Translation". The accompanying financial statements stated in U.S. dollars have been translated at the official exchange rate prevailing at March 31, 1999 (Pesetas 155 to US$1.00) and March 31, 1998 (Pesetas 157 to US$1.00). The criteria for translating the revenue and expense accounts are the average rates prevailing during the period. The gain or loss resulting from this translation process is included in the Cumulative Translation Adjustment component of shareholders' equity. 3. SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies applied in the preparation and presentation of the financial statements are summarized as follows: USE OF ESTIMATES The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. 18 FOREIGN CURRENCY TRANSACTIONS Accounts receivable and payable denominated in foreign currencies are recorded at the exchange rates in effect on the relevant transaction dates. Such receivables and payables are adjusted to current exchange rates as of the balance sheet date. .. SHORT-TERM INVESTMENTS Short-term investments are stated at cost plus income accrued to the balance sheet date, and are comprised of investment funds. ACCOUNTS RECEIVABLE Accounts receivable are stated at their estimated net realizable value. EQUIPMENT AND OTHER FIXED ASSETS Equipment and other fixed assets are stated at cost of purchase less accumulated depreciation. Depreciation is calculated using the straight-line method. The annual rates used take into consideration the estimated useful lives of the assets as follows: Software 5 years Furniture and fixtures 10 years Computer equipment 4 years Vehicles 3 years
REVENUES, COSTS AND EXPENSES Revenues, costs and expenses are recognized on the accrual basis. The Company's revenues are derived from the sale of advertisements. Advertising revenues are recognized ratably in the period in which the advertisement is displayed, provided that no significant Company obligations remain outstanding and collection of the resulting receivable is probable. COMPREHENSIVE INCOME The Company reports comprehensive income in accordance with SFAS No. 130, "Reporting Comprehensive Income". SFAS No. 130 established rules for the reporting and display of comprehensive income and its components. SFAS No. 130 requires foreign currency translation adjustments to be included in comprehensive income. 19 INCOME TAXES The Company accounts for income taxes pursuant to the asset and liability method which requires deferred income tax assets and liabilities to be computed annually for temporary differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to effect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The income tax provision or credit is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities. 4. ACCOUNTS RECEIVABLE Accounts receivable as of March 31, 1999 and 1998 were comprised of:
March 31, 1999 March 31, 1998 --------------------- -------------------- Media Contacts, S.A. $ -- 5,652 Human Mark, S.L. 2,697 -- --------------------- -------------------- $ 2,697 5,652 --------------------- -------------------- --------------------- --------------------
5. EQUIPMENT AND OTHER FIXED ASSETS Equipment and other fixed assets were comprised of:
March 31, 1999 March 31, 1998 --------------------- --------------------- Software $ 20,908 162 Furniture and fixtures 1,548 1,529 Computer equipment 1,677 1,656 Vehicles 32,258 -- --------------------- --------------------- 56,391 3,347 Accumulated depreciation (10,883) (261) --------------------- --------------------- Net $ 45,508 3,086 --------------------- --------------------- --------------------- ---------------------
20 6. ACCOUNTS PAYABLE AND BANK LOANS Accounts payable and bank loans as of March 31, 1999 and 1998 were comprised of:
March 31, 1999 March 31, 1998 ------------------ ------------------- Suppliers $ 2,294 571 V.A.T. and other taxes payable 2,466 3,009 Obligations under bank credit facilities 2,873 11,575 ------------------ ------------------- $ 7,333 15,155 ------------------ ------------------- ------------------ -------------------
Short-term obligations under bank revolving credit loans cannot exceed $12,500 and bear interest at 8.5%. 7. DUE TO SHAREHOLDERS The balance of $22,714 due to shareholders at March 31, 1999 arose from payments made by the shareholders on behalf of the Company. The balance is non-interest bearing and due on demand. 8. INCOME TAXES At March 31, 1999, the Company had net operating loss carryforwards available for income tax reporting purposes of approximately $30,900 expiring in 2008 through 2009 which, upon recognition, based on current tax regulations would generate tax benefits of approximately $9,300. There were no other material temporary differences. Therefore, the Company had deferred tax assets of approximately $9,300 at March 31, 1999 related to net operating loss carryforwards. The Company has fully provided for these assets through a valuation allowance due to uncertainties surrounding their realization. The Company had a current income tax provision of $0 and $455 for the three months ended March 31, 1999 and 1998, respectively. The reconciliation of the effective income tax rate to the statutory rate is as follows:
For the three For the three months ended months ended March 31, 1999 March 31, 1998 --------------------- ------------------- Statutory income tax rate 30% 30% Effect of valuation allowance (30%) -- --------------------- ------------------- Effective income tax rate 0 30% --------------------- -------------------- --------------------- --------------------
The Company is open to tax inspection for the period since it was incorporated. 21 9. CAPITAL STOCK Capital stock is comprised of 7,000 and 500 shares as of March 31, 1999 and 1998, respectively, and owned as follows:
March 31, 1999 March 31, 1998 ------------------------------------ ---------------------------------------- Number Amount Number Amount ------------ ------------------- ------------ --------------------- Salvador Porte Llinas 5,600 $ 36,672 $ -- Eduardo Kawas Pino 1,400 9,168 -- Roberto E. Ortiz de Zeballos -- 400 2,685 Juan Rafael Fernandez Calero -- 100 671 ------------ -------------- ------------ ------------------ 7,000 $ 45,840 500 $ 3,356 ------------ -------------- ------------ ------------------ ------------ -------------- ------------ ------------------
On February 4, 1998, Roberto E. Ortiz de Zeballos sold his shares to Salvador Porte Llinas and on June 4, 1998, Juan Rafael Fernandez Calero sold his shares to Salvador Porte Llinas. On June 8, 1998, an additional 6,500 shares of common stock have been issued at 1,000 pesetas par value fully subscribed by Salvador Porte Llinas and on August 25, 1998, Salvador Porte Llinas sold 1,400 shares to Eduardo Kawas Pino. 10. FINANCIAL INSTRUMENTS CONCENTRATION OF CREDIT AND OTHER RISKS Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash investments and trade accounts receivable. The Group maintains cash with major, high quality financial institutions located in Spain. 22 FAIR VALUE OF FINANCIAL INSTRUMENTS The following methods and assumptions were used by the Company in estimating its fair value disclosure for financial instruments. Cash: The carrying amount of cash reported by the Company approximates their fair value. Accounts receivable and payable: The carrying amounts of accounts receivable and payable approximate their fair value. Short-term investments: The carrying amount of short-term investments reported by the Company approximates its fair value. 11. SUBSEQUENT EVENT On May 26, 1999, StarMedia Network, Inc. issued 1,133,334 shares of common stock to acquire all of the issued and outstanding shares of capital stock of the Company. 23 (b) PRO FORMA CONSOLIDATED FINANCIAL INFORMATION STARMEDIA NETWORK, INC. PRO FORMA BALANCE SHEET MARCH 31, 1999 (UNAUDITED)
INITIAL STARMEDIA STRATEGIC PUBLIC WASS NET KD SISTEMAS PRO FORMA ASSETS HISTORICAL INVESTMENT OFFERING HISTORICAL HISTORICAL ADJUSTMENTS CONSOLIDATED ----------- ----------- ---------- ------------ ------------ ------------- ------------ Current Assets: Cash and cash equivalents $40,588,000 $41,000,000 $111,034,000 $ 248,000 $ (5,250,000) (c) $187,620,000 Accounts receivable, net 973,000 88,000 1,061,000 Other current assets 2,241,000 3,000 2,244,000 ---------------------------------------------------------------------------------------------- Total current assets 43,802,000 41,000,000 111,034,000 3,000 336,000 (5,250,000) 190,925,000 Fixed assets, net 7,308,000 46,000 92,000 7,446,000 Intangible assets, net 492,000 492,000 Goodwill, net 920,000 5,764,000 (c) 6,684,000 Other assets 1,367,000 (811,000) 556,000 ---------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------- $53,889,000 $41,000,000 $110,223,000 $ 49,000 $428,000 $514,000 $206,103,000 ---------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------- LIABILITIES Current liabilities: Accounts payable $ 3,732,000 $ $ $ 5,000 $ 20,000 $ $ 3,757,000 Accrued liabilities 6,845,000 (575,000) 23,000 32,000 250,000 (a) 6,575,000 Loan payable, current portion 1,085,000 3,000 1,088,000 Capital lease obligations, current portion 166,000 166,000 Deferred payment for acquisition 890,000 (c) 890,000 Deferred revenue 591,000 591,000 ---------------------------------------------------------------------------------------------- Total current liabilities 12,419,000 -- (575,000) 31,000 52,000 1,140,000 13,067,000 Deferred rent, other long term liabilities 126,000 126,000 Loan payable, long term 2,541,000 2,541,000
24
STOCKHOLDERS' EQUITY Preferred stock, authorized 60,000,000 shares: Series A Redeemable Convertible Preferred Stock, $.001 par value, 7,330,000 shares authorized, 7,330,000 shares issued and outstanding stated at liquidation value, net of related expenses 4,311,000 (4,311,000) - Series B Redeemable Convertible Preferred Stock, $.001 par value, 8,000,000 shares authorized, 8,000,000 shares issued and outstanding stated at liquidation value, net of related expenses 13,246,000 (13,246,000) - Series C Redeemable Convertible Preferred Stock, $.001 par value, 16,666,667 shares authorized, 16,666,667 shares issued and outstanding stated at liquidation value, net of related expenses 81,478,000 (81,478,000) - Stockholders' (deficit) equity Common stock, $.001 par value, 100,000,000 shares authorized, 10,427,000 shares issued and outstanding at March 31, 1999 10,000 4,000 40,000 46,000 103,000 (149,000)(b),(c) 54,000 Additional paid-in capital 24,185,000 40,996,000 209,793,000 51,000 819,000 (a),(b) 275,844,000 Deferred compensation (11,854,000) (11,854,000) Other comprehensive (loss) income (218,000) 3,000 (165,000) 165,000 (c) (215,000) Accumulated (deficit) earnings (72,355,000) (82,000) 438,000 (1,461,000)(a),(c) (73,460,000) ------------------------------------------------------------------------------------------------ TOTAL STOCKHOLDERS' (DEFICIT) EQUITY (60,232,000) 41,000,000 209,833,000 18,000 376,000 (626,000) 190,369,000 ------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $53,889,000 $41,000,000 $110,223,000 $49,000 $428,000 $514,000 $206,103,000 ------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------
25 STARMEDIA NETWORK, INC. PRO FORMA STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1998 (UNAUDITED)
KD STARMEDIA WASS NET SISTEMAS PRO FORMA HISTORICAL HISTORICAL HISTORICAL ADJUSTMENTS CONSOLIDATED ---------- ---------- ---------- ----------- ------------ Revenues $ 5,329,000 $ 21,000 $1,083,000 $ (103,000) (a), (c ) $6,330,000 Operating expenses: Product and technology development 6,816,000 84,000 273,000 3,000 (b), (d) 7,176,000 (a), (b), Sales and marketing 29,274,000 404,000 (335,000) (c), (d) 29,343,000 General and administrative 4,600,000 220,000 (b), (d) 4,820,000 Depreciation and amortization 774,000 7,000 1,930,000 (d), (e) 2,711,000 Stock-based compensation expense 10,421,000 10,421,000 ------------------------------------------------------- -------------- Total operating expenses 51,885,000 91,000 677,000 1,818,000 54,471,000 ------------------------------------------------------- -------------- Net (loss) income from operations (46,556,000) (70,000) 406,000 (1,921,000) (48,141,000) Interest income (expense), net 670,000 (2,000) 17,000 685,000 ------------------------------------------------------- -------------- Net (loss) income before provision for income taxes (45,886,000) (72,000) 423,000 (1,921,000) (47,456,000) Provision for income taxes (83,000) (83,000) ------------------------------------------------------- ------------- Net (loss) income $(45,886,000) $(72,000) $ 340,000 $(1,921,000) (47,539,000) ------------------------------------------------------- -------------- ------------------------------------------------------- -------------- Pro forma basic and diluted net loss per common share (f) $(1.09) $(1.11) ------------------------------------------------------- -------------- ------------------------------------------------------- -------------- Number of shares used in computing basic and diluted pro forma net loss per share (f) 42,198,667 42,873,566 ------------------------------------------------------- -------------- ------------------------------------------------------- --------------
26 STARMEDIA NETWORK, INC. PRO FORMA STATEMENT OF OPERATIONS (UNAUDITED)
PERIOD FROM AUGUST 29 (DATE OF YEAR ENDED INCEPTION) TO YEAR ENDED DECEMBER, 31 DECEMBER 31, DECEMBER 31, 1997 1997 1997 STARMEDIA WASS NET PRO FORMA HISTORICAL HISTORICAL ADJUSTMENTS CONSOLIDATED ------------ ----------------- ----------- ------------ Revenues $460,000 $12,000 $472,000 Operating expenses: Product and technology development 1,229,000 8,000 (4,000) (b) 1,233,000 Sales and marketing 2,108,000 2,000 (b) 2,110,000 General and administrative 648,000 2,000 (b) 650,000 Depreciation and amortization 38,000 38,000 ----------------------------------------------------- ---------------- Total operating expenses 4,023,000 8,000 -- 4,031,000 ----------------------------------------------------- ---------------- Net (loss) income from operations (3,563,000) 4,000 -- (3,559,000) Interest income, net 35,000 35,000 ----------------------------------------------------- ---------------- Net (loss) income before provision for income taxes (3,528,000) 4,000 (3,524,000) ----------------------------------------------------- ---------------- Provision for income taxes -- (1,000) (1,000) ----------------------------------------------------- ---------------- Net (loss) income $ (3,528,000) $3,000 -- $ (3,525,000) ----------------------------------------------------- ---------------- ----------------------------------------------------- ---------------- Pro forma basic and diluted net loss per common share (f) $ (0.08) $(0.08) ----------------------------------------------------- ---------------- ----------------------------------------------------- ---------------- Number of shares used in computing basic and diluted pro forma net loss per share (f) 42,008,667 42,036,169 ----------------------------------------------------- ---------------- ----------------------------------------------------- ----------------
27 STARMEDIA NETWORK, INC. PRO FORMA STATEMENT OF OPERATIONS THREE MONTHS ENDED MARCH 31, 1999 (UNAUDITED)
KD STARMEDIA WASS NET SISTEMAS PRO FORMA HISTORICAL HISTORICAL HISTORICAL ADJUSTMENTS CONSOLIDATED ---------- ---------- ---------- ----------- ------------ Revenues $1,541,000 $12,000 $224,000 $(41,000) (a),(c) $1,736,000 Operating expenses: Product and technology development 3,562,000 21,000 58,000 8,000 (b), (d) 3,649,000 (a), (b), Sales and marketing 9,657,000 106,000 (96,000) (c), (d) 9,667,000 General and administrative 2,410,000 46,000 (b), (d) 2,456,000 Depreciation and amortization 467,000 4,000 481,000 (d), (e) 952,000 Stock-based compensation expense 1,417,000 1,417,000 ------------------------------------------------------- ---------- Total operating expenses 17,513,000 25,000 164,000 439,000 18,141,000 ------------------------------------------------------- ---------- Net (loss) income from operations (15,972,000) (13,000) 60,000 (480,000) (16,405,000) Interest income, net 421,000 11,000 432,000 ------------------------------------------------------- ----------- Net (loss) income before provision for income taxes (15,551,000) (13,000) 71,000 (480,000) (15,973,000) Provision for income taxes (35,000) (35,000) ------------------------------------------------------- ------------ Net (loss) income $ (15,551,000) $(13,000) $36,000 $(480,000) $(16,008,000) ------------------------------------------------------- ------------ ------------------------------------------------------- ------------ Pro forma basic and diluted net loss per common share (f) $ (0.37) $ (0.37) ------------------------------------------------------- ------------ ------------------------------------------------------- ------------ Number of shares used in computing basic and diluted pro forma net loss per share (f) 42,406,167 43,539,501 ------------------------------------------------------- ------------ ------------------------------------------------------- ------------
28 STARMEDIA NETWORK, INC. PRO FORMA STATEMENT OF OPERATIONS THREE MONTHS ENDED MARCH 31, 1998 (UNAUDITED)
STARMEDIA WASS NET PRO FORMA HISTORICAL HISTORICAL CONSOLIDATED ---------- ---------- ------------ Revenues $256,000 $5,000 $261,000 Operating expenses: Product and technology development 794,000 3,000 797,000 Sales and marketing 1,816,000 1,816,000 General and administrative 450,000 450,000 Depreciation and amortization 79,000 79,000 Stock-based compensation expense 2,000 2,000 --------------------------------- ----------------- Total operating expenses 3,141,000 3,000 3,144,000 --------------------------------- ----------------- Net (loss) income from operations (2,885,000) 2,000 (2,883,000) Interest income (expense), net 28,000 (1,000) 27,000 --------------------------------- ----------------- Net (loss) income $ (2,857,000) $1,000 $ (2,856,000) --------------------------------- ----------------- --------------------------------- ----------------- Pro forma basic and diluted net loss per common share (f) $(0.07) $(0.07) --------------------------------- ----------------- --------------------------------- ----------------- Number of shares used in computing basic and diluted pro forma net loss per share (f) 42,008,667 42,089,619 --------------------------------- ----------------- --------------------------------- -----------------
29 NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS For purposes of determining the pro forma effects of the Wass Net Merger and the KD Acquisition on the balance sheet at March 31, 1999, the following Pro Forma adjustments have been made: (a) To record $1,023,000 in transaction costs related to the Wass Net Merger of which $773,000 will be paid by former Wass Net shareholders. (b) To adjust Wass Net historical equity to the equivalent share amount of the surviving business. (c) Goodwill related to the KD Acquisition was calculated as follows:
Cash consideration paid $5,000,000 Expenses of acquisition 250,000 Note payable 890,000 ---------- Total Consideration 6,140,000 Fair value of net assets acquired 376,000 ---------- Goodwill $5,764,000 ---------- ----------
For purposes of determining the pro forma effects of the Wass Net Merger on the statements of operations for the years ended December 31, 1998 and 1997 and the three months ended March, 31, 1999 and 1998, the following pro forma adjustments have been made:
Year ended Three months ended December 31, 1998 March 31, 1999 ----------------- ------------------ (a) Revenues $(3,000) $(5,000) Sales and marketing (3,000) (5,000) --------- -------- Net (loss) income from operations -- -- --------- -------- --------- --------
To eliminate the inter-company revenue of Wass Net earned from the Company.
Year ended Year ended Three months ended December 31, 1998 December 31, 1997 March 31, 1999 ----------------- ----------------- ----------------- (b) Product and technology development $(75,000) $(4,000) $(16,000) Sales and marketing 10,000 2,000 8,000 General and administrative 65,000 2,000 8,000 --------- -------- --------- Net (loss) income from operations -- -- -- --------- -------- --------- --------- -------- ---------
30 To reclassify Wass Net historical operating expenses to conform to StarMedia historical presentation. For purposes of determining the pro forma effects of the KD Acquisition on the statement of operations for the three months ended March 31, 1999 and for the year ended December 31, 1998, the following pro forma adjustments have been made:
Year ended Three months ended December 31, 1998 March 31, 1999 ----------------- ------------------ (c) Revenues $(100,000) $(36,000) Sales and marketing (100,000) (36,000) ---------- --------- Net (loss) income from operations -- -- ---------- --------- ---------- ---------
To eliminate the revenue of KD Sistemas earned from the Company.
Year ended Three months ended December 31, 1998 March 31, 1999 ----------------- --------------- (d) Product and technology development $78,000 $24,000 Sales and marketing (242,000) (63,000) General and administrative 155,000 38,000 Depreciation 9,000 1,000 --------- -------- Net (loss) income from operations -- -- --------- -------- --------- --------
To reclassify KD Sistemas historical operating expenses to conform to StarMedia historical presentation.
Year ended Three months ended December 31, 1998 March 31, 1999 ----------------- ------------------ (e) Amortization of Goodwill $1,921,000 $480,000 ---------- -------- ---------- --------
Amortization expense of the goodwill over 3 years on a straight-line basis. In computing pro forma basic and diluted net loss per common share, the following pro forma adjustments were made: (f) In conjunction with the Company's initial public offering, all outstanding shares of series A, B, and C Redeemable Convertible Preferred Stock automatically converted into Common Stock on a one for one basis. Accordingly, the effect of the conversions has been reflected in the computation of pro forma basic and diluted net loss per common share. Additionally, the computation of pro forma basic and diluted net loss per common share is based on the aggregate weighted average shares of the combined business, adjusted to equivalent shares of the surviving business for all periods presented. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. STARMEDIA NETWORK, INC. ----------------------------------- (Registrant) Date: August 10, 1999 By: /s/ Steven J. Heller ---------------------------- Name: Steven J. Heller Title: Chief Financial Officer 31 EX-23.1 2 EXHIBIT 23.1 Exhibit 23.1 [L A V I N I A A U D I T O R S L E T T E R H E A D] CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As Independent Public Accountants we hereby consent to the inclusion of our report dated July 23, 1999, related to the finanial statements of WASSNET, S.L., as of December 31, 1998 and 1997, and of our report on limited review dated July 23, 1999 of WASSNET, S.L. as of March 31, 1999 and 1998 in this 8-K. It should be noted that we have not performed any procedures subsequent to the date of our report. LAVINIA AUDITORS, S.L. /s/ Jaume Pigem Jutglar ------------------------- Jaume Pigem Jutglar [SEAL] Barcelona, Espana August 6, 1999 -----END PRIVACY-ENHANCED MESSAGE-----