MDI Suspects Fraud by Investment Firm
Trading on MDI Entertainment Inc. (LTRY) stock was halted last Thursday while Nasdaq requested additional information concerning the lottery promotion company's financing transaction with Oxford International Inc., which is under investigation by the FBI.
The transaction was disclosed in MDI's Forms 8-K filed on May 1, May 2 and
July 16. The reason for the transaction between MDI and the Bethesda, Md.-based investment firm was to enable MDI to meet Nasdaq's net tangible assets maintenance requirements.
The July 16 form showed that Oxford gave MDI $3.2 million in securities of two companies instead of the previously planned cash investment. In the agreement, Oxford waived certain rights from the stock purchase agreement, including the right to any accrued dividends and to a board seat. The company also agreed MDI would have the option of exchanging the securities it received from Oxford for the MDI shares issued to Oxford.
MDI was notified on July 13 that the companies whose stock it had received in this agreement had contacted the FBI concerning Oxford. The FBI told MDI that the securities it received may be subject to a dispute between the issuers and Oxford. MDI believes it may have been defrauded by Oxford.
MDI said in a press release that it expects to reply to Nasdaq's inquiries by the required date of July 20 and will attempt to resolve the situation and salvage the economic benefit that was originally intended.
Sports.com Gets Cash Infusion
Sports.com raised an extra £9.3 million, part of which came from George Soros. The company hopes the money will help it be profitable by mid-2002.
The funds were raised by Sports.com's existing investors, which include Soros' Private Equity Partners and IMG. Sports.com had raised £37.5 million in January of last year but was considering a stock market flotation until the dot-com sector went downhill.
Word is that the new funds will be used to enlarge the company's betting service as well as develop services for next-generation cell phones. Vodafone is said to be the likely partner. Sports.com has trimmed 70 staffers during the past few months from its 270-person staff and currently generates about 120 million page views a month.
IQ-Ludorum Chooses COO/Director
Last week gaming software maker IQ-Ludorum Plc appointed Roger Geoffrey Stone as chief operating officer and director. He'll join the company Aug. 15 and will be based in London.
Stone has more than 30 years of experience in management in the global software and telecommunications industries. Most recently he was vice president of retail in Europe for IDT Corporation, where he established and managed IDT's pre-paid retail business in Europe. During his two-year tenure the telecommunications company opened retail operations in eight new countries and increased call time from pre-paid business by 145 percent.
Since February of this year Stone was also the vice president of IDT Asia, where he established and managed the company's operations for that region. Before that, he was marketing director for ReserVision Software Technologies A.G.
Stone will be responsible for IQ-Ludorum's global business, including product development, sales, marketing and customer support.
Virtgame.com CEO Resigns
Virtgame.com's president and chief executive officer, Joseph Paravia, resigned recently in order to pursue personal interests, according to a press release released by the company.
Paravia will be replaced by Scott A. Walker on an interim basis. Walker has been the e-border control technology company's director since October 1998. Walker said Virtgame.com is in the process of assembling a veteran management team.
Harrah's Insiders Sell Company Stock
Top executives as well as board members at Harrah's sold portions of their holdings in the company in the weeks leading up to the announcement on July 5 that second-quarter earnings would not be as good as analysts expected.
According to filings tabulated by Lancer Analytics, ten of the company's executives and board members sold 734,577 shares of stock between April 27 and June 8. As of March 31, Harrah's had 117.2 million outstanding shares.
Observers say such stock sales, although not illegal, make a bad impression on investors. Jenice Malecki, a securities lawyer in New York, told the Las Vegas Review-Journal that it sends the wrong message when insiders sell their stock.
"You could say that individuals had some private matter requiring funding," she said, "but when you see groups of insiders relinquishing their stock you have to say, 'What's going on?' "
Gambling Report Impact
The United Kingdom's eagerly awaited Gambling Review Report did not encourage investors to take a gamble on the wagering sector, The Times of London reported last week.
The report calls for plenty of changes that could benefit casino and betting shop operators, although the proposed relaxation of the demand test on new applications for casino licenses might harm the position of existing operators such as London Clubs International (LCI.L), Rank (RNK.L) and Stanley Leisure (SLY.L). The recommendation that betting shops be allowed to operate four £500 jackpot machines, instead of the current two £15 machines, is expected to be good for bookmaking firms like Stanley and Hilton Group (HG.L) and games machine makers like Kunick plc (KNK.L).
Profits, Turnover Increase for IG Group
IG Group, which operates the financial spread-betting business IG Index, reported a 53 percent increase in pre-tax profits and a 41 percent increase in turnover. Pre-tax profits amounted to £15.38 million and turnover ended up at £33.39 million for the year ending May 31.
The company's profits for the current year stand to be affected by the new gaming laws, which require that bookmakers' gross profits are taxed rather than the current structure of taxing betting stakes. IG Group assured investors that if the new law had been in place this year, a 40 percent growth in pre-tax profit would have still occurred. The new betting tax will come in to effect on Oct. 6 and is expected to lower the company's pre-tax profits by about £1 million.
Although it was a difficult year for stock traders because of decreasing volumes exchanged, IG Group experienced a 44 percent increase in financial spread betting turnover to £27.5 million from £19.04 million. The company attributes its revenue growth to an increased volume of business.
Oddzon to be Acquired by HLNT
HLNT Networks (HLNT) said Wednesday that it has signed a letter of intent to acquire Oddzon Gaming Pty. Ltd, the owner of a master license to a proprietary online gaming platform.
Pending the completion of a formal agreement, HLNT Networks will have exclusive rights to use the master license. The Vancouver-based company helps businesses make the transition from bricks and mortar to e-commerce. The president and CEO of HLNT said he expects the arrangement with Oddzon to give the company an immediate foothold as a service provider to the Internet gambling industry.
CryptoLogic Conference Call on July 24
CryptoLogic Inc. will hold a conference call to discuss its second-quarter financial results on July 24 at 10 a.m. EDT. The results for the quarter ended June 30 will be released before the market opens on July 24. To participate, call 416-695-5806 or 1-800-273-9672. A replay of the conference will be available until July 31 at midnight. To listen to the replay, call 416-695-5800 or 1-800-408-3053 and enter the pass code 854248.