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O.C. BUSINESS PLUS | ORANGE COUNTY EARNINGS

Counterfeit Stock Hurt MindArrow Results

April 17, 2001|E. Scott Reckard

MindArrow Systems Inc., which said in February that 1.1 million counterfeit shares of its stock had been issued, reported on Monday a $23.1-million fiscal second-quarter loss, most of it related to the fraud.

The Aliso Viejo provider of online advertising services previously had disclosed that it would take a $18.7-million charge against earnings to account for the unauthorized shares. Its founders have canceled 1.1 million shares of their own stock so other stockholders won't have their stakes diluted.

The charge made the loss, amounting to $2.16 per share for the quarter ended March 31, much deeper that the net loss of $17.8 million for last year's second quarter, for which per-share figures were not provided. Its operating loss was $3.8 million, an improvement over the year-earlier quarterly operating loss of $5.5 million.

Quarterly revenue more than tripled to $917,798 from a year earlier.

MindArrow is in a race to show profits before its funds run out: Its stockholder equity, or net worth, had fallen from $16.7 million on Sept. 30 to $7.6 million as of March 31.

The FBI is investigating the unauthorized issuance of the shares, and the Nasdaq Stock Market has suspended trading in MindArrow shares.

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