MindArrow Fiscal Year Revenue More Than Doubles
The company also said that its net loss for the year more than doubled to $36.2 million, or $3.36 per share, from $16.5 million, or $2.95 per share, in 2000. MindArrow Systems said $18.7 million of that loss came from a non-cash charge resulting from fraud committed against the company by its former stock transfer agency.
The owner of a stock transfer agency and her associate pleaded guilty in June to federal stock fraud and money laundering charges in the counterfeiting of 1.1 million MindArrow Systems shares.
The U.S. attorney's office said Nikki Ann Daly and Maseia Bardasian, both of Reno, NV, entered a guilty plea in the case and that under the plea agreement, Bardasian faces 57 months to 71 months in prison and Daly faces 46 months to 57 months.
According to the charges, Daly set up a stock transfer agency, RTT Transfers, and issued more than 1.1 million fraudulent shares of MindArrow Systems stock from May 1999 through April 2000. The bogus shares were then sold at market prices, which ranged from $7 to $55 at the time.
Rather than cancel the fraudulent stock certificates, which a number of stockholders purchased in good faith, MindArrow co-chairmen Tom Blakeley and Eric McAfee contributed more than 1.1 million of their own shares to the company and promptly canceled the shares. This offset much of the potential effect the fraudulent shares would have had on the company's bottom line by bringing the number of outstanding shares back in line with previously reported numbers. Still, MindArrow took a loss of $18.7 million as a result.
As part of their plea agreement, the defendants agreed to pay back $15.7 million. They agreed to forfeit more than $4.6 million in cash and a number of luxury cars that were purchased with their illegal proceeds.
MindArrow Systems, Aliso Viejo, CA, said the fraudulent shares were not recorded in RTT Transfers' ledger but were issued and sold nonetheless. The company discovered the fraudulent activity in February 2000.
Robert Webber, president/CEO of MindArrow Systems, characterized the incident as "bizarre."
"Early in the year we discovered a bizarre act of fraud by the company's prior transfer agent, which led to a temporary trading halt of our stock and ultimately arrests and guilty pleas by the perpetrators," Webber said. "We were also impacted by the dot-com meltdown and lost potential revenue from a couple of client companies that went out of business. Despite these obstacles, we have seen business increase during the past couple of months."
MindArrow managed to decrease its operating loss slightly in fiscal 2001, dropping it to $16.7 million from more than $17 million a year ago. The company reported cash and equivalents of $1.3 million, down from $10.6 million in 2000.
Webber said he expects the company's fiscal first quarter, which ended Dec. 31, to be the strongest in the company's history. He would not be more specific.