Shareholders of e-district.net were misled about the company's financial performance to the tune of £1 million according to an initial report into irregularities at the company.

Although the investigation is ongoing, a preliminary report has found that there was "substantial overstatement of registered users, page impressions and revenues".

Last month Steven Laitman, Chief Executive of e-district.net, was dismissed amid a thorough investigation into the company's affairs.

He was subsequently served with an injunction freezing his assets and is in the process of being sued for damages.

It's understood he will contest the proceedings.

Despite the proximity of legal proceedings, a statement issued by the company today appears to shed some light on the activities at the company during the last couple of years.

The investigation found that revenues for the 17 months ended 31 December 1999 were only around £98,000. E-district had formally reported revenues of £781,571.

Likewise, the revenues reported in the unaudited half-year report for the six months ended 30 June 2000 were £1,038,069. However, the investigation discovered that revenues during this period were actually nearer £32,000.

Subsequent revenues are said to be "negligible".

In a statement today the company linked the discrepancy to Mr Laitman.

It claims that a "substantial majority of the monies received by the company's bankers and recorded in the company's records as being received from sales agencies was in fact received from bank accounts linked to Mr Laitman with fabricated supporting documentation indicating that such receipts were from sales agencies."

"It appears that in total approximately £1.0 million has been received in this way between (and including) November 1999 and February 2001 and credited against false trade debtors," it said.

The investigation has also found that usage figures were also inflated.

In January the company said it had 2.6 million active users at the end of December 2000 and boasted 367.1 million page impressions a month.

The investigation has found that in January 2001, the outfit had just 52,768 registered users and 54.4 million page impressions a month.

E-district also reported today that it has suspended two senior managers within the technical department - one of whom has now resigned.

The company also confirmed that it has also held discussions with the Fraud Squad. ®

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