Fthr re investigations

e-district.net PLC
13 March 2001

              e-district.net plc ('e-district' or the 'Company')


Background


e-district announced on 19 February 2001 that it was undertaking a full
investigation, together with its external advisers, into what appeared to be
financial irregularities.


The Company has now received preliminary reports from Cap Gemini Ernst & Young
and PricewaterhouseCoopers Forensic Services.


The Company previously announced that it had suspended Steven Laitman, Chief
Executive, with effect from 18 February 2001 and subsequently, on 23 February
2001, an injunction was served on him freezing his assets and proceedings were
commenced against him for damages. The freezing order has also been served on
Clearsearch Limited, a company that holds certain assets belonging to a trust
connected with Mr Laitman and of which he is one of the beneficiaries. Mr
Laitman has indicated through his solicitors that the freezing order and the
proceedings will be contested at a hearing at a later date. On 26 February
2001 Mr Laitman was given notice of summary termination of his employment
contract with the Company. Mr Laitman has also been dismissed as a director of
the Company. Additionally, e-district has suspended two senior managers within
the technical department with effect from 27 February 2001, one of whom has
now resigned.


The Fraud Squad of the Metropolitan Police has been notified.


Preliminary findings


Although the investigations are continuing, the preliminary reports have
established what appears to be the substantial overstatement of registered
users, page impressions and revenues. The investigations have also identified
evidence of collusion within the Company connected with the overstatement of
registered users and page impressions.


A substantial proportion of the Company's revenue was expected to be generated
through the receipt of income from sales agencies retained on its behalf to
sell banner and other advertising on the Company's various interactive sites.


The investigations have established that revenues were overstated by
manipulating the Company's internal monthly reports which showed the level of
business conducted with the Company's sales agencies. In addition, supporting
documentation, both written and electronic, appears to have been fabricated
and manipulated.


Furthermore, 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.


The results of the preliminary investigations show that the reported numbers
for revenues have been substantially overstated. The revenues reported in the
financial statements for the 17 months ended 31 December 1999 were £781,571.
Based solely on information obtained from the sales agencies during the
investigation, these revenues were approximately £98,000. The revenues
reported in the unaudited half year report for the six months ended 30 June
2000 were £1,038,069. Based solely on information obtained from the sales
agencies during the investigation, these revenues were approximately £32,000.
The Company has not yet reported its results for the year ended 31 December
2000 but now expects revenues in the, as yet unaudited, six month period to 31
December 2000 to be negligible.


Cap Gemini Ernst & Young has been engaged to examine details of current and
historic registered users and page impressions. Historic data on the Company's
databases is only available back to February 2000. Cap Gemini Ernst & Young
carried out a comparative analysis of data on the Company's databases against
the published traffic details in respect of registered users and page
impressions. Its preliminary findings are that data contained within the
Company's systems do not reconcile with the published traffic details. Cap
Gemini Ernst & Young have not been able to verify the accuracy of the data
upon which they relied.


Cap Gemini Ernst & Young have examined the Company system containing traffic
details for the period to 26 February 2001. This system suggests the following
figures for the last four months:

                           Active unique users          Page impressions
November 2000              29,818                       46.9m
December 2000              35,736                       46.6m
January 2001               52,768                       54.4m
February 2001(to 26)       89,429                       56.8m


A review of the figures within the Company's system also appears to show a
reduction in registered traffic between May and June 2000, falling from 150
million page impressions in May to under 9 million in June. The reasons for
this are still being investigated.


The integrity of the base data and the processes which recorded these figures,
and therefore the figures themselves, cannot be guaranteed. The results of any
review are necessarily subject to the accuracy of the underlying data. There
is no agreed standard methodology for measuring traffic data.


Current position


The board is continuing its investigations and considering its current options
with its advisers in order to maximise shareholder value.


The Company has agreements with a number of major platform suppliers,
including Telewest, NTL, Bush Internet, Worldgate Communications and
Planetweb. Approximately two-thirds of the Company's users access its services
via interactive television.


e-district has a cash balance in excess of £12 million. It has a cash burn
rate in respect of its ordinary operational activities of approximately £
200,000 per month (excluding investment income).


The Company will make further announcements as appropriate.


Enquiries:


Gavin Anderson and Company

Graham Prince 020 7457 2345