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Microcap & Penny Stocks : Rande Is. . .FISHING. . [under $1.50] -- Ignore unavailable to you. Want to Upgrade?

To: Bucky Katt who wrote (113)	1/5/1999 2:09:00 PM
From: ~digs	Respond to of 4766

Portions of MDIH's filing found at sec.gov ---------- COMPANY DATA: COMPANY CONFORMED NAME: MDI ENTERTAINMENT INC CENTRAL INDEX KEY: 0001045080 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-AMUSEMENT & RECREATION SERVICES [7900] IRS NUMBER: 731515699 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-24919 FILM NUMBER: 98725925 BUSINESS ADDRESS: STREET 1: 201 ANN ST STREET 2: SUITE 210 CITY: HARTFORD STATE: CT ZIP: 06103 BUSINESS PHONE: 8605275359 MAIL ADDRESS: STREET 1: 201 ANN ST CITY: HARTFORD STATE: CT ZIP: 06103 ------------- Revenue is derived by the Company from contracts with the state lotteries for scratch ticket games based on licensed brand names and entertainment properties. The Company provides the lotteries with second chance prize packages consisting of grand prizes and various consolation prizes in addition to marketing support related to each of the games. Most of the lottery contracts require the lotteries to pay the Company in full upon the signing of the contract. The Company defers this revenue and recognizes the revenue when the terms of the applicable game are satisfied (i.e., the shipment of contracted merchandise). ----------------- Management's Discussion and Analysis or Plan of Operations The following discussion and analysis should be read in conjunction with the Company's Consolidated Financial Statements and the notes thereto appearing elsewhere in this Form 10-QSB. All statements contained herein that are not historical facts, including but not limited to, statements regarding the Company's current business strategy and the Company's plans for future development and operations, are based upon current expectations. These statements are forward-looking in nature and involve a number of risks and uncertainties. Generally, the words "anticipates," "believes," "estimates," "expects" and similar expressions as they relate to the Company and its management are intended to identify forward looking statements. Actual results may differ materially. Among the factors that could cause actual results to differ materially are those contained in the Company's Registration Statement on Form 10-SB under the caption "Description of Business--Risk Factors." The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which statements are made pursuant to the Private Litigation Reform Act of 1995 and, as such, speak only as of the date made. The Company's principal business has been the scratch ticket segment of the government lottery industry. The Company is a leader in designing and marketing instant scratch ticket games based on licensed brand names and entertainment properties and the Company's lottery promotions feature such properties licensed by the Company. Prizes awarded in such promotions typically include a number of "second chance" prizes related to the licensed property, including collectible logo-bearing merchandise such as logoed T-shirts and caps, and other related merchandise such as posters, money clips, telephones, playing cards, film cells, stadium blankets, carryall bags, jackets, electronic games, video and music collections, watches, clocks, credit cards with prepaid credit, trips and, in the case of Harley-Davidson, -Registered Trademark- Harley-Davidson 1200 Sportster motorcycles. The Company developed its strategy of identifying such properties in early 1996. Prior to that time, the Company had developed a series of promotions that utilized popular videotapes, compact discs and audiocassettes as second chance lottery prizes. Those promotions enabled the Company to develop an expertise in sourcing and distributing products as second chance lottery prizes and to develop a reputation with lottery personnel as a reliable organization attuned to the special needs of lotteries and their players. The Company derives over ninety-five percent (95%) of its revenues from lotteries in two distinct ways. First, the Company will usually charge a lottery a license and royalty fee to utilize a particular licensed property as a lottery game. License fees are a fixed assessment while royalties are a percentage of the printing cost of the tickets. License fees typically include an up-front license fee and a royalty based on the manufacturing costs of tickets. Manufacturing costs of tickets usually range from $10.00 per thousand to $30.00 per thousand. Actual costs depend on the size of the ticket and the quantity printed. Ticket quantities range from about one million to as many as 60 million with an average quantity of about five million. The Company's second source of lottery revenue is the sale of logoed merchandise to the lottery as second-chance prizes. In merchandise-based lottery games, between 5% to 10% of a lottery's prize fund is typically used for the purchase of merchandise related to the property the lottery is utilizing. 10 <PAGE> Typically, the Company purchases merchandise from other licensees of the property and resells the merchandise to the lottery at a price that is designed to include overhead costs, profit, shipping and handling and any marketing support the Company provides the lottery such as brochures, posters or other advertising assistance for which there are no separate charges. The Company is in negotiations to obtain additional properties and expects to reach several agreements over the next six to 12 months; however there can be no assurance that such agreements will actually be reached. Some of these agreements may require the expenditures of significant sums as up-front advances. --------------- Results for the three months ended August 31, 1998 reflect revenue of $2,102,000 as compared to $291,000 for the same period in 1997. This sales increase reflects the shift of the Company's business to licensed promotions. Revenue during the 1998 period was derived primarily from sales based on three entertainment-based or brand name properties, including Harley-Davidson - -Registered Trademark- (65% of sales), Wheel of Fortune -Registered Trademark- (17% of sales) and Star Trek (17% of sales).