P.E.I. Geosweep investment loses $535K in value

Atlantic Lotto has told the P.E.I. Lotteries Commission that the province's investment in the company Geonomics has seen its value reduced by an estimated $535,096.

That amount was recorded as an impairment in the P.E.I. Lotteries Commission's audited financial statements for 2013-14, and is now shown as a liability owing to ALC. It's the first time there has been a recorded drop in the value of the investment.

The Atlantic Lotteries Corporation says Geonomics has missed some key performance indicators. It says it's watching the investment closely and will conduct a further impairment test on the value of the investment at the end of March.

"I can't really get into the details of which expectations have not been met," said ALC chief financial officer Patrick Daigle.

"It's not performing as expected and we're going to be watching it closely over the coming months."

P.E.I. and New Brunswick agreed to let ALC invest money on behalf of the provinces in Geonomics Global Games (then known as Roboreus) in 2011. Each province is responsible for an initial share purchase of $4.3 million.

Atlantic Lottery makes investments on behalf of Islanders every day of the year, and they do very, very well with them, said P.E.I. Finance Minister Wes Sheridan.

We cant be second-guessing or be Monday morning armchair quarterbacks on this one.

Sheridan said it was ALC that conducted all the due diligence on the company before P.E.I. decided to invest. The province did not have the capacity to conduct that type of research on its own.

Yes, we made the final decision, said Sheridan.

But we have to do it on the due diligence that is done by our professionals, and in this case thats Atlantic Lottery.

Loss on paper, for now

The $535,096 impairment, while recorded as a liability owed to ALC, is for now only a loss on paper. It wouldnt be realized until Atlantic Lotto or the province tries to sell the shares.

A German company, Tipp24, became a stockholder in Geonomics in 2012. Atlantic Lotto says when that happened, it signed an agreement not to sell its shares until after the end of 2015. Sheridan said even without the agreement, selling the shares at this point isnt an option.

Theres no way you would sell an investment at this stage, and take a loss on your investment, when theres a possibility that we could see a growth in the game, he said.

You cant get out at this stage. Theres no way that theres anyone thats going to purchase those shares. So at this point the best thing we can do is continue to leave it in the hands of the experts that are running this game and hope that they can turn it around and see some very viable numbers come out of it.

Game re-christened, relaunched in U.K.

Geosweep was launched for the third time in the U.K. in September, re-christened as GeoLotto. The game was originally cancelled in that country after registering sales of less than CN$200 per day. Geonomics has also launched Treasure Hunt, an instant win version of the game.

The plug was pulled on an Atlantic Canadian version of Geosweep in July 2013, when Atlantic Lotto said the game wasnt living up to its potential in the market.

While Geonomics continues to try to establish firm footing for their games, P.E.I. continues to pay costs associated with its investment. While the $4.3 million remains owing to the Atlantic Lottery Corporation, the province has been responsible for annual interest payments and other costs which so far have totalled $278,995.

Investment too risky: opposition

P.E.I. Opposition leader Steven Myers said the investment in Geonomics was too risky from the beginning, and the province never should have become involved.

Its a gamble is what it was. It was a gamble on a gambling venture, said Myers.

The government has gambled money and gambled money and gambled money and they lose each and every time, and its not theirs. I mean if this government wants to go and gamble their own personal dollars then so be it, but theyre gambling taxpayers dollars and when they lose, we all lose.