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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2004
COMMISSION FILE NUMBER: 0-26015
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YOUBET.COM, INC.
DELAWARE 95-4627253
5901 DE SOTO AVENUE, WOODLAND HILLS, CALIFORNIA 91367
(818) 668-2100
Indicate by check whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
As of May 3, 2004, the issuer had 29,769,703 shares of common stock, par value
$0.001 per share, issued and outstanding. The aggregate market value of the
issuer's common stock held by non-affiliates (assuming that the Registrant's
only affiliates are its officers, directors and 10% or greater stockholders) of
the issuer as of May 3, 2004 was approximately $113,334,881 based upon the
closing market price of $4.75 per common share on that date as reported on the
Nasdaq SmallCap Market.
YOUBET.COM, INC.
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED
MARCH 31, 2004
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheet as of March 31, 2004
(unaudited) and December 31, 2003 3
Condensed Consolidated Statements of Operations for the
three months ended March 31, 2004 and March 31,
2003 (unaudited) 4
Condensed Consolidated Statements of Cash Flows for the
three months ended March 31, 2004 and March 31,
2003 (unaudited) 5
Notes to Unaudited Condensed Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 15
Item 3. Quantitative and Qualitative Disclosures About Market Risk. 20
Item 4. Controls and Procedures 20
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 20
Item 2. Changes in Securities, Use of Proceeds, and Issuer Purchases
of Equity Securities 21
Item 3. Defaults Upon Senior Securities 21
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 5. Other Information 21
Item 6. Exhibits and Reports on Form 8-K 21
PRELIMINARY NOTE
This quarterly report on Form 10-Q is for the three-month period ended March 31,
2004. This quarterly report modifies and supersedes documents filed prior to
this quarterly report. The SEC allows Youbet to "incorporate by reference"
information that Youbet files with it, which means that Youbet can disclose
important information to you by referring you directly to those documents.
Information incorporated by reference is considered to be part of this quarterly
report. In addition, information that Youbet files with the SEC in the future
will automatically update and supersede information contained in this quarterly
report.
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
YOUBET.COM, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
2004 2003
-------------- --------------
(UNAUDITED) (AUDITED)
ASSETS:
Current Assets:
Cash and Cash Equivalents $ 8,359,904 $ 8,273,926
Restricted Cash, current (Note 2) 3,422,470 3,518,016
Receivables (Note 3) 170,925 140,657
Interest and Other Receivables (Note 3) 1,595,010 1,270,759
Prepaid Expenses 802,426 884,409
-------------- --------------
Total Current Assets $ 14,350,735 $ 14,087,767
Property and Equipment, net 2,541,093 2,731,922
Licensing Rights, net (Note 4) 503,602 1,407,447
Deferred Lease Costs 28,283 29,331
Deposits (Note 6) 95,650 595,650
-------------- --------------
TOTAL ASSETS $ 17,519,363 $ 18,852,117
============== ==============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Accounts Payable - Trade $ 555,957 $ 439,559
Fees Payable to Related Party (Note 4) 2,237,324 3,426,076
Accounts Payable - Track Related (Note 5) 2,365,552 2,539,534
Accrued Expenses 849,434 1,756,918
Customer Deposits 2,500,771 2,356,004
Accrued Compensation and Related Items 464,922 524,197
Deferred Revenues 86,184 79,519
-------------- --------------
TOTAL CURRENT LIABILITIES $ 9,060,144 $ 11,121,807
============== ==============
Stockholders' Equity:
Preferred Stock, $0.001 par value, authorized -- --
1,000,000 shares, none outstanding
Common Stock, $0.001 par value, authorized 100,000,000 shares
29,777,946 and 28,377,443 shares outstanding as of March 31,
2004 and December 31, 2003, respectively $ 29,778 $ 28,377
Treasury Stock (623,683 shares at cost) (1,828,709) (1,828,709)
Additional Paid In Capital 102,089,635 101,377,238
Accumulated Deficit (91,831,485) (91,846,596)
-------------- --------------
TOTAL STOCKHOLDERS' EQUITY 8,459,219 7,730,310
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 17,519,363 $ 18,852,117
============== ==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
3
YOUBET.COM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
QUARTER ENDED MARCH 31,
-------------------------------
2004 2003
------------- -------------
REVENUES (NOTES 4 AND 5)
Commissions $ 14,260,036 $ 10,845,220
Subscription and Transaction Fees 182,321 84,874
Race Information 84,747 76,313
------------- -------------
TOTAL REVENUES $ 14,527,104 $ 11,006,407
OPERATING EXPENSES:
Track Fees 7,133,091 5,883,606
Licensing Fees - Related Party (Note 4) 1,973,036 1,323,835
Network Operations 521,609 378,653
Research and Development 415,841 393,286
Sales and Marketing 669,092 381,434
General and Administrative 2,719,198 2,180,593
Depreciation and Amortization 1,125,432 1,384,260
------------- -------------
TOTAL OPERATING EXPENSES $ 14,557,299 $ 11,925,667
------------- -------------
LOSS FROM OPERATIONS $ (30,195) $ (919,260)
OTHER INCOME (EXPENSE):
Interest Income 33,990 8,786
Interest Expense (1,434) (395,150)
Other Income 12,750 57,945
------------- -------------
TOTAL OTHER INCOME (EXPENSE) $ 45,306 $ (328,419)
------------- -------------
NET INCOME (LOSS) $ 15,111 $ (1,247,679)
============= =============
EARNINGS (LOSS) PER SHARE - BASIC $ 0.00 $ (0.05)
------------- -------------
EARNINGS (LOSS) PER SHARE - DILUTED $ 0.00 $ (0.05)
------------- -------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
4
YOUBET.COM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
QUARTER ENDED MARCH 31,
------------------------------
2004 2003
------------ ------------
INCREASE IN CASH AND CASH EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 15,111 $(1,247,679)
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH USED IN OPERATING ACTIVITIES:
Depreciation and Amortization 1,125,432 1,384,260
Non-Cash Interest Expense -- 358,638
Stock-Based Compensation (7,006) 51,009
Loss on Sale of Property and Equipment 7,891 --
CHANGE IN OPERATING ASSETS AND LIABILITIES:
Restricted Cash (2,182) (344,837)
Receivables (30,268) 210,458
Interest and Other Receivables (324,251) 2,785
Prepaid Expenses 81,983 50,544
Deposits 501,047 1,048
Account Payable - Trade 116,398 (4,962)
Fees Payable - Related Parties (1,188,751) (934,131)
Accounts Payable - Track Related (173,982) (1,443,230)
Accrued Expenses (491,601) 865,597
Customer Deposits and Other 144,767 478,289
Accrued Compensation and Related Items (59,275) (295,364)
Deferred Revenues 6,665 37,761
------------ ------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (278,023) (829,814)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Restricted Cash 97,728 63,041
Purchases of Property and Equipment (38,649) (160,106)
------------ ------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 59,079 (97,065)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Exercise of Stock Options and Warrants 304,922 253,164
Proceeds from Notes Payable -- 2,000,000
Payments of Notes Payable -- (750,000)
------------ ------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 304,922 1,503,164
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 85,978 576,285
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD 8,273,926 4,559,897
------------ ------------
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD $ 8,359,904 $ 5,136,182
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash Paid for Interest $ 2,121 $ 80,137
============ ============
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Issuance of Warrants for $2 million note $ -- $ 518,223
Stock Issuance for Surrender of TVG's Additional Warrant (Note 9) 3,640,000 --
Stock Issuance for TVG Legal Expense Reimbursement (Note 9) 415,882 --
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
5
YOUBET.COM, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2004
NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION
BUSINESS
Youbet.com, Inc. ("Youbet") has established itself as a leading global
brand name for online, live event sports entertainment and wagering.
Wagering on live events, such as horse racing, car racing, soccer,
football, and other sporting events is a large global industry which
adapts well to the Internet. Youbet has focused on the United States
horse race wagering market through its main product, Youbet
Express(SM), which features online wagering, simulcast, and in-depth,
up-to-the-minute information on horse racing. Youbet is working to
expand the Youbet brand, its products, and its services throughout the
United States and in select international markets. Youbet currently
provides its customers with the ability to receive interactive,
real-time audio/video broadcasts directly on their computers, access a
comprehensive database of handicapping information and, in most states,
wager on a wide selection of U.S. and international horse races.
On August 2, 2001, Youbet received a multi-jurisdictional license from
the State of Oregon Racing Commission to accept and place online and
telephone horse racing pari-mutuel wagers. In each of August 2002 and
2003, Youbet obtained a one year renewal of its Oregon license.
On February 21, 2002, Youbet received a one-year out-of-state,
multi-jurisdictional wagering hub Advance Deposit Wagering ("ADW")
license from the State of California Horse Racing Board ("CHRB"). On
February 22, 2003, Youbet received a two-year renewal of this license.
On June 6, 2002, Youbet received a two-year in-state,
multi-jurisdictional wagering hub ADW license from the State of
California. On April 22, 2004, Youbet received a renewal of its
in-state, multi-jurisdictional wagering hub ADW license through the end
of 2004. All wagers are processed through Youbet Oregon, Inc., a
wholly-owned subsidiary of Youbet.
BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited condensed
financial statements for the three months ended March 31, 2004 and 2003
include all adjustments (consisting of normal recurring accruals) which
management considers necessary to present fairly the financial position
of the Company as of March 31, 2004, the results of its operations for
the three months ended March 31, 2004 and March 31, 2003, and its cash
flows for the three months ended March 31, 2004 and 2003 in conformity
with accounting principles generally accepted in the United States
("GAAP"). These financial statements have been prepared consistently
with the accounting policies described in the Company's Annual Report
on Form 10-KSB for the year ended December 31, 2003, as filed with the
Securities and Exchange Commission on March 10, 2004, and should be
read in conjunction with this Quarterly Report on Form 10-Q. The
results of operations for the three months ended March 31, 2004 are not
necessarily indicative of the consolidated results of operations to be
expected for the full fiscal year ending December 31, 2004. Certain
information and footnote disclosures normally included in the financial
statements presented in accordance with GAAP have been condensed or
omitted.
6
Youbet.com, Inc., a Delaware corporation, and its wholly owned
subsidiary, Youbet Oregon, Inc., are collectively referred to herein as
"Youbet.com", "Youbet", or the "Company". All intercompany accounts and
transactions have been eliminated in consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities as of the date of the financial statements and
the reported amounts of revenues and expenses during the reporting
period. Actual results could materially differ from these estimates.
BASIC AND DILUTED EARNINGS PER SHARE
Basic earnings per share is calculated by dividing net income by the
weighted average number of common shares outstanding during the period.
Diluted earnings per share is calculated by dividing net income by the
basic shares outstanding and all dilutive securities, including stock
options, warrants, convertible notes, and preferred stock, but does not
include the impact of potential common shares which would be
anti-dilutive. As of March 31, 2004, total warrants outstanding were
1,369,005 with exercise prices between $0.50 to $19.50 and total stock
options outstanding were 6,756,594 with exercise prices between $0.50
and $10.50. As of March 31, 2004 and 2003, because the average market
price for Youbet's common shares was greater than the weighted average
exercise prices for both the warrants and stock options, there were no
dilutive securities excluded from the computation of diluted EPS.
CONCENTRATION OF CREDIT RISK
The Company maintains cash balances at various financial institutions.
Deposits are insured up to $100,000 per account by the Federal Deposit
Insurance Corporation. At March 31, 2004 and December 31, 2003, the
Company had uninsured cash and cash equivalents and restricted cash of
$11,814,121 and $10,320,727, respectively.
RECLASSIFICATIONS
Certain prior period amounts have been reclassified to conform to the
current period presentation.
NOTE 2: RESTRICTED CASH, CURRENT
PLAYERS TRUST(SM)
As of March 31, 2004, the balance of customer accounts maintained in
Players Trust(SM) was $2,636,767, all of which is recorded as
restricted cash, current. This amount was $124,102 in excess of
customer deposits. As of December 31, 2003, the balance of customer
accounts maintained in the Players Trust(SM) was $2,634,585, which was
$116,427 in excess of customer deposits.
7
OBLIGATIONS UNDER FACILITY LEASES
As required under a lease agreement that expires March 15, 2010 for
Youbet's executive and operating offices, Youbet posted a letter of
credit supported by a restricted cash account in the amount of $707,804
in September 2003. As of March 31, 2004 and December 31, 2003, the cash
required to support the letter of credit was $710,011 and $707,804,
respectively, and is classified as restricted cash, current.
CREDIT CARD RESERVES
The Company uses outside vendors to process its credit card and check
transactions. These vendors require the Company to keep in reserve, for
up to six months, a certain percentage of the total amounts processed
as a reserve against any future potential losses. As of March 31, 2004
and December 31, 2003, these reserves amounted to $75,692 and $175,627,
respectively, all of which is recorded as restricted cash, current.
NOTE 3: RECEIVABLES
As of March 31, 2004, Receivables of $170,925 primarily consisted of $8,457
due from Magna Entertainment Corporation ("Magna") for fees earned on
handle generated through Magna's Call-A-Bet system, and $161,383 due from
various tracks for settlement of wagers processed through the Company's
Oregon hub.
As of March 31, 2004, Interest and Other Receivables of $1,595,010
primarily consisted of $1,149,368 due from Youbet's Directors and Officer's
liability insurance carrier for reimbursement of litigation and arbitration
expenses, and $345,642 due from Magna for underreported handle amounts to
Youbet (See Note 5).
As of December 31, 2003, Receivables of $140,657 primarily consisted of
$29,202 due from Magna for fees earned on wagers processed through Magna's
Call-A-Bet system (exclusive of the audit receivable described in Note 5)
and $109,996 due from various tracks for settlement of wagers processed
through Youbet's Oregon hub.
As of December 31, 2003, Interest and Other Receivables of $1,270,759
primarily consisted of $851,653 due from Youbet's Directors and Officer's
liability insurance carrier for reimbursement of litigation and arbitration
expenses, and $138,400 due from Magna for underreported handle amounts.
NOTE 4: LICENSING RIGHTS - RELATED PARTY
In May 2001, Youbet entered into a track content and patent license
agreement (the "License Agreement") and a warrant issuance agreement with
ODS Technologies, L.P., a subsidiary of Gemstar-TV Guide International
("Gemstar"), doing business as Television Games Network ("TVG"). These
agreements relate to the grant by TVG to Youbet of a non-exclusive license
to use telephones and certain simulcast audio, video, and data content for
the purpose of streaming such content online and the agreement of
racetracks to accept wagers based on such content, and to use TVG's
patented systems for making pari-mutuel wagers on horse races online.
8
The License Agreement remains in effect until May 2011 (subject to certain
extensions), but may be terminated prior to that time should Youbet cease
to operate its Oregon account wagering hub or another account wagering
facility approved by TVG or in the event Youbet brings any legal action
against TVG or any of TVG's affiliate. Either TVG or Youbet may terminate
the License Agreement in the event that the other party materially breaches
the License Agreement without cure upon notice.
In consideration of the rights granted to Youbet under the License
Agreement, Youbet has agreed to pay to TVG fees based on the handle
generated by Youbet from wagering activity and issued to TVG warrants to
purchase Youbet common stock, as described below.
Youbet pays three distinct types of fees to TVG. First, Youbet pays to TVG
fees based on wagers made by Youbet customers. These fees are calculated as
a percentage of total handle wagered by Youbet customers and vary based on
where such customer wagers are processed. Second, Youbet pays TVG certain
milestone payments. These payments are calculated based on transaction or
subscription fees charged to by Youbet to its customers. Third, Youbet pays
a portion of TVG's host track fees and racing association fees with respect
to account wagers placed by Youbet customers on races conducted at TVG
exclusive tracks or within a certain distance of TVG exclusive tracks.
Youbet issued to TVG an initial warrant (the "Initial TVG Warrant"), on May
18, 2001, and recorded the fair value of the Initial TVG Warrant
($2,910,000 using the Black-Scholes method) as a deferred asset captioned
"Licensing Rights". Accumulated amortization as of March 31, 2004 and
December 31, 2003 was $2,773,924 and $2,531,413, respectively. The Initial
TVG Warrant was exercised during the quarter ended June 30, 2002, resulting
in cash proceeds to Youbet of $3,885 and issuance of 3,884,650 shares of
Youbet common stock to TVG.
Youbet also issued to TVG an additional warrant (the "Additional Warrant"),
on September 20, 2001, and recorded the fair value of the Additional
Warrant ($7,054,000 using the Black-Scholes method) as a deferred asset
captioned "Licensing Rights". Accumulated amortization as of March 31, 2004
and December 31, 2003 was $6,686,832 and $6,025,497, respectively.
Pursuant to rights granted under the settlement agreement dated February,
23, 2004 (See Note 9), on March 31, 2004, TVG notified Youbet that it was
surrendering the Additional Warrant. In accordance with the settlement
agreement, Youbet issued one million shares of its common stock valued at
$3.64 per share, the fair value on the date of issuance, in consideration
for the tendered unexercised warrant. Finally, the settlement called for
Youbet to reimburse TVG for the legal expenses it incurred during the
dispute up to $725,000. Youbet issued 124,144 shares of common stock to TVG
valued at $3.35 per share, the fair value on the date of issuance, for a
total value of $415,882 in February 2004 towards satisfaction of such legal
expense reimbursement. Youbet is obligated to satisfy the remainder of this
obligation on July 2, 2004.
The estimated remaining aggregate amortization expense related to Licensing
Rights through May 2004 is $503,602.
We periodically review the carrying value of these rights based upon
estimates of future cash flows. While management believes its estimates of
future cash flows are reasonable, different assumptions regarding such cash
flows could materially affect this valuation.
9
NOTE 5: AGREEMENT WITH MAGNA AND INDEPENDENT TRACKS
In addition to revenue generated from its relationship with TVG as
discussed in Note 4, Youbet generates revenue under agreements with Magna,
one of the largest owner/operators of premier horse racetracks in the
United States and various other independent tracks.
In June 1997, Youbet entered into a Telecommunication Facilitation
Agreement with Magna. Under the Telecommunication Facilitation Agreement
Youbet provides Magna with an interactive graphics interface into Youbet
Express(SM) through which Youbet customers who have established accounts
with Magna's Call-A-Bet System may communicate with Magna to transmit
wagering information. Effective December 26, 2003, the arrangement with
Magna was modified to restrict wagering through Youbet only to Magna's
California tracks, Santa Anita, Bay Meadows, and Golden Gate Fields.
Pursuant to the terms of the Telecommunication Facilitation Agreement,
Youbet audited Magna's records for proper accounting of commissions owed to
Youbet and determined that Magna underreported handle amounts and, as a
result, has underpaid Youbet in excess of $692,000. Youbet has recorded a
receivable for this amount and has reserved a major portion of the
receivable. At March 31, 2004 and December 31, 2003, approximately $345,000
and $138,000 of this receivable was recorded as cumulative revenue,
respectively (See Note 3).
Pari-mutuel racetrack operators typically retain a portion of all wagers as
their commission prior to distributing payoffs to the winners. In
accordance with various agreements with Magna and independent racetracks,
Youbet receives a pre-arranged fee from each racetrack for wagers delivered
to their respective pari-mutuel pools. Through the introduction of the
Total Access product, Youbet currently has independent simulcast agreements
with over 90 tracks that are paid a host fee for their signal. These host
fees are based on handle generated by Youbet members to the respective
tracks.
For the three months ended March 31, 2004 and 2003, $201,894 and $484,259,
respectively, of the Company's revenues were generated through the Magna
Telecommunication Facilitation Agreement.
NOTE 6: DEPOSITS
As of March 31, 2004, deposits primarily included (1) $60,078 security
deposit for Youbet's Woodland Hills office, (2) $10,000 charge back deposit
for credit card processing, and (3) $15,835 deposit for satellite
equipment.
As of December 31, 2003, deposits primarily included (1) $500,000 deposit
for licensing with the California Horse Racing Board, (2) $60,078 security
deposit for Youbet's Woodland Hills office, (3) $10,000 charge back deposit
for credit card processing, and (4) $15,835 deposit for satellite
equipment.
10
NOTE 7: EARNINGS PER SHARE
The following table is a reconciliation of the weighted average shares used in
the computation of basic and diluted earnings per share for the periods
presented:
THREE MONTHS ENDED MARCH 31,
2004 2003
--------------------------------------------------------------------------------------------------------
WEIGHTED WEIGHTED
NET AVERAGE NET AVERAGE
INCOME SHARES EPS (LOSS) SHARES EPS
--------------------------------------------------------------------------------------------------------
Earnings $ 15,111 28,549,772 $ 0.00 $ (1,247,679) 23,519,239 $ (0.05)
per share -
basic
Effect -- 4,286,671 -- -- -- --
of
dilutive
securities
Earnings $ 15,111 32,836,443 $ 0.00 $ (1,247,679) 23,519,239 $ (0.05)
per share -
diluted
NOTE 8: STOCKHOLDERS' EQUITY
The Company has issued various stock options and warrants in non-capital
raising transactions for services rendered and to be rendered, and as
financing costs. The Company accounts for stock options and warrants
granted to employees and non-employees in accordance with Statement of
Financial Accounting Standards No. 123. The Company has calculated the fair
value of such warrants and stock options according to the Black-Scholes
pricing model.
All securities described below were issued under an exemption to the
registration requirements of the Securities Act of 1933, as amended,
pursuant to Section 4(2) thereof and Regulation D.
ISSUANCE OF WARRANTS
Information with respect to common stock purchase warrants issued is
summarized as follows:
WEIGHTED AVERAGE
WARRANTS EXERCISE PRICE
---------------------- --------------------
BALANCE, DECEMBER 31, 2003 17,861,874 $2.54
Warrants Terminated (16,432,969) 2.50
Warrants Exercised (59,900) 1.94
----------------------
WARRANTS EXERCISABLE AT MARCH 31, 2004 1,369,005 $3.08
======================
11
Additional information about outstanding warrants to purchase the
Company's common stock at March 31, 2004 is as follows:
WARRANTS OUTSTANDING AND EXERCISABLE
---------------------------------------------------------
WEIGHTED AVG. WEIGHTED
REMAINING AVERAGE
NUMBER CONTRACTUAL LIFE EXERCISE
OF SHARES (IN YEARS) PRICE
--------------- ----------------------- ---------------
RANGE OF EXERCISE PRICES:
$0.01 - 0.99 1,077,399 1.31 $0.74
$2.00 - 4.99 64,606 Not determinable 2.87
$5.00 - 19.50 227,000 0.13 14.25
---------------
TOTAL 1,369,005 $3.08
===============
STOCK OPTION ARRANGEMENTS
As of March 31, 2004, under the Company's 1998 Stock Option Plan, there
were 8,269,030 stock options granted and outstanding out of a total
approved pool of 8,500,000 options.
ISSUANCE OF STOCK OPTIONS
During the three months ended March 31, 2004, the Company granted
various stock options, as follows:
o Stock options were granted to employees to purchase 506,500
shares of common stock at exercise prices ranging from
$2.49 to $3.64, the fair market value at the date of grant.
These options vest ratably over four years and are
exercisable for a period of five years.
Information with respect to activity under the Company's Stock Option
Plans is summarized below.
STOCK OPTIONS WEIGHTED AVERAGE
EXERCISE PRICE
-------------------- ----------------------
BALANCE, DECEMBER 31, 2003 6,581,704 $1.15
Options Granted 506,500 2.89
Options Exercised (216,459) 0.87
Options Forfeited (115,151) 0.55
--------------------
BALANCE, MARCH 31, 2004 6,756,594 1.30
====================
OPTIONS EXERCISABLE (VESTED) AT MARCH 31, 2004 5,354,621 $1.18
====================
12
Additional information about outstanding options to purchase the
Company's common stock at March 31, 2004 is as follows:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------------------- -------------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF EXERCISE NUMBER OF CONTRACTUAL EXERCISE NUMBER OF EXERCISE
PRICES SHARES LIFE (IN YEARS) PRICE SHARES PRICE
-----------------------------------------------------------------------------------------------------
$0.50 - $0.99 4,198,472 7.10 $ 0.65 3,516,305 $ 0.64
$1.00 - $1.99 312,749 2.80 1.26 190,943 1.12
$2.00 - $4.99 2,215,373 7.10 2.49 1,617,373 2.28
$5.00 - $10.50 30,000 5.50 5.31 30,000 5.31
----------------- ----------------
TOTAL 6,756,594 6.89 $ 1.30 5,354,621 $ 1.18
================= ================
On August 1, 2001, the Board of Directors approved an option repricing
plan whereby each current non-executive employees' previously issued
stock options at a strike price above $1.00, were repriced to the then
current market price of the common stock ($1.00). The Board of
Directors believed that many of the stock options previously granted by
the Company no longer provided the performance incentive intended by
the option because the exercise price of many of the Company's
outstanding stock options was well in excess of the market price of the
common stock. Pursuant to the repricing plan, 378,774 options were
repriced to $1.00. Each repriced option retained its expiration date
and vesting schedule. As of March 31, 2004, 127,807 of the $1.00
repriced options remain vested and unexercised and 32,316 of the $1.00
repriced options remain unvested.
As of March 31, 2004, the Company had one stock-based employee
compensation plan, the 1998 Stock Option Plan. The Company accounts for
stock options issued to officers and employees under the recognition
and measurement principles of APB Opinion No. 25, "Accounting for Stock
Issued to Employees", and related interpretations. No stock-based
employee compensation cost is reflected in net income, as all options
granted under the plan had an exercise price equal to the market value
of the underlying common stock on the date of grant. Options granted to
outside directors and consultants are accounted for in accordance with
"Statement of Financial Accounting Standards No. 123".
If compensation expense for stock options issued to officers and
employees had been determined based upon the fair value at the grant
date consistent with the methodology prescribed under Statement of
Financial Accounting Standards No. 123, the net loss and basic loss per
share would have been as shown below. The fair value of stock options
granted under the Company's plan was estimated on the date of grant
using the Black-Scholes option pricing model using the following
weighted average assumptions:
THREE MONTHS ENDED MARCH 31,
2004 2003
----------------------- -------------------
Expected Life in Years 4.86 6.1
Risk Free Interest Rate 4.0% 5.0%
Dividend Yield 0% 0%
Expected Volatility 73.5% 73.3%
13
The weighted average fair value at the date of grant for stock options
granted during the three months ended March 31, 2004 was $2.89. No
warrants were granted during the three month period ended March 31,
2004.
THREE MONTHS ENDED MARCH 31,
2004 2003
--------------- ---------------
AS REPORTED NET INCOME (LOSS) $ 15,111 $ (1,247,679)
Add: Stock-based employee
compensation expense included in
reported income, net of related tax
effects (10,168) 40,799
Less: Total stock based employee
compensation expense determined under
fair value based methods for all
awards, net of related tax effects (1,433,785) (405,152)
--------------- ---------------
PRO FORMA NET LOSS $ (1,428,842) $ (1,612,032)
=============== ===============
NET LOSS PER SHARE:
As Reported $ (0.00) $ (0.05)
Pro Forma $ (0.05) $ (0.07)
NOTE 9: LEGAL PROCEEDINGS
On February 23, 2004, Youbet.com, Inc. and TVG agreed to settle their
disputes. As part of this settlement, Youbet agreed not to seek stockholder
approval of certain charter and bylaw provisions, and TVG dropped all
pending litigation and the related arbitration. The companies also agreed
to recognize the dilutive effects of several specific securities
transactions on the Additional Warrant and gave TVG the right to agree to
surrender the Additional Warrant at any time prior to April 1, 2004 in
exchange for one million shares of Youbet common stock. Finally, the
settlement called for Youbet to reimburse TVG for the legal expenses it
incurred during the dispute up to $725,000. Pursuant to this settlement
agreement, Youbet issued 124,144 shares of common stock valued at $3.35 per
share, the fair value on the date of issuance, for a total value of
$415,882 to TVG in February 2004 towards satisfaction of the $725,000 legal
expense reimbursement. We are obligated under the settlement agreement to
satisfy the remainder of this obligation on July 2, 2004.
Pursuant to rights granted under the settlement agreement dated February,
23, 2004, TVG agreed, on March 31, 2004, to surrender the Additional
Warrant to Youbet in exchange for one million shares of Youbet common
stock. Youbet issued one million shares of its common stock valued at $3.64
per share, the fair value on the date of issuance, for a total value of
$3,640,000 in consideration for surrendering the unexercised Additional
Warrant.
Youbet from time to time is involved in litigation arising in the ordinary
course of its business. At March 31, 2004, Youbet was not a party to any
material litigation outside the ordinary course of business.
14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
FORWARD LOOKING STATEMENTS
The following discussion and analysis of Youbet's financial condition
and results of operations should be read in conjunction with Youbet's
Consolidated Financial Statements and other financial information
included herein. This Management's Discussion and Analysis of Financial
Condition and Results of Operations and other sections of this report
contain forward-looking statements that are based on the current
beliefs and expectations of management, as well as assumptions made by,
and information currently available to, management. Such statements
include those regarding general economic and e-gaming industry trends.
Such statements involve risks and uncertainties, including the timely
development and market acceptance of products and technologies,
successful integration of acquisitions, the ability to secure external
sources of financing on acceptable terms, the ability to reduce
operating expense and other factors described in our filings with the
Securities and Exchange Commission. Actual actions and strategies and
the timing and expected results may differ materially from those
expressed or implied by such forward-looking statements, and Youbet's
future results, performance or achievements could differ materially
from those expressed in, or implied by, any such forward-looking
statements. Future events and actual results could differ materially
from those set forth in or underlying the forward-looking statements.
OVERVIEW
Youbet.com, Inc. was formed as a Delaware corporation on November 13,
1995.
Youbet has established itself as a leading, global brand name for
online, live event sports entertainment and wagering. Wagering on live
events, such as horse racing, car racing, soccer, football, and other
sporting events is a large global industry, which adapts well to the
Internet. Youbet has focused on the United States horse race wagering
market through its main product, Youbet Express(SM), which features
online wagering, simulcast, and in-depth, up-to-the-minute information
on horse racing. Youbet is working to expand the Youbet.com(SM) brand,
its products, and its services throughout the United States and in
select international markets. Youbet currently provides its customers
with the ability to receive interactive, real-time audio/video
broadcasts directly on their computers, access a comprehensive database
of handicapping information and, in most states, wager on a wide
selection of U.S. and international horse races.
Since the introduction of simulcasting in 1978 and the passage of the
Interstate Horse Wagering Act, horse wagering has migrated away from
the horse track. Handicappers prefer to place wagers at either remote
sites or by phone because it is more convenient. This trend is expected
to continue for the foreseeable future. Currently, approximately 84% of
all horse racing wagers are placed from remote locations.
Off-track wagering is typically captured through intertrack simulcasts,
off-track betting (OTB) facilities, telephone-based live operator and
interactive voice recognition (IVR), and PC-based and wireless
transmissions. This shift from at-the-track to off-track wagering was
driven by racing enthusiasts' desire for convenient, remote access to a
wide range of horse racing events, the ability to deliver this service
through developments in electronic systems, and the concept of advance
15
deposit wagering (ADW). ADW is accomplished when a customer opens an
account with a state-licensed entity and then deposits funds into that
account for future wagering. Customers may then use their funds plus
any realized winnings for on-going wagering. Customers using OTB
facilities, including our ADW service, receive the same odds as they
would receive if the were physically at the track.
Similar to most forms of gaming, live event wagering is most enjoyable
when there are a wide variety of wagering options available.
Simultaneously covering the action at more than one hundred domestic
and international horse tracks, Youbet exhibits dozens of races every
day. Through personal computers and hand-held wireless devices, our
web-based technology provides substantially more gaming action than is
possible through any other live event wagering alternative. Our
proprietary interactive system completes the wagering process,
including exotic selections, much faster than face-to-face or phone
transactions with winning outcomes instantly credited to the customer's
account for future events or prompt disbursement. As we consider
expansion into gaming venues beyond horse racing, these advanced gaming
platforms and wagering products may be leveraged into new markets.
The convenience of remote wagering has encouraged new and existing
customers to become more engaged with the sport of horse racing. We
believe that its marketing activities and user-friendly products have
attracted consumers who have rarely or never wagered, but have now
found an efficient, friendly method in which to experiencing the thrill
of wagering.
CRITICAL ACCOUNTING POLICIES
REVENUES
Youbet records gross commission proceeds as Revenues and records the
related costs under operating expenses as Track Fees and Licensing
Fees - Related Party. In addition, Youbet recognizes net commissions
earned on wagers placed at third-party wagering facilities as
Revenue. Youbet records on a monthly basis the current portion of
paid subscriptions as Revenue and the balance as Unearned Revenue.
Youbet also records as Revenue sales of handicapping information on a
per use basis.
LICENSING RIGHTS
The company recorded deferred licensing rights based on the fair
value of the Initial and Additional TVG warrants issued, using the
Black-Scholes option pricing model (see Note 4 to the accompanying
consolidated financial statements). The licensing rights are being
amortized over a three year period. At March 31, 2004, the
accumulated amortization of the license rights was $9,460,756. These
licensing rights will be fully amortized by May 2004. We periodically
review the carrying value of these rights based upon our estimates of
future cash flows. While we believe our estimates of future cash
flows are reasonable, different assumptions regarding such cash flows
could materially affect our valuation.
16
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2004 COMPARED TO THE
THREE MONTHS ENDED MARCH 31, 2003
Revenues increased 32% to $14,527,104 for the quarter ended March 31, 2004
compared to $11,006,407 in the first quarter of 2003. Gross handle grew 18%
from $60,966,241 for the first quarter 2003 to our largest first quarter
handle of $71,766,491 for the three months ended March 31, 2004. The handle
growth was primarily due to increases in new customer accounts,
successfully targeted marketing campaigns and promotions, enhancements in
Web content and functionality, and our robust content offering. Although
Magna restricted Youbet's wagering activity to California tracks only,
Youbet was still able to achieve an increase in total handle from
year-over-year in the first quarter of 2004. Our revenue improvement was
driven by our growth in handle and the maximization of revenue yield by
offering our customers incentives to wager on tracks that generate the
greatest revenue yield to Youbet. Revenue from subscription packages
increased to $182,321 for the quarter ended March 31, 2004 compared to
$84,874 for the quarter ended March 31, 2003.
OPERATING EXPENSES
TRACK FEES: Track Fees increased 21% to $7,133,091 in 2004, compared to
$5,883,606 in the first quarter of 2003. The increase was primarily due
to an increase in handle and revenues. Track Fees consist of amounts
paid and payable to various tracks, the California Horse Racing Board,
the Oregon Racing Commission, and various tote fees.
LICENSING FEES - RELATED PARTY: Licensing Fees - Related Party
represents amounts paid and payable as a result of our licensing
agreement with TVG (See Note 4 to the accompanying consolidated
financial statements). For the three months ended March 31, 2004, these
fees increased 49% to $1,973,036 compared to $1,323,835 for the first
quarter of 2003 primarily due to increased wagering on TVG tracks.
NETWORK OPERATIONS: Network Operations expense increased 38% to
$521,609 in 2004, compared to $378,653 in the first quarter of 2003.
The increase was due to increased number of personnel and data center
expenses. Network Operations expense consists of costs for salaries,
data center management, and telecommunications.
RESEARCH AND DEVELOPMENT: Research and Development expense increased 6%
to $415,841 in 2004, compared to $393,286 in the first quarter of 2003.
The increase was primarily due to increased personnel costs, partially
offset by reduced consulting fees. We will continue to invest in the
development of its network infrastructure and to support continued
maintenance and technology upgrades, which could further increase our
Research and Development expenses.
SALES AND MARKETING: Sales and Marketing expense increased 75% to
$669,092 in 2004, compared to $381,434 in the first quarter of 2003.
The increase was primarily due to our Kentucky Derby campaign, whereby
we increased print and online media expenses during the first quarter
of 2004, in addition to receiving a credit of $91,500 in the first
quarter of 2003 for advertising fees. Sales and Marketing expense
consists of costs for salaries, marketing and advertising, racing
operations, and member services.
17
GENERAL AND ADMINISTRATIVE: General and Administrative expense
increased 25% to $2,719,198 in 2004, compared to $2,180,593 in the
first quarter of 2003. The increase was primarily due to increases in
fully burdened salaries, performance related bonuses, our 401K matching
program, outside legal and consulting expenses, and investor relations;
partially offset by decreased bad debt expense. General and
administrative expense consists primarily of salaries, benefits,
insurances, facilities expenses, legal, accounting, and investor
relations.
DEPRECIATION AND AMORTIZATION: Depreciation and Amortization decreased
19% to $1,125,432 in 2004 compared to $1,384,260 in the first quarter
of 2003. Depreciation and Amortization primarily consists of
amortization of licensing rights related to the TVG license agreement
(See Note 4).
OTHER INCOME (EXPENSE)
INTEREST INCOME: Interest Income increased 287% to $33,990 in 2004
compared to $8,786 in the first quarter of 2003. $13,173 of the
increase was due to interest income received on the $500,000 California
Horse Racing Board deposit that was refunded in the first quarter of
2004. The balance of the increase was due to higher balances of cash in
banks.
INTEREST EXPENSE: Interest Expense decreased to $1,434 in 2004,
compared to $395,150 in the first quarter of 2003. The decrease was
primarily due to the retirement of previously issued unsecured notes
and the related amortization of the note discount during the first
quarter of 2003.
OTHER INCOME: Other income of $12,750 primarily represents collection
of previously written-off receivables of $12,605
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter of 2004, we funded our operations primarily
through working capital, in addition to proceeds from the exercise of stock
option and warrants. As of March 31, 2004, we had net working capital of
$5,290,591, compared to $2,965,960 at December 31, 2003. As of March 31,
2004, we had $8,359,904 in cash and cash equivalents and $3,422,470 in
restricted cash. Our principal recurring cash commitments consist of
payroll and benefits, business insurance, real estate leases, data center
operations, and telecommunications. Management believes that its ongoing
efforts to reduce costs and operate more efficiently, combined with the
growth in gross handle, has improved cash flow to a level needed to support
future operations. However, we may from time to time seek additional
capital to fund operations, reduce our liabilities, and fund our expansion
plans consistent with our anticipated changes in operations and
infrastructure.
Net cash used in operating activities was $278,023 and $829,814 for the
three months ended March 31, 2004 and 2003, respectively. The
year-over-year decrease of $551,791 in cash used in operating activities
was primarily due to (1) net income of $15,111 reported in the current
quarter, representing a variance of $1,262,790 from a net loss of
$1,247,679 reported in the prior year quarter, (2) changes in the Player's
Trust(SM) restricted cash, which increased $2,182 in the current quarter,
18
representing a variance of $342,655 from the increase in restricted cash
noted in the prior year quarter, (3) changes in deposits, which decreased
$501,047 in the current quarter, representing a variance of $499,999 from
the increase in deposits noted in the prior year quarter, (4) changes in
accounts payable - track related, which decreased $173,982 in the current
quarter, representing a variance of $1,269,248 from the decrease in
accounts payable - Track related noted in the prior year quarter, and (5)
changes in accrued compensation and related items, which decreased $59,275
in the current quarter, representing a variance of $236,089 from the
decrease in accrued compensation and related items noted in the prior year
quarter. These variances were partially offset by (1) a variance of
$358,638 from the decrease in non-cash interest expense noted in the prior
year quarter (2) changes in accounts receivable, which increased $30,268 in
the current quarter, representing a variance of $240,726 from a decrease in
accounts receivable noted in the prior year quarter, (3) changes in
interest and other receivables, which increased $324,251 in the current
quarter, representing a variance of $327,036 from a decrease in interest
and other receivables noted in the prior year quarter, (4) changes in
accrued expenses, which decreased $907,484 in the current quarter,
representing a variance of $1,357,198 from an increase in accrued expenses
noted in the prior year quarter, and (5) changes in customer deposits,
which increased $144,767 in the current quarter, representing a variance of
$333,522 from the increase in customer deposits noted in the prior year
quarter.
The decrease in deposits since December 31, 2003 was the result of Youbet
obtaining in February 2004 a surety bond secured by a letter of credit,
which the California Horse Racing Board upon its receipt, released a
$500,000 cash deposit, plus interest, back to Youbet. Accounts payable -
track related decreased mostly due to a decrease in the Magna payable
caused by Magna restricting our access to their California tracks only. The
increase in interest and other receivables was primarily due to an increase
in our Directors and Officer's liability policy insurance claim, related to
the TVG litigation & arbitration expenses (See Note 3 to the accompanying
consolidated financial statements). Accrued expenses decreased primarily
due to a decrease in accrued bonuses and legal expenses.
Net cash provided by investing activities for the three months ended March
31, 2004 was $59,079 compared to $97,065 of net cash used in investing
activities in the prior year quarter. The year-over-year increase of
$156,144 relates to (1) changes in property plant and equipment, which
decreased $38,649 in the current period, representing a variance of
$121,457 from the prior year quarter, and (2) changes in non-Player's
Trust(SM) restricted cash, which decreased $97,728 in the current quarter,
representing a variance of $34,687 from the decrease in restricted cash
noted in the prior year quarter.
Net cash provided by financing activities was $304,922 and $1,503,164 for
the three months ended March 31, 2004 and 2003, respectively. The
year-over-year decrease of $1,198,242 in cash provided by financing
activities was due to (1) changes in proceeds from exercise of stock
options and warrants which increased $304,922 in the current quarter,
representing a variance of $51,758 from the increase noted in the prior
year quarter, and (2) the decrease of net cash proceeds received from notes
payable of $1,250,000 from the prior year quarter.
Youbet settled a dispute with its largest stockholder, TVG, in February
2004. This settlement called for Youbet to reimburse TVG for the legal
expenses it incurred during the dispute up to $725,000. Youbet issued
124,144 shares of common stock as partial satisfaction of this obligation
in Februray 2004 and is obligated under the settlement agreement to satisfy
the remainder of this obligation on July 2, 2004. We have filed an
insurance claim to recover these amounts, among other things, and in the
event we do not receive payment prior to July 1, 2004, we have the option
of satisfying the remaining obligation by issuing additional shares of
Youbet common stock.
19
TVG held a warrant to acquire 51% of Youbet's common stock. In connection
with the February 2004 settlement, TVG agreed, on March 31, 2004, to
surrender its warrant to Youbet in exchange for one million shares of
Youbet common stock. On March 31, 2004, TVG also requested that Youbet file
a registration statement covering all five million shares of common stock
held by TVG. Youbet is in the process of preparing a shelf registration in
accordance with TVG's registration rights set forth in the warrant issuance
agreement, and at this time, TVG has not advised us of any specific method
of distribution or of its timing for any sales of Youbet common stock.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Our exposure to market risk and related changes in interest rates relates
primarily to our investment portfolio. As of March 31, 2004, our portfolio
of investments included $8,359,904 in cash and cash equivalents and
$3,422,470 of restricted cash. Due to the conservative nature of our
investment portfolio, we believe that a sudden 10% change in interest rates
would not have a material effect on the value of the portfolio since the
average yield on our investments is less than 1% at March 31, 2004. The
impact on our future interest income will depend largely on the gross
amount of our investment portfolio. We do not expect our operating results
or cash flows to be affected to any significant degree by a sudden change
in market interest rates.
ITEM 4. CONTROLS AND PROCEDURES
As of March 31, 2004, our management, including our Chief Executive Officer
and our Chief Financial Officer, evaluated the effectiveness of the design
and operation of our disclosure controls and procedures (as defined in Rule
13a-15(e) promulgated under the Securities and Exchange Act of 1934, as
amended). Based on that evaluation, our management, including the Chief
Executive Officer and our Chief Financial Officer, concluded that our
disclosure controls and procedures were effective in timely alerting
management, including our Chief Executive Officer and our Chief Financial
Officer, of material information that we are required to include in
periodic Securities and Exchange Commission filings.
There have been no changes in our internal control over financial reporting
that occurred during the quarter ended March 31, 2004 that have materially
affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On February 23, 2004, Youbet.com, Inc. and TVG agreed to settle their
disputes. As part of this settlement, Youbet agreed not to seek stockholder
approval of certain charter and bylaw provisions, and TVG dropped all
pending litigation and the related arbitration. The companies also agreed
to recognize the dilutive effects of several specific securities
transactions on the Additional Warrant and gave TVG the right to agree to
surrender the Additional Warrant at any time prior to April 1, 2004 in
exchange for one million shares of Youbet common stock. Finally, the
20
settlement called for Youbet to reimburse TVG for the legal expenses it
incurred during the dispute up to $725,000. Pursuant to this settlement
agreement, Youbet issued 124,144 shares of common stock to TVG in February
2004 towards partial satisfaction of the $725,000 legal expense
reimbursement. We are obligated under the settlement agreement to satisfy
the remainder of this obligation on July 2, 2004.
Pursuant to rights granted under the settlement agreement dated February,
23, 2004, TVG agreed, on March 31, 2004, to surrender the Additional
Warrant to Youbet in exchange for one million shares of Youbet common
stock. Youbet issued one million shares of its common stock valued at $3.64
per share, the fair value on the date of issuance, for a total value of
$3,640,000 in consideration for surrendering the unexercised Additional
Warrant.
Youbet from time to time is involved in litigation arising in the ordinary
course of its business. At March 31, 2004, Youbet was not a party to any
material litigation outside the ordinary course of business.
ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF
EQUITY SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 3.1 Certificate of Incorporation of Youbet.com, as amended
through November 12, 2001 (incorporated by reference to
Exhibit 3.1 to the Form 10-Q of Youbet.com. Inc. for the
quarter ended September 30, 2003).
Exhibit 3.2 Amended and Restated Bylaws of Youbet.com
(incorporated by reference to Exhibit 3.1 to the Form
8-K of Youbet.com, Inc. filed February 23, 2004).
Exhibit 10.1 Employment agreement dated as of January 1, 2004 by and
between Youbet.com, Inc. and Gary W. Sproule
Exhibit 10.2 Settlement Agreement, dated as of February 19, 2004,
between Youbet.com, Inc. and ODS Technologies, L.P. d/b/a
TVG Network (incorporated by reference to Exhibit 10.1 to
the Form 8-K of Youbet.com, Inc. filed February 23, 2004).
21
Exhibit 10.3 Form of Supplement to Employment Agreement
(incorporated by reference to Exhibit 10.2 to the Form
8-K of Youbet.com, Inc. filed February 23, 2004).
Exhibit 31.1 Certification of Chief Executive Officer Pursuant to Rule
13a-14(a) of the Securities Exchange Act of 1934
Exhibit 31.2 Certification of Chief Financial Officer Pursuant to Rule
13a-14(a) of the Securities Exchange Act of 1934
Exhibit 32.1 Certification Pursuant to Rule 13a-14(b) of the Securities
Exchange Act of 1934
(b) Reports on Form 8-K
Form 8-K, dated December 29, 2003 and filed January 1, 2004, reporting
under Items 5 and 7 the early retirement of $2 million aggregate
principal amount of notes payable.
Form 8-K, dated January 14, 2004 and filed January 20, 2004, reporting
under Items 5 and 7 the delays in court and arbitration proceedings
concerning Youbet's definitive proxy statement and TVG's warrants.
Form 8-K, dated January 28, 2004 and filed February 2, 2004, reporting
under Items 5 and 7 additional delays in court and arbitration
proceedings concerning Youbet's definitive proxy statement and TVG's
warrants.
Form 8-K, dated and furnished February 12, 2004, reporting under Items
7 and 12 Youbet.com, Inc.'s financial results for the fourth quarter
and fiscal year ended December 31, 2003.
Form 8-K, dated and furnished February 18, 2004, reconciling under
Items 7 and 12 EBITDA to net loss for the three years ended December
31, 2003.
Form 8-K, dated February 19, 2004 and filed February 23, 2004,
reporting under Items 5 and 7 the settlement of disputes with TVG.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
YOUBET.COM, INC.
May 4, 2004 By: /s/ Charles F. Champion
------------------------------------------
Charles F. Champion
President and Chief Executive Officer
May 4, 2004 By: /s/ Gary W. Sproule
------------------------------------------
Gary W. Sproule
Chief Financial Officer
22