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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ending June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
Commission file number 33-13789 LA
YOU BET INTERNATIONAL, INC.
(Exact name of Small Business Issuer As Specified in Its Charter)
DELAWARE 87-0422246
(State or other jurisdiction (I.R.S. employer
of incorporation or Organization) identification no.)
1950 Sawtelle, Suite 180
Los Angeles, CA 90025
(Address of Principal Executive Offices
310 444-3300
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities 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 __ No X
The number of shares outstanding of the Registrant's Common Stock on August 10,
1996 was 8,283,333 shares.
Transitional Small Business Disclosure Format (check one)
Yes __ No X
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YOU BET INTERNATIONAL, INC.
INDEX
PART I FINANCIAL INFORMATION PAGE NO.
- ------ --------------------- --------
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1996 3
and December 31, 1995
Consolidated Statements of Operations for the Three 4
and Six Months Ended June 30, 1996 and 1995
Consolidated Statements of Cash Flows for the Six 5
Months Ended June 30, 1996 and 1995
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Results 7
of Operations and Financial Condition
PART II OTHER INFORMATION
-----------------
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
- ----------
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YOU BET INTERNATIONAL, INCORPORATED
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 AND DECEMBER 31, 1995
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
------------- -----------------
<S> <C> <C>
ASSETS
Current Assets
Cash and Cash Equivalents $ 2,001,522 $ 3,297,908
Accounts Receivable 30,608 35,608
Prepaid Expenses 187,027 -
Other Current Assets 6,116 5,364
-------------- ---------------
Total Current Assets 2,225,273 3,338,880
Fixed assets - net of depreciation 486,923 78,154
-------------- ---------------
Total Assets $ 2,712,196 $ 3,417,034
============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current Liabilities
Accounts Payable $ 304,117 $ 259,214
Related party Payables - 45,213
Income taxes Payable - 2,400
Other current Liabilities 80,563 5,410
-------------- ---------------
Total Current Liabilities 384,680 312,237
-------------- ---------------
STOCKHOLDERS' EQUITY
Common Stock (par value .001) 8,283 8,071
Additional Paid-In capital 4,498,934 4,030,648
Accumulated Deficit (1,852,594) (682,822)
Deferred Compensation (327,107) (251,100)
-------------- ---------------
Total Stockholders' Equity 2,327,516 3,104,797
-------------- ---------------
Total Liabilities and Stockholders' Equity $ 2,712,196 $ 3,417,034
============== ===============
</TABLE>
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YOU BET INTERNATIONAL, INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
Three Months Ended June 30 Six Months Ended June 30
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
CONSULTING INCOME $ 3,000 $ 22,960 $ 3,000 $ 67,960
OPERATING EXPENSES
Research & Development 359,513 55,842 570,401 118,240
Sales & Marketing 73,796 - 148,022 -
General & Administrative 318,522 20,028 506,122 53,578
----------- ----------- ----------- -----------
Total Operating Expenses 751,831 75,870 1,224,545 171,818
----------- ----------- ----------- -----------
LOSS FROM
OPERATIONS (748,831) (52,910) (1,221,545) (103,858)
INTEREST EXPENSE (336) (3,106) (2,799) (5,775)
INTEREST INCOME 24,910 - 54,572 6,607
----------- ----------- ----------- -----------
LOSS BEFORE
PROVISION FOR INCOME
TAXES (724,257) (56,016) (1,169,772) (103,026)
PROVISION FOR INCOME
TAXES - - - -
----------- ----------- ----------- -----------
NET LOSS $ (724,257) $ (56,016) $(1,169,772) $ (103,026)
=========== =========== =========== ===========
WEIGHTED AVERAGE
NUMBER OF SHARES
OUTSTANDING 8,283,000 343,333 8,248,000 343,333
=========== =========== =========== ===========
LOSS PER SHARE $ (.09) $ (.16) $ (.14) $ (.30)
=========== =========== =========== ===========
</TABLE>
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YOU BET INTERNATIONAL, INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
Six Months Ended
1996 1995
-------------- --------------
<S> <C> <C>
CASH FLOW FROM OPERATING
ACTIVITIES:
Net Loss $ (1,169,772) $ (103,026)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation 24,545 436
Amortization of deferred compensation 52,243 -
Accounts Receivable (5,000) 30,000
Prepaid and other current assets (187,779) -
Accounts Payable 96,013 47,516
Other Current Liabilities (23,571) 6,297
-------------- --------------
Net cash used in operating activities (1,213,321) (31,371)
-------------- --------------
NET CASH USED IN INVESTING ACTIVITIES:
Acquisition of equipment (433,314) (7,127)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance from stock (net) 350,249 -
-------------- --------------
Net cash provided by financing activities 350,249 -
-------------- --------------
NET DECREASE IN CASH AND CASH
EQUIVALENTS (1,296,386) (38,498)
CASH AND CASH EQUIVALENTS:
BEGINNING OF PERIOD 3,297,908 55,477
-------------- --------------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 2,001,522 $ 16,979
============== ==============
</TABLE>
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YOU BET INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1
The unaudited consolidated financial statements of the Company have
been prepared in accordance with generally accepted accounting principles for
interim financial information, and accordingly, they do not include all
information and footnotes required by generally accepted accounting principles
for complete financial statements. The accompanying consolidated financial
statements should be read in conjunction with the more detailed consolidated
financial statements and related footnotes included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1995 filed with the
Securities and Exchange Commission.
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (which include only normal
recurring accruals), necessary to present fairly the financial position of the
Company as of June 30, 1996, and the results of its operations for the three
and six months ended June 30, 1996 and 1995, and its cash flows for the six
months ended June 30, 1996. The results of operations for the period ended
June 30, 1996 is not necessarily indicative of the results expected for the
entire year ending December 31, 1996.
NOTE 2
In November 1995, the Company's Board of Directors approved the 1995
Stock Option Plan and the 1995 Stock Option Plan for Non-Employee Directors
(collectively the "1995 Plans"). The 1995 Plans provide for the granting of
awards of incentive stock options, nonqualified stock options, and stock
appreciation rights. The aggregate number of shares of common stock available
for issuance under the 1995 Plans is 15% of the total number of shares of
common stock outstanding from time to time. A total of 643,500 options were
issued in 1995 which are exercisable at $2.50 per share through December 2005
and vest in four equal installments. An additional 285,000 options were issued
during 1996, which were exercisable at $3.00 to $4.00 per share. A total of
85,500 options have vested at June 30, 1996. Compensation totaling $417,825
was recorded upon the issuance of the options, which amount is being amortized
over the 48 month vesting period of the options.
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ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
The information set forth below should be read in conjunction with the
unaudited interim condensed consolidated financial statements and notes thereto
included in Part I - Item 1 of this Quarterly Report and with the consolidated
financial statements and Management's Discussion and Analysis of Financial
Condition and Results of Operations contained in the Company's Annual Report on
Form 10-K for the year ended December 31, 1995, as filed with the Securities
and Exchange Commission.
GENERAL
Management believes that the historical financial information relating
to the Company is not indicative of the operations of the Company in the future
for the following reasons:
. In 1995, the Company generated a modest amount of revenue
through consulting projects relating to on-line marketing and
wagering. It is not anticipated that consulting assignments
will be sought or that significant consulting revenue will be
received in the current year or subsequent periods.
. Revenue and expenses for the foreseeable future are expected
to be related to the You Bet! on-line software product.
QUARTER ENDED JUNE 30, 1996 COMPARED TO QUARTER ENDED JUNE 30, 1995.
REVENUES
Revenues declined $19,960 to $3,000 for the three months ending June
30, 1996, as compared to the three months ending June 30, 1995. Revenue
declined $64,960 to $3,000 for the six months ending June 30, 1996, as compared
to the six months ending June 30, 1995. The decline in revenue resulted
because of the substantial cessation of consulting business in the fourth
quarter of 1995 and increased emphasis related to the research and development
of the You Bet! product.
EXPENSES
Research and Development
Research and Development costs increased $303,671 (544%) to $359,513
for the three months ending June 30, 1996 as compared to $55,842 for the three
months ending June 30, 1995. Research and Development costs increased $452,161
(380%) to $570,401 for the six months ending June 30, 1996 compared to $118,240
for the six months ending June 30, 1995. The increase in research and
development costs were due to the build-up of staff and the continued
development of the software and graphic design of the Company's You Bet!
product. Salaries attributable to research and development increased $257,936
(2,635%) and $396,322 (2,032%) for the three and six month periods ending June
30, 1996 respectively, as a result of new employees hired for product
development and network operations. Other areas of increased expenses in this
category include consulting expenses and recruiting fees as a result of
utilizing recruiters to assist in finding and hiring new employees.
Sales and Marketing
Sales and Marketing expenses increased $73,796 for the three months
ending and $148,022 for the six months ending June 30, 1996. In the first and
second quarter of 1995 there was no sales or marketing expenses. In 1996,
however, the Company began to establish corporate identity and product
marketing programs.
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General and Administrative
General and Administrative costs increased $298,494 (1,490%) to
$318,522 for the three months ending June 30, 1996 as compared to $20,028 for
the three months ending June 30, 1995. General and Administrative costs
increased $452,544 (837%) to $506,122 for the six months ending June 30, 1996,
as compared to $53,578 for the six months ending June 30, 1995. Significant
areas of increased expenses included salaries which increased $82,818 and
$178,101 for the three and six month periods ending June 30, 1996,
respectively, as a result of 4 new employees hired for administrative and
finance operations, including a chief financial officer. No salaries were
recorded in general and administrative in 1995. Other areas of significant
expenses included professional fees, deferred compensation expense and rent.
Interest Income and Expense
Interest income increased $24,910 for the three months ending June 30,
1996; there was no interest income in the comparable period. Interest income
increased $47,965 (733%) to $54,572 for the six months ending June 30, 1996
compared to $6,607 for the six months ending June 30, 1995. The increases were
primarily the result of investing, on a short term basis, the proceeds of the
sale of the Company's securities in interest bearing accounts. Interest
expense decreased $2,770 (89%) to $336 for the three months ending June 30,
1996 from $3,106 for the three months ending June 30, 1995 and $2,976 (52%) to
$2,799 for the six months ending June 30, 1996 from $5,775 for the six months
ending June 30, 1995 as a result of a decline in interest accruing liabilities.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company's primary sources of liquidity and capital
resources have been cash flow from operations and borrowing from related
parties. During the six months ending June 30, 1996, the Company's cash
position decreased $1.3 million to $2.0 million as of June 30, 1996, compared
to $3.3 million at December 31, 1995. The decrease was attributable to
$1,213,000 used in operating activities, and $433,000 used for the acquisition
of equipment. The cash expended was partially offset by the receipt in 1996 of
$350,000 of cash proceeds from the private placement that began in 1995.
Cash used in operating activities consisted of research and
development costs of $568,000, marketing costs of $148,000, and general and
administrative costs of $431,000. These costs were partially offset by
interest income of $52,000. In addition, prepaid expenses increased $188,000
as result of prepaying the office lease and accounts payable, and other
liabilities increased $75,000 from extending the payment period to vendors.
In July 1996, the Company entered into a capital lease that calls for
a $100,000 sale and lease back of equipment previously purchased and a
$150,000 line for new purchases. The lease is payable over 30 months, with a
20% security deposit of which 1/3 is returned after each year, with an
effective interest rate of approximately 15% per annum.
The Company has begun a new private placement offering in the summer
of 1996. The Company is offering for sale on a "best efforts" basis, a maximum
of 1,115,000 shares (at an anticipated price of $4.50 per share) of the
Company's .001 par value Common Stock, exclusively to persons other than U.S.
Persons, as defined in Regulation S ("Regulation S"), promulgated under the
Securities Act of 1993, as amended (the "Securities Act"), in offshore
transactions.
The Company expects that the cash on hand coupled with the cash to be
raised from the new private placement, assuming it will be successful, will be
sufficient for operating expenses and capital
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expenditures through at least June 1997. No assurance can be given that the
Company will be successful in raising additional funds. If the Company is not
successful in raising this additional financing, management will be required to
consider a variety of other options including seeking joint venture partners,
selling or licensing all or a portion of its proprietary technology, curtailing
product development and delaying the roll-out of its first product, as well as
other cost cutting actions, including suspending all or a portion of its
activities.
The Company's need for capital (beyond that contemplated in the
anticipated private placement) during the next year or more will vary based
upon a number of factors, including the rate at which demand for products
expands, the level of sales and marketing activities for its products, and the
level of effort needed to develop and commercialize additional applications.
In addition, the Company's business plans may change or unforeseen events may
occur which require the Company to raise additional funds. Additional funds
may not be available on terms acceptable to the Company when the Company needs
such funds. The unavailability of additional funds when needed could have a
material adverse effect on the Company.
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PART II: OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K:
(A) EXHIBITS
The following exhibits are filed herewith:
Financial Data Schedule (EDGAR filing only).
10
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SIGNATURES
Pursuant to the requirements 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.
YOU BET INTERNATIONAL, INC.
BY:______________________
DAVID MARSHALL
CHAIRMAN OF THE BOARD,
PRESIDENT, AND CHIEF
EXECUTIVE OFFICER
___________________ Chief Financial Officer August __, 1996
BARRY PETERS
11
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 2,001,522
<SECURITIES> 0
<RECEIVABLES> 30,608
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,225,273
<PP&E> 514,324
<DEPRECIATION> 27,401
<TOTAL-ASSETS> 2,712,196
<CURRENT-LIABILITIES> 384,680
<BONDS> 0
0
0
<COMMON> 8,283
<OTHER-SE> 2,319,233
<TOTAL-LIABILITY-AND-EQUITY> 2,712,196
<SALES> 3,000
<TOTAL-REVENUES> 3,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 726,921
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 336
<INCOME-PRETAX> 724,257
<INCOME-TAX> 0
<INCOME-CONTINUING> 724,257
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 724,257
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
