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Filed Pursuant to Rule 424(b)(2) Registration Number
333-85675
YOUBET.COM, INC.
7,834,179 SHARES
COMMON STOCK
Certain selling stockholders are offering up to 4,550,000 shares of
common stock issuable on the conversion of the principal amount and interest
on our 11% Senior Convertible Discount Notes due in 2004. In addition,
certain other selling stockholders are offering up to 1,479,729 shares of
common stock on the exercise of outstanding stock purchase warrants. Certain
other selling shareholders are offering outstanding shares of common stock.
Youbet.com will not receive any proceeds from the offering. However, to the
extent selling stockholders convert their 11% Senior Convertible Discount
Notes to common stock or exercise stock purchase warrants, Youbet.com will be
released from obligations under such notes or may receive proceeds from the
exercise of warrants, except in such cases where the warrants have "cashless"
exercise features and such features are invoked.
Youbet.com's common stock is currently traded on the Nasdaq National
Market under the symbol "UBET." The closing sale price for Youbet.com's
common stock on September 27, 1999 on the Nasdaq National Market was $6.8125
per share.
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INVESTING IN YOUBET.COM'S COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 4.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES, OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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THE DATE OF THIS PROSPECTUS IS OCTOBER 4, 1999.
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TABLE OF CONTENTS
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PAGE
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Prospectus Summary.......................................................................................................... 2
Risk Factors................................................................................................................ 4
Use of Proceeds............................................................................................................. 13
Selling Stockholders........................................................................................................ 13
Plan of Distribution........................................................................................................ 13
Legal Matters............................................................................................................... 15
Experts..................................................................................................................... 15
Indemnification............................................................................................................. 15
Incorporation of Documents by Reference..................................................................................... 16
Available Information....................................................................................................... 16
</TABLE>
PROSPECTUS SUMMARY
BECAUSE THIS IS ONLY A SUMMARY, IT DOES NOT CONTAIN ALL THE INFORMATION
THAT MAY BE IMPORTANT TO YOU. YOU SHOULD READ THE ENTIRE PROSPECTUS, INCLUDING
"RISK FACTORS" AND THE MORE DETAILED INFORMATION AND THE FINANCIAL STATEMENTS
AND THE RELATED NOTES WHICH ARE INCORPORATED BY REFERENCE IN THIS PROSPECTUS.
YOUBET.COM
Youbet.com intends to establish itself as the leading global brand name
for online live event wagering. Wagering on live events such as horse track
racing, car racing, soccer, football, etc., is a large industry. Youbet.com has
focused its efforts primarily on the United States horse track racing industry
and believes that its principal product, the You Bet Network, is currently the
only legal system available for online wagering in the United States. Youbet.com
intends to pursue an aggressive marketing program to build a horse track racing
subscriber base and brand awareness in the United States. At the same time,
Youbet.com plans to pursue the much larger opportunities for live event wagering
offered in international markets.
Youbet.com believes that online communication is an ideal medium for
live event wagering. First, online communication allows bettors instant access
to vast amounts of historical performance data used in assessing potential
wagers. Second, online communication offers the ability to sort and analyze such
data in ways and at speeds that are unachievable manually. Third, online
communications technology allows wagers to be placed from virtually any location
within a jurisdiction where wagering is legal, thus freeing bettors from
traditional site-specific wagering locations. In addition, the speed of
electronic communications allows wagers to be placed and acknowledged in
seconds. This represents a dramatic improvement over alternative methods such as
standing in line at an event venue or waiting on the telephone for a voice
transaction. This shortening of response time is critically important in
wagering, since it allows bettors to place their wager seconds before the
closing of the wagering pool. Finally, online technologies such as streaming
audio and video allow an event to be displayed in real time on a user's PC as it
is actually occurring, thereby allowing the user to experience the event without
actually attending in person. For these reasons, Youbet.com believes that the
online-capable PC is the ideal appliance for wagering.
Youbet.com has chosen to focus initially on horse track racing in the
United States because it is the most widely permitted form of live event
wagering. General sports wagering is legal only in Nevada and to persons
physically located in Nevada. Such wagers may not be taken (by phone or
otherwise) from any bettor outside Nevada. In contrast, 42 states permit
pari-mutuel wagering on horse track racing. Furthermore, certain states provide
for "account wagering" where wagers on horse races are taken from out-of-state
bettors, with wins and losses settled in an
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account maintained for the bettor by a licensed wagering entity located in the
host state. It is this account wagering activity which forms the core of
Youbet.com's United States business.
Youbet.com's initial product, the You Bet Network, is a PC-based system
which utilizes the communications backbone of the Internet and a closed-loop
private network with Internet access to provide up-to-the minute detailed
information on races taking place at horse tracks nationwide and at selected
international venues. Youbet.com also delivers a live simulcast of selected
horse races directly to the subscriber's computer. In addition, subscribers can
use the You Bet Network to fill out an electronic wagering ticket with a brief
series of mouse-clicks and transmit this information electronically to an
account wagering entity. Youbet.com currently has an account wagering agreement
with Mountain Laurel Racing, Inc., and Washington Trotting Association, Inc.,
both of which are subsidiaries of Ladbroke USA (collectively "Ladbroke").
Ladbroke accepts and processes wagers into the particular horse track pari-
mutuel pool from its hub in Pennsylvania. Youbet.com transmits electronic
information related to wagers to Ladbroke from the 40 states where Ladbroke
currently accepts telephone wagers. After processing the wager, Ladbroke sends
an electronic confirmation to the bettor through the You Bet Network. The time
for the entire process from information submission to acknowledgment is usually
less than three seconds.
Youbet.com does not actually accept or place any wagers. Wagers are
accepted and placed only by a state licensed wagering facility, currently
Ladbroke. Youbet.com's role in the wagering process is limited to transmitting
information related to the wagers to and from the licensed wagering facility.
Youbet.com is not aware of any United States based competitor
currently offering another online or Internet-based wagering product for
horse track racing, and the only competitor of which it is aware has launched
a cable TV product on a C-band cable network. This competitor allows for
phone wagering in three states and has announced plans for a PC based product
late in 1999. Youbet.com believes that it has a lead time advantage in the
United States horse track racing market. Youbet.com intends to significantly
increase its marketing expenditures in order to further develop the
"Youbet.com" brand name and increase its subscriber base before any
competitor has an opportunity to establish a rival product.
Youbet.com currently derives revenue from the You Bet Network in three
ways. First, it charges a monthly subscription fee, currently $5.95 per month.
Second, it receives a fee from Ladbroke equal to fifty percent (50%) of the net
commissions to Ladbroke derived from wagers placed by Youbet.com subscribers.
Third, it receives revenue from the sale of handicapping information.
Youbet.com believes its opportunities internationally are dramatically
larger and less restricted than in the United States. Youbet.com believes that
sports wagering on live events is legal in most parts of Europe, Asia, Australia
and Latin America and that wagering on horse track racing is also legal in most
jurisdictions. In many of these jurisdictions, such as Hong Kong and Japan, the
annual amount wagered on horse track racing per capita is several times larger
than is wagered in the United States. Youbet.com also believes that it has a
significant opportunity overseas because overseas markets have embraced Internet
gaming to a greater degree than the United States. While there are significantly
more wagering competitors overseas, Youbet.com believes that the market is large
enough to support many competitors profitably.
Youbet.com's goal is to be the dominant global brand for online live
event wagering. Youbet.com believes that it must significantly increase
expenditures on marketing in order to maximize consumer awareness and increase
the size of its subscriber base before its competitors can respond. To fund this
marketing program, Youbet.com has recently raised significant new capital, and
will use such capital primarily for marketing. In addition, Youbet.com intends
to establish strategic relationships with important partners, including content,
Internet and telecommunications providers.
Youbet.com's executive offices are located at 1950 Sawtelle Boulevard,
Suite 180, Los Angeles, CA 90025. Youbet.com's telephone number is (310)
444-3300 and its World Wide Web site is http://www.youbet.com. INFORMATION
CONTAINED IN YOUBET.COM'S WEB SITE SHOULD NOT BE CONSIDERED A PART OF THIS
PROSPECTUS.
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THE OFFERING
<TABLE>
<S> <C>
Common Stock outstanding(1)................................... 19,121,288 shares
Common Stock offered.......................................... 7,834,179 shares
Common Stock to be outstanding after the offering(2).......... 24,511,394 shares
Common Stock fully diluted after the offering(3).............. 32,350,550 shares
Use of Proceeds............................................... Youbet.com will not receive any of the proceeds from the
offering. However, to the extent selling stockholders convert
their 11% Senior Convertible Discount Notes to common
stock or exercise stock purchase warrants, Youbet.com will
be released from obligations under such notes or may receive
proceeds from the exercise of warrants, except in such cases
where the warrants have "cashless" exercise features and such
features are invoked. See "Use of Proceeds."
Market Symbol................................................. UBET
</TABLE>
(1) As of August 31, 1999
(2) Assumes that the selling stockholders convert all of their 11% Senior
Convertible Discount Notes and exercise all of their warrants within 60
days of August 31, 1999.
(3) Assumes the conversion of all 11% Senior Convertible Discount Notes and the
exercise of all outstanding warrants and stock options within 60 days of
August 31, 1999.
RISK FACTORS
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD CAREFULLY
CONSIDER THE RISKS DESCRIBED BELOW BEFORE DECIDING WHETHER TO INVEST IN SHARES
OF COMMON STOCK OF YOUBET.COM. THIS PROSPECTUS CONTAINS FORWARD-LOOKING
STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THESE STATEMENTS REFER TO
FUTURE PLANS AND MAY USE WORDS SUCH AS "EXPECT," "INTEND," "ANTICIPATE" AND
"PLAN". ANY SUCH FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES, AND
ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE IN THE FORWARD-LOOKING
STATEMENTS AS A RESULT OF MANY UNCERTAINTIES AND OTHER FACTORS.
RISKS RELATED TO WAGERING STATUTES AND REGULATIONS
LEGAL ISSUES CONCERNING ONLINE WAGERING MAY ADVERSELY AFFECT YOUBET.COM
To the extent that Youbet.com's facilities are used by subscribers to
place intrastate or interstate wagers or Youbet.com receives commissions derived
from such wagers, various federal and state statutes and regulations could have
a direct and material adverse effect on Youbet.com's business and indirectly
could have a material adverse effect on the public's demand for Youbet.com's
services. Gaming activities are subject to extensive statutory and regulatory
regulation by both state and federal authorities, and are likely to be
significantly affected by any changes in the political climate and changes in
economic and regulatory policies. Such effects could be materially adverse to
Youbet.com.
All 50 states currently have statutes or regulations regarding gaming
activities, and three states have no gaming at all. In most states it is illegal
to place or accept a wager, with specific state-by-state statutory exceptions.
For example, pari-mutuel wagering of some kind is permitted in 42 states. Eight
of these 42 states have statutes which provide for account wagering, and five of
these eight states allow accounts for pari-mutuel wagers to be established from
bettors outside of their state. The adoption of laws or regulations affecting
pari-mutuel wagering or adoption of anti-pari-mutuel wagering policies by any
jurisdiction could have a material adverse effect on Youbet.com's business.
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The Federal Interstate Wire Act contains provisions which make it a
crime for anyone in the business of gaming to use a telephone line or other
wire communication facility in interstate or foreign commerce to transmit
information assisting in the placing of wagers, unless the wagering is legal
in the jurisdictions from which and into which the transmission is made.
Other federal laws impacting gaming activities include the Interstate Horse
Racing Act, the Interstate Wagering Paraphernalia Act, the Travel Act and the
Organized Crime Control Act. The National Gambling Impact Study Commission
released its final report and recommendations on June 18, 1999. Certain
recommendations in that report could form the basis for new anti-gaming
(including anti-online-gaming) laws or regulations that could have a material
adverse effect on Youbet.com's business. Other governmental and
quasi-governmental bodies are reviewing interstate and interactive wagering,
and may reach influential anti-gaming conclusions that could form the basis
for new laws, regulations, or enforcement policies that could have a material
adverse effect on Youbet.com's business.
Federal legislation has been proposed which could limit either the
intrastate or interstate activities Youbet.com engages in or the type of
activities associated with intrastate or interstate wagering. Any change in
either the substance or the enforcement of the applicable rules and
regulations in these areas could have an adverse effect on Youbet.com's
business and prospects.
Youbet.com believes that its activities are in compliance with all
applicable gaming laws and regulations as currently applied. Youbet.com has been
advised by counsel that a reasonable conclusion can be drawn that Youbet.com's
activities do not violate the gaming laws of the United States or the 40 states
(plus the District of Columbia) in which it operates. However, because there is
little clear statutory and case law authority, this conclusion is not free from
doubt. While it is possible to compare Youbet.com's activities to applicable
statutes, the wording of many such statutes is ambiguous. Furthermore, there is
little case law to rely upon for interpretation of these ambiguities. Thus, it
is possible that Youbet.com may be alleged to be in violation of an applicable
statute based on an interpretation of the statute which differs from
Youbet.com's and its counsel's or based on a future change of law or
interpretation or enforcement policy. Such allegations could result in either
civil or criminal proceedings brought by governmental or private litigants. As a
result of such proceedings, Youbet.com could incur substantial litigation
expense, fines, diversion of the attention of key Youbet.com employees, and
injunctions or other prohibitions preventing Youbet.com from engaging in various
anticipated business activities. Also, if it were finally determined that
Youbet.com did violate applicable law, then civil damages or criminal penalties
could be imposed and Youbet.com might be barred from pursuing that activity.
Such an outcome would have a material adverse effect on Youbet.com.
INCREASED GOVERNMENT REGULATION OF INTERNET COMMERCE AND GAMING MAY ADVERSELY
AFFECT YOUBET.COM
Various state legislatures, Congress, and federal and state executive
authorities have proposed laws and regulations directly applicable to online and
Internet gaming which could have a material adverse effect on Youbet.com. Most
prominently, in 1998, a bill sponsored by U.S. Senator Jon Kyl of Arizona and
adopted by a wide margin in the Senate (but ultimately not enacted) would have
prohibited online and Internet gaming, with specified exceptions, including
exceptions for certain horse race wagering and certain "closed-loop" online
systems. However, the latter exceptions were narrow and this 1998 bill, had it
been enacted, would have had a material adverse effect on Youbet.com's business.
Other online and Internet gaming bills have been considered in recent years in
both the Senate and the House of Representatives. Senator Kyl has reintroduced a
new version of his Internet Gambling Prohibition Act of 1999. This 1999 Kyl bill
(S. 692) contains more broadly drafted exceptions than the 1998 Kyl bill and, if
it were enacted in the form in which it was introduced on March 23, 1999 or in
the form approved by the Senate Judiciary Committee on June 17, 1999, Youbet.com
does not believe that the bill would have a material adverse effect on
Youbet.com's business. However, a proposal such as the 1998 Kyl bill could
emerge again in Congress; many states have considered and are considering
interactive and Internet gaming legislation and regulations which may or may not
be worded so as to permit Youbet.com's business to continue in such states; and
anti-gaming conclusions and recommendations of the National Gambling Impact
Study Commission or other governmental or quasi-governmental bodies could form
the basis for new laws, regulations, or enforcement policies that could have a
material adverse effect on Youbet.com's business.
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TAXES ON WAGERS MAY BE IMPOSED
If one or more governmental authorities successfully asserts that
Youbet.com should collect taxes on wagers it could adversely affect Youbet.com's
business. Youbet.com does not currently collect taxes for wagers, as all
wagering transactions by Youbet.com subscribers are currently processed by
Ladbroke at its facility in Pennsylvania. Ladbroke pays all applicable taxes to
the State of Pennsylvania. However, one or more local, state or foreign
jurisdictions may seek to tax online and Internet wagering when a subscriber is
physically within their jurisdiction at the time the wager is placed. Such taxes
if imposed might have a materially adverse effect on Youbet.com's business.
RISKS RELATED TO YOUBET.COM'S OPERATIONS
YOUBET.COM HAS A LIMITED OPERATING HISTORY
Youbet.com's limited operating experience may not form a sufficient
basis on which to predict future results. Youbet.com commenced development in
1995 of PC-based proprietary communications software for online entertainment.
Its first service, the You Bet Network, has only recently been introduced and it
is a new business in a rapidly changing field.
YOUBET.COM HAS A HISTORY OF LOSSES AND ANTICIPATES FUTURE LOSSES
Youbet.com has experienced significant losses since its inception and
has financed its operations from the sale of its securities and short-term debt.
Youbet.com incurred net losses of approximately $13.9 million and $6.5 million
for the fiscal year ended December 31, 1998 and the six months ended June 30,
1999, respectively. Youbet.com expects operating losses and negative cash flow
to continue at least through 1999 and possibly later. These losses are expected
to increase as Youbet.com increases its levels of spending to implement its
business plan and it is possible that such increases in spending may not
generate sufficient increases in revenue to permit profitable operations.
YOUBET.COM'S FUTURE OPERATING RESULTS ARE UNPREDICTABLE
Due to Youbet.com's short operating history, results are unpredictable
and may vary on a quarterly basis as a result of a variety of factors. Many of
these factors are outside of Youbet.com's control. These factors include:
- Youbet.com may not be able to attract and retain subscribers
to the You Bet Network;
- Youbet.com may not be successful in maintaining good relations
with horse tracks and other content and information suppliers;
- The introduction of competing wagering services from
interactive gaming or leisure companies may have an adverse
effect on Youbet.com's business;
- Youbet.com may not succeed in its brand-building and marketing
campaigns;
- Price competition from competing services may become more
intense;
- The level of use of online and Internet interactive services,
both domestically and internationally, may not grow as
expected;
- There may be a lack of consumer confidence in and acceptance
of online and interactive services for leisure and wagering;
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- Youbet.com may not experience the expected increases in
volume, size, timing and completion rates for wagers
transmitted through the You Bet Network;
- There may be technical difficulties or lengthy interruptions
in the You Bet Network;
- Youbet.com may not be able to adequately update and upgrade
the You Bet Network with technological innovations and
infrastructure to accommodate growth;
- Federal or local governmental controls and regulation may
change and become less favorable; and
- General economic conditions and economic conditions specific
to online and Internet interactive activity may be depressed.
YOUBET.COM MAY NEED ADDITIONAL CAPITAL
Youbet.com intends to establish Youbet.com as a brand name by
significantly increasing expenditures on marketing, advertising and product
development both domestically and internationally. To the extent that such
increases in expenditures are not followed by increases in revenues, Youbet.com
will be adversely affected financially. In the event additional capital is
required to fund operating losses or other capital needs, Youbet.com may not be
able to obtain such capital or such capital may be available on terms which are
unfavorable to Youbet.com or its stockholders.
YOUBET.COM FACES STRONG COMPETITION FROM THE TELEVISION GAMES NETWORK AND OTHERS
Youbet.com expects that competition from an interactive cable channel
known as the "Television Games Network" and others will become more intense and
that new companies will enter the market. The Television Games Network is owned
by TV Guide, Inc. and has access to substantial resources.
The Television Games Network has announced that it has launched a cable
TV product on a C-band cable network. The Television Games Network allows for
phone wagering in three states and has announced plans for a PC based product
late in 1999. The Television Games Network has also formed exclusive
relationships with a number of major United States horse tracks. Further
expansion of the Television Games Network's product and expansion of exclusive
relationships may make it difficult for Youbet.com to grow its subscriber base
and to obtain quality racing content to supply the You Bet Network.
Additionally, if exclusive relationships account for a significant number of
horse tracks, the Television Games Network may be able to secure additional
horse tracks at more favorable terms than Youbet.com.
Worldwide, numerous Internet and other interactive ventures have been
announced. Youbet.com expects to compete with these entities, as well as other
established companies which may enter the interactive, pari-mutuel gaming
market. Many of Youbet.com's other current and potential competitors have far
greater resources than Youbet.com.
YOUBET.COM CURRENTLY RELIES HEAVILY ON ITS RELATIONSHIP WITH LADBROKE
Youbet.com expects to obtain a majority of its future revenues from
fees derived as a percentage of Ladbroke's net commissions on amounts wagered
through the You Bet Network. Accordingly, Youbet.com is highly dependent on
maintaining its online connection with Ladbroke's wagering system. Any system
interruption or malfunction at Ladbroke which inhibits its ability to process
wagers from the You Bet Network may adversely affect Youbet.com's business.
Additionally, Ladbroke's termination of its agreement with Youbet.com, whether
due to an intentional breach or due to Ladbroke's inability to comply with its
terms, would also adversely affect Youbet.com's business.
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CREDIT CARD COMPANIES MAY REFUSE TO PROCESS YOUBET.COM ACCOUNTS OR WAGERING
ACCOUNTS
Due to perceived legal uncertainty surrounding online live event
wagering, credit card companies may as a policy refuse to process wagering
account transactions for Ladbroke or any other account wagering entities with
whom Youbet.com has a relationship. Additionally, although Youbet.com does not
actually accept or place any wagers, credit card companies may also be hesitant
to process fees and online transactions by Youbet.com subscribers for the You
Bet Network and other handicapping products. This would limit the methods of
payment available to Youbet.com subscribers, lowering the convenience of the You
Bet Network and may make competitive services more attractive. This may
adversely affect Youbet.com's business and its relationship with account
wagering entities.
YOUBET.COM RELIES ON CONTENT PROVIDERS
Youbet.com is largely dependent upon negotiating and maintaining
agreements with third party information providers and horse tracks for much of
the audio, video and other content presented on the You Bet Network. Youbet.com
does not have exclusive relationships with any content providers. Youbet.com and
Ladbroke may not be able to negotiate or renew acceptable agreements with such
third parties on a timely basis or under acceptable terms and conditions.
As of the date of this prospectus, Youbet.com and Ladbroke have
agreements which allow a subscriber to obtain simulcast audio and video signals
from 31 horse tracks. These horse tracks may terminate the agreements.
Youbet.com strives to improve its content and may not be able to obtain such
agreements for such additional content from other providers or may lose
providers, especially in light of the efforts of competitors, such as the
Television Games Network, to enter into exclusive contracts with such providers.
YOUBET.COM MAY HAVE DIFFICULTY MAINTAINING ITS TECHNOLOGICAL POSITION
Youbet.com's performance depends on its ability to develop, license or
acquire new technologies to enhance its existing services in a time effective
manner. Youbet.com may not be able to maintain its competitive technological
position against current and potential competitors, especially those with
greater financial resources. Youbet.com relies on its software technology to
give it a competitive advantage. This software operates the You Bet Network and
runs on subscribers' PCs. Although Youbet.com is exploring the possibility of
additional intellectual property protection, its software is not currently
protected by patents or copyrights. Youbet.com's main technological advantage
versus potential competitors is its software lead-time in the market and
Youbet.com's experience in operating a wagering network. Therefore, if
competitors introduce new products and services which are based on the You Bet
Network, Youbet.com may have little recourse and its business could be adversely
affected.
INTERNATIONAL EXPANSION EFFORTS MAY NOT SUCCEED
Youbet.com is exploring international relationships and joint ventures
to facilitate the international deployment of sports wagering networks similar
to the United States launch of the You Bet Network. However, there are many
risks in doing business on an international basis, including:
- Potential online live wagering networks, offered by
competitors with greater resources;
- Satisfying different and possibly conflicting regulatory
requirements;
- Foreign currency exchange rate fluctuations;
- Legal uncertainty regarding liability;
- Tariffs, and other trade barriers;
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- Difficulties in staffing and managing foreign operations;
- Longer payment cycles and problems in collecting account
receivables;
- Different accounting practices;
- Political instability;
- Seasonal reductions in business activity; and
- Potentially adverse tax consequences.
Any of these risks could affect the success of Youbet.com's international
expansion. Also, Youbet.com may not be able to successfully establish itself
internationally.
SYSTEM DAMAGE OR FAILURE MAY ADVERSELY AFFECT YOUBET.COM
Youbet.com's systems are vulnerable to damage from earthquake, fire,
floods, power loss, telecommunications failures, break-ins and other unforseen
events. Youbet.com's business is dependent upon its communications hardware and
computer hardware, substantially all of which are located at a leased facility
in Los Angeles, California. Youbet.com has built in certain redundancies in its
systems in case of a system failure or damage, but does not have duplicate
geographic locations for its site of operations. A substantial interruption in
its systems would adversely affect Youbet.com's business.
Youbet.com has property and business interruption insurance covering
damage or interruption of Youbet.com's systems. However, this insurance may not
compensate Youbet.com for all losses that may occur.
YOUBET.COM IS SUBJECT TO ONLINE SECURITY RISKS
If Youbet.com's systems and controls are unable to handle online
security risks, its business will be adversely affected. Youbet.com uses packet
filters, fire walls, and proxy servers which are all designed to control and
filter the data allowed to enter Youbet.com's data center. However, advances in
computer capabilities, new discoveries in the field of cryptography, or other
events or developments may make it easier for someone to compromise or breach
the technology used by Youbet.com to protect subscribers' transaction data. If
such a breach of security were to occur, it could cause interruptions in service
and loss of data or cessation in service to subscribers of Youbet.com. This may
also allow someone to introduce a "virus," or other harmful component to the You
Bet Network causing an interruption or malfunction.
To the extent that activities of Youbet.com involve the storage and
transmission of information such as credit card numbers, security breaches could
damage Youbet.com's reputation and expose Youbet.com to a risk of loss or
litigation and possible liability. Youbet.com's insurance policies may not be
adequate to reimburse Youbet.com for losses caused by such security breaches.
YOUBET.COM DEPENDS ON THE COMMUNICATIONS INFRASTRUCTURE OF THE INTERNET FOR
TRANSMITTING WAGERING INFORMATION
Youbet.com utilizes electronic communications and the Internet
infrastructure to send and receive information to and from subscribers, Ladbroke
and other suppliers. Youbet.com's future success will depend, in significant
part, upon the maintenance and growth of this infrastructure and any failure or
interruption may have a material adverse effect on Youbet.com's business. This
infrastructure is necessary to economically transmit the large amounts of audio
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and video data which comprise a broadcast of a horse track racing event. To the
extent that this infrastructure continues to experience increased numbers of
users, increased frequency of use or increased bandwidth requirements of users,
Youbet.com cannot be certain that this infrastructure will be able to support
the demands placed on it or that the performance or reliability of this
infrastructure will not be adversely affected.
Outages and delays in sending or receiving data as a result of damage
to portions of this infrastructure could also affect Youbet.com's subscribers
ability to transmit wagering information or Ladbroke's ability to process such
information. This will also have an adverse effect on Youbet.com's business.
YOUBET.COM MAY FACE LIABILITY FOR CONTENT AND INFORMATION TRANSMITTED ON THE YOU
BET NETWORK
Youbet.com may face potential direct and indirect liability for
negligence, copyright, patent or trademark infringement, and other claims based
upon the content and data which Youbet.com makes available or sells to
subscribers. If Youbet.com were to be found liable, it would have an adverse
effect on Youbet.com's business. For example, by distributing an incorrect past
performance report, a subscriber may claim he relied on such information and
suffered a monetary loss. Computer failures may also result in incorrect data
being distributed. In these and other instances, Youbet.com may be required to
engage in long and expensive litigation, which could have the effect of
diverting management's attention and require the expenditure of significant sums
of money. Youbet.com's liability insurance may not cover all of these claims or
may not be adequate to protect against all liability that may be imposed. Any
such claims or resulting litigation could have a material adverse effect on
Youbet.com's business.
YOUBET.COM MAY EXPERIENCE PROBLEMS WITH RAPID GROWTH
In order to grow the You Bet Network, Youbet.com will be required to
improve existing transaction processing and operational systems and to train and
grow its number of employees. Youbet.com's current and planned management
systems and controls may not be adequate to support such growth. Additionally,
Youbet.com's management may not succeed in expanding and exploiting existing and
potential strategic relationships and market opportunities. The failure of
Youbet.com to expand effectively could have a material adverse effect on
Youbet.com's business, results of operations and financial condition.
YEAR 2000 RISKS MAY ADVERSELY AFFECT YOUBET.COM
System failure or miscalculations resulting from the year 2000 risk
could disrupt Youbet.com's operations, resulting in, among other things, a
temporary inability to process transactions, send wagering confirmations or
engage in similar normal business activities. The year 2000 risk is the result
of computer programs being written using two digits rather than four digits to
define the applicable year. Computer programs that have sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000.
Based on an internal assessment, Youbet.com believes that its software
programs, both those developed internally and purchased from outside vendors,
are already year 2000 compliant or will be by December 31, 1999. However, any
failure of Youbet.com's software to properly process dates for the year 2000
could require Youbet.com to incur unanticipated expenses. This could have an
adverse effect on Youbet.com's business. Also, Youbet.com may suffer a system
failure if any third party supplier of content or software, such as Ladbroke, is
not fully year 2000 compliant.
YOUBET.COM DEPENDS ON KEY PERSONNEL
Youbet.com depends on the services of its senior management, which if
not available might have a material adverse effect on Youbet.com. While certain
members of senior management are parties to employment or services agreements
with Youbet.com, none of these agreements are long-term, and none prohibit an
employee from terminating such an agreement. Additionally, Youbet.com has not
yet filled certain key positions in its management
10
<PAGE>
team, which management believes are crucial to Youbet.com's development.
Youbet.com's future success depends on its ability to identify, attract, hire,
train, retain and motivate highly skilled technical, managerial, marketing and
customer service personnel. Competition for such personnel is intense and
Youbet.com may not be able to retain and attract such employees. Also, at the
present time Youbet.com does not carry any key personnel life insurance.
RISKS RELATED TO THE OFFERING
YOUBET.COM HAS A SIGNIFICANT AMOUNT OF DEBT
Youbet.com has a significant amount of debt outstanding consisting
primarily of $45.5 million principal amount of 11% Senior Convertible Discount
Notes and has approximately $37.7 million of stockholders' equity as of June 30,
1999. The degree to which Youbet.com is leveraged could have important
consequences to the stockholders, including the following:
- Youbet.com's ability to obtain additional financings for
working capital, capital expenditures, acquisitions or general
corporate purposes may be impaired;
- Commencing in October 2001, Youbet.com must pay interest on
its notes leaving less funds for other purposes;
- Youbet.com may be at a competitive disadvantage to its less
leveraged competitors; and
- Youbet.com may be more vulnerable to a downturn in general
economic conditions.
If Youbet.com were to be in default under the notes for any reason, there can be
no assurance that any assets will remain for Youbet.com's stockholders after
payment of amounts owed to the noteholders.
WARRANTHOLDERS MAY ASSERT CLAIMS REGARDING THEIR REGISTRATION RIGHTS
Certain of the warrantholders have or may have registration rights
with respect to their warrants and/or shares of common stock underlying such
warrants and may assert claims against Youbet.com in connection with such
rights. Specifically, on June 4, 1999 a holder of 400,000 warrants filed a
complaint against Youbet.com alleging Youbet.com breached its obligation to
register the 400,000 shares underlying such warrants. Youbet.com filed its
answer on July 15, 1999. On August 19, 1999 this warrantholder filed a motion
for summary judgment. The court has not set a briefing or hearing date for
this motion. As the litigation is in its initial stage, Youbet.com cannot
predict its outcome, although if the claim is determined adversely to
Youbet.com it could have a material adverse effect on Youbet.com.
Additionally, on August 12, 1999 a holder of 15,000 warrants gave notice to
Youbet.com of his intent to pursue a claim alleging Youbet.com's breach of
its obligation to register the 15,000 shares underlying such warrants. As no
claim has been filed, Youbet.com cannot predict the outcome of such a claim.
YOUBET.COM'S OFFICERS AND DIRECTORS EXERCISE VOTING CONTROL OVER YOUBET.COM
In June, 1998 the Robert M. Fell Living Trust, David Marshall, Russell
Fine and other stockholders, entered into a stockholders agreement, whereby they
collectively exercise voting control over Youbet.com in the election of
directors. Under the agreement, the parties agreed to vote all shares of
Youbet.com's Series A Convertible Preferred Stock (which has since been
converted to common stock as of June 18, 1999) and common stock owned by them
for the election to the board of directors of four persons designated by Mr.
Fell and three persons designated by Messrs. Marshall and Fine. As a result of
the ability to designate four directors as provided in the stockholders
agreement, Robert M. Fell may be deemed to control Youbet.com. This stockholders
agreement terminates in June, 2000. As of the date of this prospectus, the
officers and directors of Youbet.com as a group control, either directly or by
reason of the stockholders agreement, approximately 22.6% of the voting power
of Youbet.com.
YOUBET.COM DOES NOT INTEND TO PAY DIVIDENDS
11
<PAGE>
Youbet.com does not anticipate paying any cash dividends on its common
stock to its stockholders for the foreseeable future. Youbet.com intends to
retain future earnings, if any, for use in the operation and expansion of its
business. In addition, the 11% Senior Convertible Discount Notes contain, and it
is probable that any debt financing agreements entered into by Youbet.com in the
future will contain, restrictions on Youbet.com's ability to declare dividends.
YOUBET.COM'S COMMON STOCK MAY EXPERIENCE EXTREME PRICE AND VOLUME FLUCTUATIONS
The stock markets in general, the Nasdaq National Market and the market
for Internet/online companies in particular, have experienced extreme price and
volume fluctuations that have often been unrelated or disproportionate to the
operating performance of such companies. The trading prices of many technology
companies' stocks are at or near historical highs and reflect valuations
substantially above historical levels. These trading prices and valuations may
not be sustainable. In the past, following periods of volatility in the market
price of a company's securities, securities class action litigation has often
been instituted against such a company. Such litigation, if instituted against
Youbet.com, could result in substantial costs which would have a material
adverse effect on Youbet.com's business.
SHARES ELIGIBLE FOR FUTURE SALE MAY NEGATIVELY AFFECT TRADING PRICE
Sales of Youbet.com's common stock in the public market (including on
the exercise of stock options and warrants), may negatively affect the market
price of the common stock. This could also lessen Youbet.com's ability to sell
equity or equity related securities at a future time.
As of August 31, 1999, Youbet.com has outstanding 19,121,288
shares of common stock. Of these shares of common stock, approximately
1,125,000 restricted shares of common stock will become eligible for sale in
the public markets under Rule 144 within the next six months. Youbet.com's
officers and directors have agreed until January 10, 2000 not to offer to
sell, contract to sell, or to otherwise dispose of any shares of common
stock, options or warrants to purchase such shares owned as of June 14, 1999,
the effective date of Youbet.com's underwritten public offering, without the
prior written consent of the underwriters of such offering. Additionally,
none of the selling stockholders may sell shares registered pursuant to this
prospectus until December 11, 1999 without the prior written consent of the
underwriters. After such lock-up periods have expired, such shares may be
sold in the public market.
Warrantholders representing 4,519,140 shares of common stock are
subject to a letter agreement dated March 11, 1999 with Youbet.com. Pursuant
to the letter agreement, such warrantholders previously sold 654,275 shares
underlying warrants in the June 14, 1999 underwritten offering. Youbet.com
has agreed with the warrantholders who were parties to the letter agreement
to register the shares underlying such warrants not sold in the June 14, 1999
offering by no later than June 18, 2000. Such shares may be sold when
registered provided the warrantholders limit their sales during any three
month period to 25% of the shares of common stock underlying such remaining
warrants.
As of August 31, 1999, Youbet.com also has outstanding 2,426,146
stock options granted pursuant to Youbet.com's stock option plans. Youbet.com
intends to register the common stock underlying such plans.
Delaware law provisions which are not opted out of by Youbet.com's
Certificate of Incorporation and Bylaws could make it more difficult for a third
party to acquire Youbet.com, even if doing so would be beneficial to
Youbet.com's stockholders. Additionally, Youbet.com's Certificate of
Incorporation authorizes the board of directors to issue up to 1,000,000 shares
of preferred stock, in one or more series and permits the board of directors to
fix the rights, preferences, powers and designations of such series without a
stockholders vote. Depending on the terms of any such series, such preferred
stock may discourage attempts to acquire Youbet.com.
The holders of the 11% Senior Convertible Discount Notes may call the
notes due and payable upon a "change in control" of Youbet.com. "Change in
control" includes a sale of substantially all of Youbet.com's assets, an
12
<PAGE>
acquisition of 20% or more of the voting power of Youbet.com by a "group" of
affiliated persons within the meaning of Section 13(d) of the Securities and
Exchange Act of 1934, as amended, the acquisition by Youbet.com of more than 30%
of its capital stock outstanding immediately prior to such acquisition, the
payment of a dividend or other distribution to Youbet.com's stockholders in an
amount that is 30% or more of the fair market value of Youbet.com's outstanding
capital stock immediately prior to such distribution or dividend, or the
acquisition by a person or affiliated group of the power to elect or appoint the
majority of Youbet.com's board of directors.
USE OF PROCEEDS
The shares of common stock being offered are solely for the accounts of
the selling stockholders. Youbet.com will not receive any proceeds from the sale
of the common stock. However, to the extent selling stockholders convert their
11% Senior Convertible Discount Notes to common stock or exercise stock purchase
warrants, Youbet.com will be released from obligations under such notes or may
receive proceeds from the exercise of warrants, except in such cases where the
warrants have "cashless" exercise features and such features are invoked.
SELLING STOCKHOLDERS
Youbet.com issued the 11% Senior Convertible Discount Notes on April 5,
1999 pursuant to a series of Note Purchase Agreements. These agreements require
Youbet.com to file a registration statement covering the common stock issuable
upon conversion of such notes. This prospectus is a part of such registration
statement.
Additionally, the holders of 3,284,179 shares of common stock
(including 1,479,729 shares issuable on exercise of stock purchase warrants) are
registering such shares for resale under this prospectus.
The table in Appendix I hereto, sets forth information about the
selling stockholders and the number of shares of common stock beneficially
owned by them including upon conversion of the 11% Senior Convertible
Discount Notes or exercise of the warrants. Except as disclosed in this
prospectus, none of the selling stockholders, has, or within the past three
years has had, any position, office or other material relationship with
Youbet.com or any of its predecessors. The selling stockholders listed in the
table may have sold or transferred, in transactions exempt from the
registration requirements of the Securities Act, some or all of their 11%
Senior Convertible Discount Notes, warrants and common stock since the date
on which the information in the table is presented, therefore affecting the
number of shares offered by them. Information about the selling stockholders
may change over time. Youbet.com cannot estimate the amount of common stock
that will be held by the selling stockholders upon the termination of the
offering since it is possible that selling shareholders may not sell such
shares or may acquire or dispose of shares of common stock not included in
this registration statement. See "Plan of Distribution."
Youbet.com prepared the table in Appendix I based on the information
supplied to Youbet.com by the selling stockholders named in the table.
PLAN OF DISTRIBUTION
Youbet.com is registering 7,834,179 shares of common stock on behalf
of the selling stockholders. Youbet.com has agreed to maintain the
effectiveness of this prospectus for the amount of time required pursuant to
the terms of the Note Purchase Agreements dated April 5, 1999, the
Registration Rights Agreement entered into in connection with Youbet.com's
sale of series A preferred stock, dated June 29, 1998 and the various
warrants whose underlying shares are being registered hereunder.
None of the selling stockholders may sell shares of common stock
registered hereunder prior to December 11, 1999, unless they receive written
consent from the underwriters of Youbet.com's underwritten public offering
13
<PAGE>
completed on June 18, 1999. The selling stockholders may sell the shares of
common stock covered by this prospectus from time to time at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. The selling stockholders may offer their shares
for sale in one or more of the following types of transactions:
- on the Nasdaq National Market;
- through the facilities of any national securities exchange or
U.S. automated inter-dealer quotation system of a registered
national securities association on which any of the shares of
common stock are then listed, admitted to unlisted trading
privileges or included for quotation; and
- through negotiated transactions, block transactions, special
offerings, exchange distributions and/or secondary
distributions, in settlement of short sales of common stock;
or
- through a combination of such methods of sale.
The selling stockholders also may sell all or a portion of the shares
covered by this prospectus in open market transactions in reliance on Rule 144
under the Securities Act, provided that the selling stockholders meet the
criteria and conform to the requirements of such rule.
The selling stockholders may from time to time pledge the common stock
owned by them to secure margin or other loans made to one or more of the selling
stockholders. Thus, the person or entity receiving the pledge of any of the
shares of common stock may sell them, in a foreclosure sale or otherwise, in the
same manner as described above for a selling stockholder.
Youbet.com has not been advised of any selling arrangement at the date
of this prospectus between any selling stockholder and any broker-dealer or
agent. Youbet.com will not receive any of the proceeds from the sale of the
shares by the selling stockholders. However, to the extent selling stockholders
convert their 11% Senior Convertible Discount Notes to common stock or exercise
warrants, Youbet.com will be released from obligations under such Notes or may
receive proceeds from the exercise of the warrants, except in such cases where
the warrants have "cashless" exercise features and such features are invoked.
The selling stockholders and any dealer acting in connection with the
offering or any broker executing a sell order on behalf of a selling stockholder
may be deemed to be "underwriters" within the meaning of the Securities Act, in
which event any profit on the sale of shares by a selling stockholder and any
commissions or discounts received by any the broker or dealer may be deemed to
be underwriting compensation under the Securities Act. In addition, the broker
or dealer may be required to deliver a copy of this prospectus to any person who
purchases any of the shares from or though the broker or dealer.
Under the Note Purchase Agreements dated April 5, 1999, Youbet.com
agreed, among other things, to use its best efforts to have the registration
statement declared effective by the Securities and Exchange Commission and
maintain the effectiveness of the registration statement through and until the
date which is the earliest of the date on which all shares of common stock
underlying the 11% Senior Convertible Discount Notes are sold via the
registration statement, or are freely saleable for all selling stockholders
without limits as to volume or otherwise under Rule 144(k) of the Securities
Act, or April 5, 2004. Such date will be extended 1.5 days for each day after
the effectiveness of the registration statement on which any selling stockholder
is unable to sell registrable shares because of any suspension, delisting,
blackout or other similar event, provided that after April 5, 2004, such
effective date need only be extended for shares of common stock which are not
freely tradable under Rule 144(k).
Under the Registration Rights Agreement dated June 29, 1998, Youbet.com
granted piggy-back registration rights to certain holders of common stock
(including holders of Series A Convertible Preferred Stock which has since
14
<PAGE>
been converted to common stock) and agreed, among other things, to use its best
efforts to have the registration statement declared effective by the Securities
and Exchange Commission and maintain the effectiveness of the registration
statement through the period of distribution. Youbet.com also agreed to file the
reports required to be field by Youbet.com under the Securities Act and the
Exchange Act in a timely manner and to take such further action as any holder of
securities covered by the registration rights agreements reasonably requests to
enable the holder to sell his securities without registration, including making
publicly available the information necessary to permit sales of the securities
pursuant to Rules 144 under the Securities Act.
The registration statement also registers shares of common stock
underlying certain stock purchase warrants issued by Youbet.com. The holders of
such warrants were granted certain registration rights in connection with the
issuance of such warrants.
Youbet.com is bearing all fees and expenses incurred in connection with
the registration of the shares of common stock which may be sold under the
prospectus other than attorneys' fees incurred by selling stockholders
registering shares pursuant to the Registration Rights Agreement and the various
warrants.
Youbet.com has agreed to indemnify certain of the selling stockholders
against certain liabilities which may arise in connection with this offering and
such selling stockholders have severally and not jointly agreed to indemnify
Youbet.com against certain other liabilities which may arise in connection with
this offering.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for
Youbet.com by Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP.
As of the date of this prospectus, Gary N. Jacobs, a senior partner of
Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP who serves as
Youbet.com's Secretary, beneficially owns 46,767 shares of common stock,
including shares which may be acquired pursuant to stock options exercisable
within 60 days from August 31, 1999. Another attorney having an "of counsel"
relationship with Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro,
LLP owns 20,000 shares of common stock.
EXPERTS
The financial statements of Youbet.com Inc. as of December 31, 1998
and 1997 and for each of the years in the two year period ended December 31,
1998 on Form 10-KSB are incorporated by reference in this Prospectus and have
been audited by BDO Seidman, LLP, independent certified public accountants,
to the extent and for the periods set forth in their report incorporated
herein by reference, and are incorporated herein in reliance upon such report
given upon the authority of said firm as experts in auditing and accounting.
INDEMNIFICATION
Section 145 of the General Corporation Law of the State of Delaware
provides that a corporation shall have the power, and in some cases is required,
to indemnify an agent, including an officer or director, who was or is a party
or is threatened to be made a party to any proceedings, against certain
expenses, judgments, fines, settlements and other amounts under certain
circumstances. Youbet.com's Bylaws provide that (1) Youbet.com is required to
indemnify its directors and officers to the maximum extent permitted by the
Delaware General Corporate Law, subject to certain very limited exceptions, (2)
Youbet.com may indemnify its other employees and agents to the maximum extent
permitted by the Delaware General Corporate Law, (3) Youbet.com is required to
advance expenses, as incurred, to its directors and officers in connection with
a legal proceeding, subject to certain very limited exceptions and (4) the
rights conferred in the Bylaws are not exclusive. Youbet.com also maintains
insurance covering certain liabilities of the directors and officers of the
small business issuer and its subsidiaries.
15
<PAGE>
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of
Youbet.com pursuant to the foregoing provisions, or otherwise, Youbet.com has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
INCORPORATION OF DOCUMENTS BY REFERENCE
The Securities and Exchange Commission allows Youbet.com to
"incorporate by reference" the information Youbet.com files with it, which means
that Youbet.com can disclose important information to prospective investors by
referring prospective investors to those documents. The information incorporated
by reference is considered to be part of this prospectus, and later information
that Youbet.com files with the Securities and Exchange Commission will
automatically update and supersede this information. Youbet.com incorporates by
reference the following:
- Form 10-KSB for the year ended December 31, 1998;
- Form 10-QSB for the first quarter ended March 31, 1999;
- Form 10-QSB for the second quarter ended June 30, 1999;
- Forms 8-K filed on January 26, 1999 and June 10, 1999;
- The description of Youbet.com's common stock contained in the
registration statement on Form 8-A filed under Section 12(g)
of the Exchange Act on June 10, 1999; and
- Proxy Statement for the Annual Meeting of Stockholders
held on September 23, 1999.
- Any other filings made with the Securities and Exchange
Commission under Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 after December 31 1998 until
this offering is terminated.
Youbet.com will provide without charge to each person, including any
beneficial owner, to whom this prospectus is delivered, upon the written or
oral request of such person, a copy of any or all of the documents referred
to above which have been incorporated by reference, other than exhibits to
such documents. Written requests for such copies should be addressed to:
Youbet.com, Inc., 1950 Sawtelle Boulevard, Suite 180, Los Angeles, CA 90025,
Attention: Phillip Hermann. Youbet.com's telephone number is (310) 444-3300.
AVAILABLE INFORMATION
Youbet.com has filed with the Securities and Exchange Commission a
registration statement (of which this prospectus is a part) on Form S-3 under
the Securities Act, with respect to the common stock offered hereby. This
prospectus does not contain all the information set forth in the registration
statement and the exhibits and schedules thereto. Statements contained in this
prospectus as to the content of any contract or other document are not
necessarily complete, and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the registration statement,
each such statement being qualified in all respects by such reference and the
exhibits and schedules thereto.
Youbet.com is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended and in accordance therewith files
reports and other information with the commission. The registration statement,
including the exhibits and schedules thereto, as well as any other information
filed by Youbet.com may be inspected and copied at the public reference rooms
maintained by the commission at its principal office located at 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549, the New York Regional
Office located at 7 World Trade Center, New York, New York 10048, and the
Chicago Regional Office located at Northwest Atrium Center, 500 West
16
<PAGE>
Madison Street, Room 1204, Chicago, Illinois 60661-2511. Please call the
commission at 1-800-SEC-0330 for further information on the public reference
rooms.
Electronics filings made by Youbet.com through the commission's
Electronic Data Gathering, Analysis and Retrieval System are publicly available
through the commission's World Wide Web site (http://www.sec.gov), which
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the commission.
17
<PAGE>
APPENDIX I
SELLING STOCKHOLDERS
<PAGE>
<TABLE>
<CAPTION>
MAXIMUM
BENEFICIAL OWNERSHIP OF PERCENTAGE OF NUMBER
COMMON STOCK BEFORE THE OFFERING COMMON STOCK OF SHARES OF
----------------------------------- BENEFICIALLY COMMON STOCK
COMMON OWNED BEFORE THAT MAY BE
SELLING STOCKHOLDERS STOCK NOTES(1) WARRANTS THE OFFERING(2) OFFERED(3)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. Bancorp Libra, a Division of U.S. Bancorp Investments, Inc. 138,367 20,000(4) * 181,000
Orna Wolens & Keenan Wolens As Successor Co-Trustees
FBO Ravich Children Permanent Trust Dated May 11, 1995 53,714 * 62,500
Rand Ravich 8,594 * 10,000
Andrew Africk 22,107 12,891 7,053 * 22,053
Value Partners, Ltd. 429,712 2.20% 500,000
Robert Scott Fritz 10,743 * 12,500
JMG Convertible Investments, L.P. 36,096 * 42,000
Triton Capital Investments Ltd. 36,096 * 42,000
Ravich Revocable Trust of 1989 62,000 257,827 10,000(5) 1.70% 310,000
Charles A. Yamarone 1,000 4,297 1,250(5) * 6,250
Robert G. Morrish 4,297 3,750(5) * 8,750
Upchurch Living Trust U/A/D 12/14/90 12,891 5,000(5) * 20,000
Gregory Bousquette 4,297 * 5,000
Ravich Family Foundation 21,486 * 25,000
Everest Capital Master Fund, L.P. 161,000 1,246,164 6.91% 1,450,000
Quantum Emerging Growth Partners, C.V. 47,000 687,539 3.71% 800,000
Continental Casualty Company 429,712 2.20% 500,000
Dickstein & Co., L.P. 197,667 1.02% 230,000
Dickstein International Limited 42,971 * 50,000
Dickstein Focus Fund, L.P. 17,188 * 20,000
Robert Okun 5,000(5) * 5,000
Jeffrey Benjamin 5,000(5) * 5,000
TCW Shared Opportunity Fund II, L.P. 85,942 * 100,000
TCW Leveraged Income Trust, L.P. 85,942 * 100,000
TCW Leveraged Income Trust II, L.P. 85,942 * 100,000
Robert M. Fell Trustee FBO Robert M. Fell Living Trust(6) 204,450 1,200,000 6.91% 1,404,450
David M. Marshall, Inc.(7) 2,042,737 40,342 10.87% 20,171
Russell M. Fine(8) 1,928,549 55,878 10.35% 27,939
Banque Multi Commerciale "Clients Account" 100,000 * 100,000
Thomas J. Volpe Trustee The Interpublic Group of Companies, Inc.
Benefit Protection Trust 360,000 1.88% 360,000
Barry R. Devorzon 100,000 * 100,000
Howard Arvey, Trustee of the Howard Arvey Trust dated 11/26/79 35,000 * 35,000
Sanford R. Climan 17,500 * 17,500
Sanford R. Climan C/F Joseph Todd Climan UTMA CA 4,000 * 4,000
Sanford R. Climan C/F Matthew David Climan UTMA CA 4,000 * 4,000
A. Sheikh 20,000 * 20,000
Rameshchandra M. Patel 60,000 * 60,000
Leonard R. Meyers 4,400 * 4,000
Edward Duke Vincent Trustee FBO Edward Duke Vincent Trust 40,000 * 40,000
Ed Lieberman 2,000 * 2,000
Ira Brodsky 4,000 * 4,000
Melvin Simon 100,000 * 100,000
Steve and Charlene Ustin 79,667 44,333 * 20,000
Edwin L. Fields 9,500 * 9,500
Monte M. Lemann 10,000 * 10,000
John Landsberger 20,000 * 20,000
John Landsberger Trustee FBO Landsberger Family Trust 20,000 * 20,000
Establissement Finital 278,000 100,000 1.97% 200,000
Paul C. Rivello 50,000 * 50,000
Robert & Ellen Deutschman 13,261 17,667 * 17,667
Deutschman Family Trust 10,000 20,000 * 30,000
Excalibur Investment Limited 38,833 70,667 * 30,667
Henry Wilf 20,000 * 20,000
Colin McHugo 5,800 5,000 * 5,000
Nicholas M. Strelchuk 10,000 * 10,000
Mainstreet Limited 70,000 * 70,000
Park Ave Securites 20,000 * 20,000
United Estates Limited 120,000 * 120,000
Merrill Lynch Trust Company of New York Trustee FBO Autotote
Corporation Key Executives 100,000 * 100,000
Summerdene Corporation 50,000 * 50,000
Daniel Fegan 15,900 * 6,900
Timothy Douglas Quartly-Watson 5,000 * 5,000
Cowen & Company (Custodian for Edward Gerald Ruhland IRA) 20,000 20,000 * 10,000
Edward Gerald Ruhland 7,500 30,000 * 5,000
Lorne A. Goldberg 91,999 * 61,332
Elizabeth Edlich 19,499 * 13,000
The Gary and Robin Jacobs Family Trust dated 5/25/96(9) 20,000 * 20,000
----------------------------------------------------------------
TOTAL 6,292,304 3,910,377 1,793,338 48.32% 7,834,179
----------------------------------------------------------------
----------------------------------------------------------------
</TABLE>
* Less than 1.0%
(1) Calculated using shares of common stock beneficially owned as of August
31, 1999 and such shares beneficially owned upon conversion of the 11%
Senior Convertible Discount Notes or exercise of warrants within 60
days of August 31, 1999. Beneficial ownership includes $691,873 of
estimated interest for the period from August 31, 1999 to October 31,
1999, which is convertible into 69,187 shares of common stock.
(2) Calculated based on Rule 13d-3(d)(i) of the Exchange Act using
19,121,288 shares of common stock outstanding as of August 31, 1999. In
calculating this amount, Youbet.com treated as outstanding the number
of shares of common stock and the number of shares issuable upon
conversion or exercise of that particular selling stockholder's 11%
Senior Convertible Discount Notes and warrants. However, Youbet.com did
not assume the conversion or exercise of any other selling
stockholder's 11% Senior Convertible Discount Notes and/or warrants.
(3) Assumes conversion of all selling stockholder's 11% Senior Convertible
Discount Notes at a conversion price of $10 per share of common stock
as of April 5, 2001.
(4) U.S. Bancorp Libra, a division of U.S. Bancorp Investments, Inc. acted
as placement agent in the issuance by Youbet.com of the 11% Senior
Convertible Discount Notes on April 5, 1999. Warrants exercisable into
an aggregate of 50,000 shares of common stock were issued to U.S.
Bancorp Libra for services as placement agent. U.S. Bancorp Libra
transferred warrants convertible into an aggregate of 30,000 shares of
common stock to certain of its employees or trusts for their benefit.
(5) Represents warrants transferred by U.S. Bancorp Libra.
(6) Mr. Robert M. Fell is President, Chief Executive Officer and
Chairman of the Board of Youbet.com.
(7) Mr. David M. Marshall is Vice-Chairman of the Board of Youbet.com and
served as Chief Executive Officer of Youbet.com until June, 1998.
(8) Mr. Russell M. Fine is Executive Vice President, Chief Technology
Officer and a Director of Youbet.com.
(9) Mr. Gary N. Jacobs is Secretary of Youbet.com.
19
<PAGE>
PART II
Information Not Required in Prospectus
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Securities and Exchange Commission filing Fee............................................................... $15,869.72
Printing and engraving fees and expenses.................................................................... $ 15,000
Legal fees and expenses..................................................................................... $ 50,000
Accounting fees and expenses................................................................................ $ 5,000
----------
Total.............................................................................................. $85,869.72
----------
----------
</TABLE>
Youbet.com will bear all the foregoing expenses.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware
provides that a corporation shall have the power, and in some cases is required,
to indemnify an agent, including an officer or director, who was or is a party
or is threatened to be made a party to any proceedings, against certain
expenses, judgments, fines, settlements and other amounts under certain
circumstances. Article XI of Youbet.com's Bylaws requires indemnification of
Youbet.com's officers and directors to the maximum extent permitted by the
Delaware General Corporation Law, and Youbet.com maintains insurance covering
certain liabilities of the directors and officers of Youbet.com and its
subsidiaries.
ITEM 16. EXHIBITS
<TABLE>
<S> <C>
2.1 Acquisition Agreement between PC Totes, Inc. and Embassy
Acquisition, Inc. dated as of December 6, 1995. (Incorporated
herein by reference to Youbet.com's Form 10-K for the year
ended December 31, 1995.)
*4.1 Form of Note Purchase Agreement by and among Youbet.com and
the Purchasers as defined therein, dated April 5, 1999.
*4.2 Form of Warrant to purchase Youbet.com common stock, issued in
connection with the Note Purchase Agreement dated April 5,
1999.
4.3 Registration Rights Agreement by and among Youbet.com
(formerly You Bet International, Inc.) and the other parties
listed therein, dated June 29, 1998. (Incorporated herein by
reference to Youbet.com's Form 8-K dated June 29, 1998.)
**4.4 Form of Series A Warrant to purchase Youbet.com common stock.
**4.5 Form of Series B Warrant to purchase Youbet.com common stock.
**4.6 Form of Series C Warrant to purchase Youbet.com common stock.
**4.7 Form of Series D Warrant to purchase Youbet.com common stock.
**4.8 Form of Series E Warrant to purchase Youbet.com common stock.
**4.9 Form of Series M Warrant to purchase Youbet.com common
stock at $3.125 per share.
**4.10 Form of Series M Warrant to purchase Youbet.com common
stock at $5.25 per share.
4.11 Warrant to purchase Youbet.com common stock issued to
Robert M. Fell, dated June 29, 2998. (Incorporated herein
by reference to Youbet.com's Form 8-K dated June 29, 1998.)
**4.12 Form of warrant to purchase Youbet.com common stock at
$2.50 per share, issued to Lorne Goldberg and Elizabeth
Edlich dated August 24, 1999.
**5.1 Opinion of Christensen, Miller, Fink, Jacobs, Glaser, Weil &
Shapiro, LLP
**23.1 Consent of Christensen, Miller, Fink, Jacobs, Glaser, Weil &
Shapiro, LLP (included in Exhibit 5.1)
**23.2 Consent of BDO Seidman, LLP
*24 Power of Attorney
</TABLE>
- -------------
* Filed Previously
** Filed Herewith
20
<PAGE>
ITEM 17. UNDERTAKINGS
The undersigned small business issuer hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement:
(a) To include any prospectus required by Section
10(a)(3) of the Securities Act
(b) To reflect in the prospectus any facts or events
which, individually or together, represent a
fundamental change in the information in the
registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of
securities offered would not exceed that which was
registered) and any deviation from the low or high
end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to rule 424(b) if, in the
aggregate, the changes in volume and price represent
no more than a 20 percent change in the maximum
aggregate offering price set forth in the
"Calculation of Registration Fee" table in the
effective registration statement.
(c) To include any additional or changed material
information on the plan of distribution;
provided, however, that clauses (a) and (b) do not apply if the
information required to be included in a post-effective amendment by
such clauses is incorporated by reference from periodic reports filed
by the issuer under the Exchange Act.
(2) That, for determining liability under the Securities Act, each
such post-effective amendment shall be deemed a new
registration statement of the securities offered, and the
offering of such securities at that time to be the initial
bona fide offering.
(3) To remove from registration any of the securities being
registered which remain unsold at the termination of the
offering.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the small
business issuer pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred or
paid by a director, officer or controlling person of the small business issuer
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the small business issuer will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
21
<PAGE>
The undersigned small business issuer undertakes that it will:
(1) For determining any liability under the Securities Act, treat
the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A
and contained in a form of prospectus filed by small business
issuer under Rule 424(b)(1) or (4) or 497(h) under the
Securities Act as part of this registration statement as of
the time the Commission declared it effective.
(2) For determining any liability under the Securities Act, treat
each post-effective amendment that contains a form of
prospectus as a new registration statement for the securities
offered in the registration statement, and that offering of
the securities at the time as the initial BONA FIDE offering
of these securities.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the small
business issuer certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused this
registration statement on Form S-3 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California, on September 29, 1999.
YOUBET.COM, INC.
By: /s/ Robert M. Fell
-------------------------------------
Robert M. Fell
Chairman of the Board of Directors,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
<S> <C> <C>
/s/ Robert M. Fell Chairman of the Board of Directors September 29, 1999
- ---------------------- President and Chief Executive Officer
Robert M. Fell
*/s/ David M. Marshall Vice Chairman of the Board September 29, 1999
- ---------------------- of Directors
David M. Marshall
*/s/ Russell M. Fine Executive Vice President September 29, 1999
- ---------------------- Chief Technology Officer
Russell M. Fine and Director
</TABLE>
23
<PAGE>
<TABLE>
<S> <C> <C>
/s/ Phillip C. Hermann Executive Vice President September 29, 1999
- ----------------------- and Chief Financial Officer
Phillip C. Hermann
*/s/ Caesar P. Kimmel Director September 29, 1999
- -----------------------
Caesar P. Kimmel
*/s/ Alan W. Landsburg Director September 29, 1999
- -----------------------
Alan W. Landsburg
Director September __, 1999
- --------------------------
Charles D. Peebler, Jr.
Director September __, 1999
- -----------------------
William H. Roedy
</TABLE>
* By /s/ Phillip C. Hermann
---------------------------
Phillip C. Hermann
Attorney-in-fact
24
