Youbet.com has restated its earnings for 2007 due to a recalculation of an earn-out payment to the former owners of defunct subsidiary International Racing Group, increasing its annual loss for the year to $28.4 million.
In a July 10 filing with the U.S. Securities and Exchange Commission, the advance deposit wagering company said it had increased the earn-out payment to $4.3 million from $3.2 million, which is scheduled to be paid Aug. 31. But the company said it would pursue available options to reduce the payment, which is part of the contract for the 2005 purchase of IRG by Youbet.com.
“Management is in the process of determining what claims are available to reduce the final earn-out payment and intends to vigorously pursue any and all appropriate claims,” the SEC filing said. “The nature and amount of any such claims cannot be determined or reasonably estimated at this time, are to be regarded as contingent assets and, therefore, will not be recorded until the contingencies are resolved.”
IRG, which was an off-shore telephone wagering rebate shop, was closed by Youbet.com in February as part of the fallout from a self-disclosed state and federal investigation into IRG customers and operations.
“We were advised that the U.S. Attorney's Office is investigating a potentially wide net of activities of certain individuals who may have used telephone rebate wagering services, including those offered by IRG, in an allegedly illegal manner,” the most recent SEC filing summarized. (The U.S. Attorney’s Office in Las Vegas, which is believed to be conducting the investigation with the help of the Nevada Gaming Control Board, has never publicly acknowledged the existence of the federal inquiry.)
Youbet.com in March released its year-end results, and at the time said it posted a $27.4-million loss, including write-downs totaling $17.9 million in the fourth quarter alone. The company at the time said the impairments were related to the operations of IRG and its United Tote totalizator company, which may be put up for sale by Youbet.com.
With the adjusted loss, Youbet.com has now posted an aggregate $111.3 million in losses since launching in 1996, according to SEC filings.
The company in the last several months has seen the departure of several key members of senior management, including one-time president and chief executive officer Charles Champion and succeeding interim CEO Gary Sproule. New CEO Michael Brodsky promised in a May conference call with analysts that the company would refocus its future on the core products.