Loyalty Program Forces Youbet.com to Restate Financials10th September 2009 7:16 am GMT
The U.S. online horserace betting provider Youbet.com has said that it will restate its financial results for the first and second quarters of 2009 due to incorrect calculations relating to its customer loyalty program. The adjustments are expected to result in a non-cash charge of approximately $900,000.
The company said it discovered the error during a review of the 'Youbet Advantage' program in an effort to improve its efficiency.
In the course of the review, Youbet found that customer loyalty points in the program were not being automatically cancelled in accordance with the terms and conditions of the program, and that members were still able to redeem expired points as credit against future wagers or merchandise. As a result, the calculation of accruals and related liabilities associated with the program were found to be inaccurate.
The Company expects to incur a non-cash charge reducing previously reported net income for the first and second quarters by approximately $346,000, or $0.01 per basic and diluted share, as well as corresponding adjustments to increase previously reported current and total liabilities which will decrease previously reported stockholders' equity in the company's balance sheet.
As a further consequence of the inaccuracies, the company will also need to revise its estimates of the par values of player rewards points issued in the program, at a one-time non-cash charge of approximately $550,000 in the third quarter of 2009.
"Over the last 18 months new management has embarked on a thorough review of all the company's processes and procedures including an in-depth analysis of its loyalty program 'Youbet Advantage'," said David Goldberg, President and Chief Executive Officer of Youbet.com.
"It is unfortunate that we have had to make adjustments to our accrual of rewards points due to these technical issues. We have already taken steps to ensure that expired points will be removed from accounts and that the appropriate modifications to our systems are implemented so that this type of error does not occur again."
The company also announced this week the appointment of Susan Bracey as its interim Chief Financial Officer. Ms. Bracey steps in to the vacant position created by the departure of Jim Burk in March.
Ms. Bracey joins Youbet.com from Ticketmaster, where she served as CFO and Executive Vice President.
Shares in Youbet.com (Co. Profile) (NASDAQ:UBET) are currently down 1.53% to $2.20 per share in after hours trading in New York/