INSIGHTS

Youbet had gone public in 1997 and by 2001 was dealing with multiple, concurrent issues that could quickly put the Company into bankruptcy. Youbet had:

• $750,000 in cash resources and was losing $500,000 per month.
• No access to financial markets to underwrite any debt or equity financing.
• Never been profitable.
• Significate delinquent Accounts Payable with key vendors and suppliers.
• Dropped to below $1 per share and was about to be delisted by NASDAQ.   
• A  “Going Concern Opinion” on the future of the Company rendered by their Audit Firm.
• An investor profile of “Day Traders” with a short-term investor outlook.
• A wagering platform technology that frequently and unexpectantly crashed. 
• Been ranked fourth in ADW market share. Experienced a material stock price decline from $17.00 per share to $ .44 per share.

In early 2002, Chuck Champion was recruited as President and Chief Operating Officer and Gary Sproule was recruited as Chief Financial Officer to turn Youbet around; they replaced the Youbet Executive Team that had completed the IPO.

Within the first week the new Team completed a situational assessment and determined Youbet had a viable revenue model with significant leverage and scalability, that had been poorly managed.

The Executive Team implemented and deployed the following initiatives immediately:

• Completed an Activity Value Analysis for all 85 employees that resulted in reducing Staff by 20.
• Completed a comprehensive rebuild of the wagering platform resulting in 99.5% uptime.
• Increased system capacity enabling Youbet to operate at 20% capacity accommodating future growth and major event wagering spikes with material concurrent wagering.
• Developed a new user interface for the wagering platform with value-added features and functionalities unique to Youbet.
• Secured world-wide racing content improving Youbet wager yields from 5.0% to 7.5%.  
• Deployed an aggressive customer recruiting campaign targeting 21-30 year old gamers and high- end players.
• Developed and deployed sophisticated detailed data mining software that generated detailed customer segmentation analysis based on variables such as wagering preferences and propensities.
• Created a culture driven by results, continuous improvement, and a sense of urgency.
• Established weekly key performance indicators, monitored, took corrective action, and held staff accountable for their performance.

Results for 2002-2005 Youbet turnaround:

• Reached Number 1 in ADW market share. 
• Increased gross wagers from $94 million to  $1 billion per year.
• Generated a $9.9 earnings turnaround from 2001 to 2005.
• Secured favorable “buy” recommendations from several brokerage firms.
• Convinced Auditors to remove their “Going Concern Opinion” based on financial performance.  
• Increased the stock price, lifting the NASDAQ Delisting.  
• Generated significant stock growth relative to ADW competitors.
• Youbet merged with Churchill Downs Inc.

In 2015 the publisher of The Signal retained Paladin Capital Partners  (“Paladin”) to evaluate various software platforms that would improve the operations efficiency of the newspaper. While Paladin was completing their engagement the current owners of The Signal made a strategic decision to sell the paper.

Paladin elected to make an offer to the current owners to purchase the assets of The Signal which was accepted by the owners. During that process, Paladin completed a Five Year Strategic and Operations Plan, performed their own valuation work, and completed funding, due diligence, transaction documents markup, deal negotiating, and close. While the purchase price cannot be disclosed Paladin determined that the fair market value of the Company assets was the “market clearing price,” that is, what Paladin was willing to pay when traditional valuation methodologies are irrelevant in valuing the Company.

Chuck Champion was appointed the Publisher and Chief Executive Officer and Gary Sproule was appointed as Chief Operating Officer and Chief Financial Officer, serving as Paladin independent contractors.

Paladin’s Five-Year Strategic Plan set the following strategic goals:

• Grow Revenue by over 20% per year.
• Grow EBITDA by over 35% per year.
• Invest Strategic capital and expenses to grow the Company.
• Enter into multiple strategic relationships to profitably grow the Company.
• Actively engaged in the community.
• Assemble the “best of class” Board of Directors to support growth.
• Grow Unique Signal Website Visitors by 20% per year.

Over the next 24 months under Paladin’s ownership, The Signal accomplished the following:

• Renegotiated distribution contract, reducing costs considerably while improving customer service.
• Renegotiated printing agreement with major printer with excess capacity resulting in cost reductions.
• Utilized Activity Value Analysis and 360 Performance Reviews to identify potential changes in  Staff. 
• Increased legal advertising and display advertising rates while increasing number of print advertisements.
• Built a new Signal website and launched in the first three months of new ownership.
• Developed 11 new pages for the newspaper and sold annual sponsorships for each page; examples include Veterans, Environmental, Entertainment, Money Matters, Seniors, Healthy Living and Technology.
• Increased legal notice advertising rates by 18% increasing monthly revenues by $15,000.
• Increased website Unique Visitors from 200,000 per month to 350,000 per month.
• Increased website Total Visitors from 750,000 per month to 990,000 per month.
• Acquired the only print competitor in the Santa Clarita Valley out of bankruptcy and with that competitor publishing weekly (rack) to complement The Signal’s five days a week (home delivery); reached 35,000 households per week with $40,000 monthly advertising revenues.
• Relocated Business office space, reducing footprint and rent materially.
• Created a culture in the newsroom of “real time” news reporting, supplementing the daily print with real time, relevant news posted on The Signal website.
• Developed the digital product called the “Vault” which contained timely, relevant, entertaining, informative, and original content developed by The Signal.
• Customers could access the vault with a $2.00 monthly subscription fee. 
• Paladin estimated that in its first year the Vault would generate a $120,000 net income.

In early 2018 Paladin received an unsolicited offer from a former publisher of The Signal to purchase The Signal in the form of an equity transaction.

Paladin performed it’s own valuation, completed the Purchase Transaction documents markup, negotiated and closed the transaction. While the purchase price cannot be disclosed, the price was a considerable premium to the purchase price Paladin had paid two years earlier.