##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 FOR THE QUARTERLY PERIOD ENDED
September 30, 2009
 Commission File Number: 001-34276
 YOUBET.COM, INC.
  Delaware
    
    95-4627253(State or other jurisdiction
    
    (I.R.S. Employerof incorporation or organization)
    
    Identification No.)
 2600 West Olive Avenue, 5 th Floor
 Burbank, Ca. 91505
 (818) 668-2100
 þ o
 Yes o No o
 Rule 12b-2
 Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company þ
 o þ




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##### 



YOUBET.COM, INC.
INDEX TO FORM 10-Q/A
FOR THE QUARTER ENDED
September 30, 2009
 PagePART I. FINANCIAL INFORMATIONItem 1. Consolidated financial statements:Balance sheets as of September 30, 2009 (unaudited) and December 31, 2008
    
    
    2Statements of operations for the three and nine months ended September 30, 2009 and 2008
(unaudited)
    
    
    3Statements of cash flows for the nine months ended September 30, 2009 and 2008 (unaudited)
    
    
    4Notes to unaudited financial statements
    
    
    5Item 2. Managements discussion and analysis of financial condition and results of operations
    
    
    10Item 3. Quantitative and qualitative disclosures about market risk
    
    
    21Item 4. Controls and procedures
    
    
    21PART II. OTHER INFORMATIONItem 1. Legal proceedings
    
    
    22Item 1A. Risk factors
    
    
    22Item 2. Unregistered sales of equity securities and use of proceeds
    
    
    22Item 3. Defaults upon senior securities
    
    
    22Item 4. Submission of matters to a vote of security holders
    
    
    22Item 5. Other information
    
    
    22Item 6. Exhibits
    
    
    22Exhibit 31.1Exhibit 31.2Exhibit 32.1
  Preliminary Note




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Part I. Financial Information
 
 Item 1. Consolidated Financial Statements
 YOUBET.COM, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS  (in thousands, except share amounts)
 September 30,
    
    
    December 31,2009
    
    
    2008(unaudited)ASSETSCurrent assetsCash and cash equivalents
    
    $
    16,895
    
    
    $
    16,538Current portion of restricted cash
    
    
    4,770
    
    
    
    4,698Accounts receivable, net of allowance for doubtful collections of $815 and $541
    
    
    3,121
    
    
    
    3,031Inventories
    
    
    1,628
    
    
    
    1,937Prepaid expenses and other
    
    
    1,493
    
    
    
    1,06627,907
    
    
    
    27,270Property and equipment, net of accumulated depreciation
and amortization of $33,691 and $28,623
    
    
    13,674
    
    
    
    16,218Intangible assets, net of amortization of $2,642 and $2,162
    
    
    4,108
    
    
    
    4,588Other assets
    
    
    435
    
    
    
    804$
    46,124
    
    
    $
    48,880LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesCurrent portion of long-term debt
    
    $
    8,484
    
    
    $
    8,704Trade payables
    
    
    5,097
    
    
    
    6,484Accrued expenses
    
    
    6,504
    
    
    
    8,287Customer deposits
    
    
    4,689
    
    
    
    4,445Deferred revenues
    
    
    170
    
    
    
    12124,944
    
    
    
    28,041Long-term debt, net of current portion
    
    
    37
    
    
    
    3,99624,981
    
    
    
    32,037Stockholders equityPreferred stock, $0.001 par value, authorized 1,000,000 shares,
none issued or outstandingCommon stock, $0.001 par value, authorized 100,000,000 shares,
42,626,170 shares issued
    
    
    43
    
    
    
    43Additional paid-in capital
    
    
    136,915
    
    
    
    135,732Accumulated other comprehensive loss
    
    
    (162
    )
    
    
    (129
    )Deficit
    
    
    (113,274
    )
    
    
    (116,424
    )Less treasury stock, 1,099,335 common shares
    
    
    (2,379
    )
    
    
    (2,379
    )21,143
    
    
    
    16,843$
    46,124
    
    
    $
    48,880
 The accompanying notes are an integral part of these consolidated financial statements.
  2




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YOUBET.COM, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS  (UNAUDITED)  (in thousands, except per share amounts)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008RevenuesCommissions
    
    $
    21,842
    
    
    $
    22,570
    
    
    $
    68,911
    
    
    $
    62,784Contract revenues
    
    
    5,364
    
    
    
    5,613
    
    
    
    15,146
    
    
    
    17,076Equipment sales
    
    
    26
    
    
    
    340
    
    
    
    177
    
    
    
    837Other
    
    
    644
    
    
    
    795
    
    
    
    1,873
    
    
    
    2,37127,876
    
    
    
    29,318
    
    
    
    86,107
    
    
    
    83,068Costs and expensesTrack fees
    
    
    12,807
    
    
    
    10,599
    
    
    
    39,656
    
    
    
    29,075Licensing fees
    
    
    705
    
    
    
    2,482
    
    
    
    3,365
    
    
    
    6,958Network costs
    
    
    999
    
    
    
    985
    
    
    
    2,985
    
    
    
    2,893Contract costs
    
    
    4,052
    
    
    
    3,906
    
    
    
    11,134
    
    
    
    11,302Equipment costs
    
    
    14
    
    
    
    159
    
    
    
    112
    
    
    
    38918,577
    
    
    
    18,131
    
    
    
    57,252
    
    
    
    50,617Gross profit
    
    
    9,299
    
    
    
    11,187
    
    
    
    28,855
    
    
    
    32,451Operating expensesGeneral and administrative
    
    
    4,256
    
    
    
    3,633
    
    
    
    12,701
    
    
    
    12,813Sales and marketing
    
    
    1,547
    
    
    
    1,351
    
    
    
    4,441
    
    
    
    3,753Research and development
    
    
    769
    
    
    
    796
    
    
    
    2,472
    
    
    
    2,592Depreciation and amortization of intangibles
    
    
    1,807
    
    
    
    2,197
    
    
    
    5,426
    
    
    
    5,9758,379
    
    
    
    7,977
    
    
    
    25,040
    
    
    
    25,133Income from continuing operations before other income (expense) and income tax
    
    
    920
    
    
    
    3,210
    
    
    
    3,815
    
    
    
    7,318Other income (expense)Interest income
    
    
    8
    
    
    
    52
    
    
    
    41
    
    
    
    169Interest expense
    
    
    (192
    )
    
    
    (275
    )
    
    
    (607
    )
    
    
    (947
    )Other
    
    
    194
    
    
    
    101
    
    
    
    399
    
    
    
    37Income from continuing operations before income tax
    
    
    930
    
    
    
    3,088
    
    
    
    3,648
    
    
    
    6,577Income tax
    
    
    52
    
    
    
    286
    
    
    
    480
    
    
    
    362Net income from continuing operations
    
    
    878
    
    
    
    2,802
    
    
    
    3,168
    
    
    
    6,215Discontinued operationsLoss from discontinued operations, without tax effect
    
    
    
    
    
    
    (120
    )
    
    
    (18
    )
    
    
    (743
    )Net income
    
    $
    878
    
    
    $
    2,682
    
    
    $
    3,150
    
    
    $
    5,472Basic income (loss) per shareIncome from continuing operations
    
    $
    0.02
    
    
    $
    0.07
    
    
    $
    0.08
    
    
    $
    0.15Loss from discontinued operations
    
    
    0.00
    
    
    
    (0.01
    )
    
    
    0.00
    
    
    
    (0.02
    )Net income
    
    
    0.02
    
    
    
    0.06
    
    
    
    0.08
    
    
    
    0.13Diluted income (loss) per shareIncome from continuing operations
    
    $
    0.02
    
    
    $
    0.07
    
    
    $
    0.07
    
    
    $
    0.15Loss from discontinued operations
    
    
    0.00
    
    
    
    (0.01
    )
    
    
    0.00
    
    
    
    (0.02
    )Net income
    
    
    0.02
    
    
    
    0.06
    
    
    
    0.07
    
    
    
    0.13Weighted average shares outstandingBasic
    
    
    41,517,236
    
    
    
    41,519,024
    
    
    
    41,482,476
    
    
    
    41,519,024Diluted
    
    
    44,564,870
    
    
    
    42,405,151
    
    
    
    43,801,948
    
    
    
    42,171,337
 The accompanying notes are an integral part of these condensed consolidated financial statements.
  3




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YOUBET.COM, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS  (UNAUDITED)  (in thousands)
 Nine Months EndedSeptember 30,2009
    
    
    2008Operating activitiesNet income
    
    $
    3,150
    
    
    $
    5,472Loss from discontinued operations
    
    
    (18
    )
    
    
    (743
    )Income from continuing operations
    
    
    3,168
    
    
    
    6,215Adjustments to reconcile income from continuing operations to net cash provided by operating
activities, continuing operationsDepreciation and amortization of property and equipment
    
    
    4,946
    
    
    
    5,419Amortization of intangibles
    
    
    480
    
    
    
    556Stock-based compensation
    
    
    1,082
    
    
    
    913Provision for bad debt
    
    
    346
    
    
    
    477Increase in operating (assets) and liabilities
    
    
    (3,342
    )
    
    
    2,294Net cash provided by continuing operations
    
    
    6,680
    
    
    
    15,874Net cash used in discontinued operations
    
    
    (27
    )
    
    
    (2,653
    )Net cash provided by operating activities
    
    
    6,653
    
    
    
    13,221Investing activitiesPurchase of property and equipment
    
    
    (2,433
    )
    
    
    (1,098
    )Decrease (increase) in restricted cash (other than Players TrustSM)
    
    
    217
    
    
    
    (5
    )Other
    
    
    31
    
    
    
    34Net cash used in investing activities
    
    
    (2,185
    )
    
    
    (1,069
    )Financing activitiesProceeds from the exercise of options
    
    
    101Proceeds from borrowings
    
    
    
    
    
    
    630Repayment of borrowings
    
    
    (4,179
    )
    
    
    (6,743
    )Net cash used in financing activities
    
    
    (4,078
    )
    
    
    (6,113
    )Foreign currency translation adjustments
    
    
    (33
    )
    
    
    (58
    )Net increase in cash and cash equivalents
    
    
    357
    
    
    
    5,981Cash and cash equivalents at the beginning of period
    
    
    16,538
    
    
    
    6,551Cash and cash equivalents at the end of period
    
    $
    16,895
    
    
    $
    12,532
 The accompanying notes are an integral part of these consolidated financial statements.
  4




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YOUBET.COM, INC. AND SUBSIDIARIES
 
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS  THREE AND NINE MONTHS ENDED September 30, 2009
 Note 1: Basis of Presentation
    Note 2: Earnings Per Share
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Numerator:Income from continuing operations
    
    $
    878
    
    
    $
    2,802
    
    
    $
    3,168
    
    
    $
    6,215Denominator:Basic weighted average shares outstanding
    
    
    41,517
    
    
    
    41,519
    
    
    
    41,482
    
    
    
    41,519Effect of dilutive stock options
    
    
    3,048
    
    
    
    886
    
    
    
    2,320
    
    
    
    652Diluted weighted average shares outstanding
    
    
    44,565
    
    
    
    42,405
    
    
    
    43,802
    
    
    
    42,171Earnings per share  basic
    
    $
    0.02
    
    
    $
    0.07
    
    
    $
    0.08
    
    
    $
    0.15Earnings per share  diluted
    
    $
    0.02
    
    
    $
    0.07
    
    
    $
    0.07
    
    
    $
    0.15
  5




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Note 3: Debt
  (in thousands)Promissory notes
    
    $
    3,200Bank term loan
    
    
    5,000Capital lease obligations and other
    
    
    3218,521Less: short-term debt and current portion of long-term debt
    
    
    8,484Long-term debt, less current maturities
    
    $
    37
     Note 4: Income Taxes
   6




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Note 5: Contingencies
    Note 6: Stockholders Equity
  Options available per the equity incentive plan
    
    
    13,750Stock options outstanding
    
    
    7,082Options available for grant
    
    
    1,225
  WeightedAverageStock
    
    
    OptionOptions
    
    
    Price(in thousands)Balance at January 1, 2009
    
    
    5,559
    
    
    $
    1.99Options granted
    
    
    2,210
    
    
    
    1.33Options exercised
    
    
    (63
    )
    
    
    1.59Options cancelled
    
    
    (624
    )
    
    
    3.08Balance at September 30, 2009
    
    
    7,082
    
    
    $
    1.69
  7




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##### Table of Contents



Options Outstanding
    
    
    Options ExercisableWeightedWeighted
    
    
    Average
    
    
    
    
    
    
    WeightedAverage
    
    
    Remaining
    
    
    
    
    
    
    AverageExercise
    
    
    Contractual
    
    
    
    
    
    ExerciseRange of Exercise Prices:
    
    Number of Shares
    
    
    Price
    
    
    Life (years)
    
    
    Number of Shares
    
    
    Price(in thousands)
    
    
    
    
    
    
    
    
    (in thousands)$0.50 to $0.95
    
    
    869
    
    
    $
    0.55
    
    
    
    2.86
    
    
    
    844
    
    
    $
    0.53$1.10 to $1.95
    
    
    4,211
    
    
    
    1.33
    
    
    
    8.10
    
    
    
    1,432
    
    
    
    1.33$2.23 to $2.81
    
    
    1,324
    
    
    
    2.36
    
    
    
    5.23
    
    
    
    1,183
    
    
    
    2.33$3.04 to $3.92
    
    
    374
    
    
    
    3.63
    
    
    
    6.74
    
    
    
    225
    
    
    
    3.58$4.00 to $4.91
    
    
    227
    
    
    
    4.51
    
    
    
    6.00
    
    
    
    197
    
    
    
    4.52$5.03 to $5.62
    
    
    77
    
    
    
    5.32
    
    
    
    5.60
    
    
    
    77
    
    
    
    5.32Total at September 30, 2009
    
    
    7,082
    
    
    
    1.69
    
    
    
    6.76
    
    
    
    3,958
    
    
    
    1.82
 Note 7: Fair Value of Financial Instruments
 Fair Value Measurements
and Disclosures Fair Value
Measurements
 Note 8: Segment Reporting
   8




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Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,(in thousands)2009
    
    
    2008
    
    
    2009
    
    
    2008RevenueAdvance deposit wagering segment
    
    $
    22,485
    
    
    $
    23,365
    
    
    $
    70,784
    
    
    $
    65,154Totalizator services segment
    
    
    5,563
    
    
    
    6,297
    
    
    
    15,991
    
    
    
    18,86128,048
    
    
    
    29,662
    
    
    
    86,775
    
    
    
    84,015Intersegment eliminations
    
    
    (172
    )
    
    
    (344
    )
    
    
    (668
    )
    
    
    (947
    )$
    27,876
    
    
    $
    29,318
    
    
    $
    86,107
    
    
    $
    83,068Revenue by Geographic AreaUnited States
    
    $
    27,238
    
    
    $
    28,643
    
    
    $
    84,575
    
    
    $
    82,018International
    
    
    638
    
    
    
    675
    
    
    
    1,532
    
    
    
    1,050$
    27,876
    
    
    $
    29,318
    
    
    $
    86,107
    
    
    $
    83,068Reconciliation to Income Before Income TaxIncome (loss) from operations, before other income
(expense) and income tax (benefit)Advance deposit wagering segment
    
    $
    1,840
    
    
    $
    3,847
    
    
    $
    6,666
    
    
    $
    9,070Totalizator service segment
    
    
    (920
    )
    
    
    (637
    )
    
    
    (2,851
    )
    
    
    (1,752
    )920
    
    
    
    3,210
    
    
    
    3,815
    
    
    
    7,318Interest income
    
    
    8
    
    
    
    52
    
    
    
    41
    
    
    
    169Interest expense
    
    
    (192
    )
    
    
    (275
    )
    
    
    (607
    )
    
    
    (947
    )Other
    
    
    194
    
    
    
    101
    
    
    
    399
    
    
    
    37Income from continuing operations before income tax
    
    
    930
    
    
    
    3,088
    
    
    
    3,648
    
    
    
    6,577Income from discontinued operations before income tax
    
    
    0
    
    
    
    (120
    )
    
    
    (18
    )
    
    
    (743
    )Income before income tax
    
    $
    930
    
    
    $
    2,968
    
    
    $
    3,630
    
    
    $
    5,834Capital Spending,includes capital leases (non-cash)Advance deposit wagering segment
    
    $
    947
    
    
    $
    476
    
    
    $
    2,000
    
    
    $
    1,369Totalizator services segment
    
    
    142
    
    
    
    323
    
    
    
    433
    
    
    
    508$
    1,089
    
    
    $
    799
    
    
    $
    2,433
    
    
    $
    1,877Depreciation and AmortizationAdvance deposit wagering segment
    
    $
    598
    
    
    $
    405
    
    
    $
    1,666
    
    
    $
    1,234Totalizator services segment
    
    
    1,209
    
    
    
    1,792
    
    
    
    3,760
    
    
    
    4,741$
    1,807
    
    
    $
    2,197
    
    
    $
    5,426
    
    
    $
    5,975
 September 30,
    
    
    December 31,2009
    
    
    2008(in thousands)Total AssetsAdvance deposit wagering segment
    
    $
    27,955
    
    
    $
    25,431Totalizator services segment
    
    
    18,169
    
    
    
    23,449$
    46,124
    
    
    $
    48,880
  9




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Note 9: Impairment of Intangibles
  Intangibles-Goodwill and Other Goodwill and Other Intangible Assets
  Note 10: Discontinued Operations
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenues
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    46Cost of Revenues
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    75Gross profit (loss)
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    (29
    )Operating expenses
    
    
    
    
    
    
    123
    
    
    
    18
    
    
    
    714Net loss
    
    $
    
    
    
    $
    (120
    )
    
    $
    (18
    )
    
    $
    (743
    )Impact on the Companys earning (loss) per share:- Basic
    
    $
    
    
    
    $
    (0.00
    )
    
    $
    (0.00
    )
    
    $
    (0.02
    )- Diluted
    
    $
    
    
    
    $
    (0.00
    )
    
    $
    (0.00
    )
    
    $
    (0.02
    )
 Note 11: Subsequent Event
   10




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Item 2. Managements discussion and analysis of financial condition and results of operations
 Forward-looking statements
  Overview
  www.youbet.com
       11




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Critical accounting estimates and policies
  Recent Accounting Pronouncements
  Results of continuing operations for the three months ended September 30, 2009 compared to the
three months ended September 30, 2008
  ADW Segment
    
    
    Totalizator SegmentThree months ended September 30,
    
    
    Three months ended September 30,Increase
    
    
    %
    
    
    
    
    
    
    
    
    
    
    Increase
    
    
    %2009
    
    
    2008
    
    
    (Decrease)
    
    
    Change
    
    
    2009
    
    
    2008
    
    
    (Decrease)
    
    
    Change(in thousands)Revenues
    
    $
    22,485
    
    
    $
    23,365
    
    
    $
    (880
    )
    
    
    -3.8
    %
    
    $
    5,563
    
    
    $
    6,297
    
    
    $
    (734
    )
    
    
    -11.7
    %Gross profit
    
    
    7,802
    
    
    
    8,956
    
    
    
    (1,154
    )
    
    
    -12.9
    %
    
    
    1,497
    
    
    
    2,231
    
    
    
    (734
    )
    
    
    -32.9
    %As % of revenues
    
    
    34.7
    %
    
    
    38.3
    %
    
    
    
    
    
    
    
    
    
    
    26.9
    %
    
    
    35.4
    %Operating expenses
    
    
    5,962
    
    
    
    5,109
    
    
    
    853
    
    
    
    16.7
    %
    
    
    2,417
    
    
    
    2,868
    
    
    
    (451
    )
    
    
    -15.7
    %As % of revenues
    
    
    26.5
    %
    
    
    21.9
    %
    
    
    
    
    
    
    
    
    
    
    43.4
    %
    
    
    45.5
    %Income from
continuing
operations before
other income
(expense) and
income tax
    
    $
    1,840
    
    
    $
    3,847
    
    
    $
    (2,007
    )
    
    
    -52.2
    %
    
    $
    (920
    )
    
    $
    (637
    )
    
    $
    (283
    )
    
    
    -44.4
    %As % of revenues
    
    
    8.2
    %
    
    
    16.5
    %
    
    
    
    
    
    
    
    
    
    
    -16.5
    %
    
    
    -10.1
    %
 Revenues
   12




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##### Table of Contents



ADW Segment Revenues
     Three months ended
September 30, 2009Favor2009
    
    

2008
    
    

(Unfavor)
    
    

%(in thousands)Handle
    
    $
    121,254
    
    
    $
    121,675
    
    
    $
    (421
    )
    
    
    -0.3
    %Commissions
    
    
    21,842
    
    
    
    22,570
    
    
    
    (728
    )
    
    
    -3.2
    %Less:Track fees
    
    
    12,807
    
    
    
    10,599
    
    
    
    2,208
    
    
    
    20.8
    %License fees
    
    
    705
    
    
    
    2,482
    
    
    
    (1,777
    )
    
    
    -71.6
    %Net revenue
    
    $
    8,330
    
    
    $
    9,489
    
    
    $
    (1,159
    )
    
    
    -12.2
    %Yield %
    
    
    6.9
    %
    
    
    7.8
    %
  Totalizator Segment Revenues
  Costs and Expenses
   13




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##### Table of Contents



ADW Segment Costs and Expenses
  Track fees
 Licensing fees
 Network operations
  Totalizator Segment Costs and Expenses
  Contract costs
 Equipment Costs:
  Gross Profit
   14




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##### Table of Contents



ADW Segment Gross Profit
  Totalizator Segment Gross Profit
  Operating Expenses
 Research and development
 Sales and marketing
 General and administrative
 Depreciation and amortization
 Interest expense (income)
 Other income
 Income Taxes:
  15




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##### Table of Contents



Results of continuing operations for the nine months ended September 30, 2009 compared to the nine
months ended September 30, 2008
  ADW
Segment


    

Totalizator
SegmentNine
months ended September 30,


    

Nine
months ended September 30,Increase
    
    
    %
    
    
    
    
    
    
    
    
    Increase
    
    
    %2009
    
    

2008
    
    

(Decrease)
    
    

Change
    
    

2009
    
    

2008
    
    

(Decrease)
    
    

Change(in thousands)Revenues
    
    $
    70,784
    
    
    $
    65,154
    
    
    $
    5,630
    
    
    
    8.6
    %
    
    $
    15,991
    
    
    $
    18,861
    
    
    $
    (2,870
    )
    
    
    -15.2
    %Gross profit
    
    
    24,110
    
    
    
    25,281
    
    
    
    (1,171
    )
    
    
    -4.6
    %
    
    
    4,745
    
    
    
    7,170
    
    
    
    (2,425
    )
    
    
    -33.8
    %As % of revenues
    
    
    34.1
    %
    
    
    38.8
    %
    
    
    
    
    
    
    
    
    
    
    29.7
    %
    
    
    38.0
    %Operating expenses
    
    
    17,444
    
    
    
    16,211
    
    
    
    1,233
    
    
    
    7.6
    %
    
    
    7,596
    
    
    
    8,922
    
    
    
    (1,326
    )
    
    
    -14.9
    %As % of revenues
    
    
    24.6
    %
    
    
    24.9
    %
    
    
    
    
    
    
    
    
    
    
    47.5
    %
    
    
    47.3
    %Income from
continuing
operations before
other income
(expense) and
income tax
    
    $
    6,666
    
    
    $
    9,070
    
    
    $
    (2,404
    )
    
    
    -26.5
    %
    
    $
    (2,851
    )
    
    $
    (1,752
    )
    
    $
    (1,099
    )
    
    
    -62.7
    %As % of revenues
    
    
    9.4
    %
    
    
    13.9
    %
    
    
    
    
    
    
    
    
    
    
    -17.8
    %
    
    
    -9.3
    %
 Note:
    
    Revenues exclude intersegment eliminations of $0.7 million in 2009 and $0.9 million in 2008, respectively.
 Revenues
  ADW Segment Revenues
     16




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##### Table of Contents



Nine months ended September 30, 2009Favor2009
    
    
    2008
    
    
    (Unfavor)
    
    
    %(in thousands)Handle
    
    $
    373,683
    
    
    $
    330,920
    
    
    $
    42,763
    
    
    
    12.9
    %Commissions
    
    
    68,911
    
    
    
    62,784
    
    
    
    6,127
    
    
    
    9.8
    %Less:Track fees
    
    
    39,656
    
    
    
    29,075
    
    
    
    10,581
    
    
    
    36.4
    %License fees
    
    
    3,365
    
    
    
    6,958
    
    
    
    (3,593
    )
    
    
    -51.6
    %Net Revenue
    
    $
    25,890
    
    
    $
    26,751
    
    
    $
    (861
    )
    
    
    -3.2
    %Yield %
    
    
    6.9
    %
    
    
    8.1
    %
  Totalizator Segment Revenues
  Costs and Expenses
  ADW Segment Costs and Expenses
  Track fees
 Licensing fees
 Network operations
  17




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##### Table of Contents



Totalizator Segment Costs and Expenses
  Contract costs
 Equipment Costs:
  Gross Profit
  ADW Segment Gross Profit
  Totalizator Segment Gross Profit
  Operating Expenses
 Research and development
 Sales and marketing
  18




---



##### Table of Contents



General and administrative
 Depreciation and amortization
 Interest expense (income)
 Other income
 Income Taxes:
 Discontinued Operations:
 Liquidity and capital resources
    19




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##### Table of Contents



For the Nine Month Period EndedSeptember 30,2009
    
    
    2008(in thousands)Net cash provided (used) by operating activities, from continuing operations
    
    $
    6,680
    
    
    $
    15,874Net cash used in investing operations
    
    
    (2,185
    )
    
    
    (1,069
    )Net cash used in financing activities
    
    
    (4,078
    )
    
    
    (6,113
    )Net cash used in discontinued operations
    
    
    (27
    )
    
    
    (2,653
    )Foreign currency translation adjustments
    
    
    (33
    )
    
    
    (58
    )Net increase in cash and cash equivalents
    
    $
    357
    
    
    $
    5,981
 Operating Activities
  Investing Activities
  Financing Activities
     20




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##### Table of Contents



Item 3. Quantitative and qualitative disclosures about market risk
  
 Item 4. Controls and procedures
 Evaluation of Disclosure Controls and Procedures
     Changes in Internal Control Over Financial Reporting
   21




---



##### Table of Contents



Part II. Other information
 
 Item 1. Legal proceedings
  
 Item 1A. Risk factors
  
 Item 2. Unregistered sales of equity securities and use of proceeds
  
 Item 3. Defaults upon senior securities
  
 Item 4. Submission of matters to a vote of security holders
  
 Item 5. Other information
  
 Item 6. Exhibits
 31.1
    
    
    Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934.31.2
    
    
    Certification of Principal Financial Officer Pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934.32.1
    
    
    Certification Pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934.
  22




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##### Table of Contents



SIGNATURES
  YOUBET.COM, INC.November 12, 2009
    By:
    /s/ David GoldbergDavid GoldbergPresident and Chief Executive OfficerNovember 12, 2009
    By:
    /s/ Susan BraceySusan BraceyChief Financial Officer  23




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##### Table of Contents



EXHIBIT INDEX
 31.1
    
    
    Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934.31.2
    
    
    Certification of Principal Financial Officer Pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934.32.1
    
    
    Certification Pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934.