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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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FORM 10-Q

(Mark One)

|/x/ | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ---------------------------------------------------------------------------------

For the Quarterly Period Ended March 31, 2001
or

|/ / | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ----------------------------------------------------------------------------------

For the transition period from  to

Commission File Number: 33-13789LA

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YOUBET.COM, INC.

(Exact name of registrant as specified in its charter)

Delaware(State or other jurisdiction of
incorporation or organization)

95-4627253(I.R.S. Employer
Identification No.)5901 De Soto Avenue, Woodland Hills, California 91367(Address of principal executive offices, including zip code)


(818) 668-2100(Issuer's telephone number, including area code)

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Indicate
by check whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes /x/  No / /

As
of May 10, 2001, the issuer had 19,520,850 shares of common stock issued and outstanding.

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YOUBET.COM, INC.    INDEX TO FORM 10-Q    FOR THE QUARTER ENDED    MARCH 31, 2001

|           |  |                                                                                       |                                                                                                    |    | Page
|---------- |  | ------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------- | -- | ----
|PART I.    |  | FINANCIAL INFORMATION                                                                 |                                                                                                    |   
|Item 1.    |  | Financial Statements                                                                  |                                                                                                    |   
|           |  |                                                                                       | Consolidated Balance Sheets as of March 31, 2001 and December 31, 2000                             |    | 3   
|           |  |                                                                                       | Consolidated Statements of Operations for the three months ended March 31, 2001 and March 31, 2000 |    | 4   
|           |  |                                                                                       | Consolidated Statements of Cash Flows for the three months ended March 31, 2001 and March 31, 2000 |    | 5   
|           |  |                                                                                       | Summary of Accounting Policies                                                                     |    | 6   
|           |  |                                                                                       | Notes to Unaudited Consolidated Financial Statements                                               |    | 7   
|Item 2.    |  | Management's Discussion and Analysis of Financial Condition and Results of Operations |                                                                                                    | 8 
|Item 3.    |  | Quantitative and Qualitative Disclosures About Market Risk                            |                                                                                                    | 11
|PART II.   |  | OTHER INFORMATION                                                                     |                                                                                                    |   
|Item 1.    |  | Legal Proceedings                                                                     |                                                                                                    | 11
|Item 2.    |  | Changes in Securities                                                                 |                                                                                                    | 11
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                   |                                                                                                    | 11
|Item 5.    |  | Other Information                                                                     |                                                                                                    | 12
|Item 6.    |  | Exhibits and Reports on Form 8-K                                                      |                                                                                                    | 12
|Signatures |  | 13                                                                                   

2

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Part I. Financial Information

Item 1. Financial Statements

YOUBET.COM, INC.    CONSOLIDATED BALANCE SHEETS

|                                                                                                                                       |                                            | March 31, 2001 |             | December 31, 2000 |  
|-------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | -------------- | ----------- | ----------------- | -
|
|ASSETS                                                                                                                                 |                                            |                |             |                   |  
|Current assets:                                                                                                                        |                                            |                |             |                   |  
|Cash and cash equivalents                                                                                                              |                                            | $              | 9,799,319   |                   | $
|Restricted cash (Note 1)                                                                                                               |                                            |                | 107,867     |                   |  
|Receivables                                                                                                                            |                                            |                | 153,426     |                   |  
|Interest and other receivables                                                                                                         |                                            |                | 237,289     |                   |  
|Prepaid expenses                                                                                                                       |                                            |                | 360,978     |                   |  
|                                                                                                                                       |                                            |                |             |                   |  
|                                                                                                                                       | Total current assets                       |                |             | 10,658,879        |  
|                                                                                                                                       |                                            |                |             |                   |  
|Property and equipment                                                                                                                 |                                            |                | 9,720,538   |                   |  
|Less: Accumulated depreciation and amortization                                                                                        |                                            |                | (2,485,912  | )                 |  
|                                                                                                                                       |                                            |                |             |                   |  
|                                                                                                                                       | Property and equipment, net                |                |             | 7,234,626         |  
|                                                                                                                                       |                                            |                |             |                   |  
|Capitalized software (Note 2)                                                                                                          |                                            |                | 2,542,506   |                   |  
|Restricted cash (Note 1)                                                                                                               |                                            |                | 812,938     |                   |  
|Deposits and other                                                                                                                     |                                            |                | 139,588     |                   |  
|                                                                                                                                       |                                            |                |             |                   |  
|                                                                                                                                       | Total assets                               |                | $           | 21,388,537        |  
|                                                                                                                                       |                                            |                |             |                   |  
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                   |                                            |                |             |                   |  
|Current liabilities:                                                                                                                   |                                            |                |             |                   |  
|Accounts payable                                                                                                                       |                                            | $              | 1,014,459   |                   | $
|Accrued compensation and related items                                                                                                 |                                            |                | 304,672     |                   |  
|Accrued expenses                                                                                                                       |                                            |                | 1,758,568   |                   |  
|Deferred revenues                                                                                                                      |                                            |                | 8,665       |                   |  
|Current portion of capitalized lease obligation                                                                                        |                                            |                |            |                   |  
|                                                                                                                                       |                                            |                |             |                   |  
|                                                                                                                                       | Total current liabilities                  |                |             | 3,086,364         |  
|                                                                                                                                       |                                            |                |             |                   |  
|                                                                                                                                       | Total liabilities                          |                |             | 3,086,364         |  
|Commitments and contingencies (Notes 1, 3, and 4)                                                                                      |                                            |                |             |                   |  
|Stockholders' equity:                                                                                                                  |                                            |                |             |                   |  
|Preferred stock, $.001 par value (aggregate liquidation preference of $0)Authorized 1,000,000 shares, none outstanding                |                                            |                |            |                   |  
|Common stock, $.001 par valueAuthorized 50,000,000 shares, 19,520,850 shares outstanding as of March 31, 2001, and December 31, 2000. |                                            |                | 19,521      |                   |  
|Additional paid-in capital                                                                                                             |                                            |                | 84,829,388  |                   |  
|Accumulated deficit                                                                                                                    |                                            |                | (66,406,736 | )                 |  
|Notes receivable from stockholders                                                                                                     |                                            |                | (140,000    | )                 |  
|                                                                                                                                       |                                            |                |             |                   |  
|                                                                                                                                       | Total stockholders' equity                 |                |             | 18,302,173        |  
|                                                                                                                                       |                                            |                |             |                   |  
|                                                                                                                                       | Total liabilities and stockholders' equity |                | $           | 21,388,537        |  
|                                                                                                                                       |                                            |                |             |                   |  

See
accompanying notes to unaudited consolidated financial statements.

3

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YOUBET.COM, INC.    CONSOLIDATED STATEMENTS OF OPERATIONS    (UNAUDITED)

|                               |                                                      | Three Months Ended March 31, |           
|------------------------------ | ---------------------------------------------------- | ---------------------------- | ----------
|
|Revenues                       |                                                      | $                            | 1,647,765 
|Operating expenses             |                                                      |                              |           
|                               | Network operations                                   |                              |           
|                               | Research and development                             |                              |           
|                               | Sales and marketing                                  |                              |           
|                               | General and administrative                           |                              |           
|                               | Depreciation and amortization                        |                              |           
|                               |                                                      |                              |           
|                               |                                                      | Total operating expenses     |           
|                               |                                                      |                              |           
|Loss from operations           |                                                      |                              | (2,523,305
|Other income (expense):        |                                                      |                              |           
|                               | Interest income                                      |                              |           
|                               | Interest expense                                     |                              |           
|                               | Amortization of deferred financing costs             |                              |           
|                               | Fair value of warrants issued for financing costs    |                              |           
|                               | Other                                                |                              |           
|                               |                                                      |                              |           
|                               |                                                      | Total other income (expense) |           
|                               |                                                      |                              |           
|Loss before extraordinary item |                                                      |                              | (2,353,126
|                               | Extraordinary item (Note 5)                          |                              |           
|                               |                                                      |                              |           
|Net loss                       |                                                      | $                            | (2,353,126
|                               |                                                      |                              |           
|Basic and diluted:             |                                                      |                              |           
|                               | Loss before extraordinary item per common share      |                              | $         
|                               | Extraordinary item (Note 5)                          |                              |           
|                               |                                                      |                              |           
|                               | Net loss per common share                            |                              | $         
|                               |                                                      |                              |           
|                               | Weighted average number of common shares outstanding |                              |           
|                               |                                                      |                              |           

See
accompanying notes to unaudited consolidated financial statements.

4

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YOUBET.COM, INC.    CONSOLIDATED STATEMENTS OF CASH FLOWS    (UNAUDITED)

|                                                                            |                                                       | Three Months Ended March 31,          |           
|--------------------------------------------------------------------------- | ----------------------------------------------------- | ------------------------------------- | ----------
|
|Increase (Decrease) in Cash and Cash Equivalents                            |                                                       |                                       |           
|Cash flows from operating activities:                                       |                                                       |                                       |           
|                                                                            | Net loss                                              |                                       | $         
|Adjustments to reconcile net loss to net cash used in operating activities: |                                                       |                                       |           
|                                                                            | Depreciation and amortization                         |                                       |           
|                                                                            | Amortization of deferred financing costs              |                                       |           
|                                                                            | Extraordinary gain on repurchase of convertible notes |                                       |           
|                                                                            | Interest accreted on note payable                     |                                       |           
|                                                                            | Non-cash compensation                                 |                                       |           
|                                                                            | Loss on disposal of assets                            |                                       |           
|Change in operating assets and liabilities:                                 |                                                       |                                       |           
|                                                                            | Receivables                                           |                                       |           
|                                                                            | Prepaid expenses                                      |                                       |           
|                                                                            | Other current assets                                  |                                       |           
|                                                                            | Deposits and other                                    |                                       |           
|                                                                            | Accounts payable                                      |                                       |           
|                                                                            | Accrued compensation and related items                |                                       |           
|                                                                            | Other accrued expenses                                |                                       |           
|                                                                            | Deferred revenues                                     |                                       |           
|                                                                            |                                                       |                                       |           
|                                                                            |                                                       | Net cash used in operating activities |           
|                                                                            |                                                       |                                       |           
|Cash flows from investing activities:                                       |                                                       |                                       |           
|                                                                            | Restricted cash                                       |                                       |           
|                                                                            | Purchases of property and equipment                   |                                       |           
|                                                                            |                                                       |                                       |           
|                                                                            |                                                       | Net cash used in investing activities |           
|                                                                            |                                                       |                                       |           
|Cash flows from financing activities:                                       |                                                       |                                       |           
|                                                                            | Repurchase of convertible note                        |                                       |           
|                                                                            | Proceeds from exercise of stock options and warrants  |                                       |           
|                                                                            | Increase in deferred financing costs                  |                                       |           
|                                                                            | Payments on capitalized lease obligations             |                                       |           
|                                                                            |                                                       |                                       |           
|                                                                            |                                                       | Net cash used in financing activities |           
|                                                                            |                                                       |                                       |           
|Net decrease in cash and cash equivalents                                   |                                                       |                                       | (2,294,853
|Cash and cash equivalents at the beginning of the period                    |                                                       |                                       | 12,094,172
|                                                                            |                                                       |                                       |           
|Cash and cash equivalents at the end of the period                          |                                                       | $                                     | 9,799,319 
|                                                                            |                                                       |                                       |           
|Supplemental disclosure of cash flow information                            |                                                       |                                       |           
|                                                                            | Cash paid for interest                                |                                       | $         
|                                                                            |                                                       |                                       |           
|                                                                            | Non-cash investing and financing activities:          |                                       |           
|                                                                            | Non-cash compensation                                 |                                       | $         
|                                                                            |                                                       |                                       |           

See
accompanying notes to unaudited consolidated financial statements.

5

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YOUBET.COM, INC.    SUMMARY OF ACCOUNTING POLICIES    THREE MONTHS ENDED MARCH 31, 2001

Organization and Basis of Presentation

Business

Youbet.com, Inc.
(the "Company") is a Delaware corporation. The Company is engaged in developing PC-based proprietary communications software technology to be
utilized by consumers for online live event wagering. The Company intends to establish itself as the leading global brand name for legal online live-event sports entertainment wagering and
other forms of legal online gaming. The Company has initially focused its efforts primarily on the United States horse racing market, and its principal product, the You Bet Network, a
PC-based system which allows a subscriber to transmit information and thereby facilitate wagers.

Basis
of Presentation

In
the opinion of management, the accompanying unaudited financial statements for the three months ended March 31, 2001 and 2000 include all adjustments (consisting of normal
recurring accruals) which management considers necessary to present fairly the financial position of the Company as of March 31, 2001, the results of its operations for the three months ended
March 31, 2001 and March 31, 2000, and its cash flows for the three months ended March 31, 2001 and March 31, 2000 in conformity with generally accepted accounting
principles ("GAAP"). These financial statements have been prepared consistently with the accounting policies described in the Company's Annual Report on Form 10-K for the year ended
December 31, 2000, as filed with the Securities and Exchange Commission on April 2, 2001 and should be read in conjunction with this Quarterly Report on Form 10-Q. The
results of operations for the three months ended March 31, 2001 are not necessarily indicative of the consolidated results of operations to be expected for the full fiscal year ending
December 31, 2001.

Certain
information and footnote disclosures normally included in the financial statements presented in accordance with GAAP have been condensed or omitted. The accompanying unaudited
financial statements should be read in conjunction with the Company's audited financial statements and notes thereto in the Company's Annual Report on Form 10-K for the year ended
December 31, 2000.

Use
of Estimates

The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from
these estimates.

Basic
and Diluted Earnings (Loss) Per Share

Basic
earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted income (loss) per
share is calculated by dividing net loss by the basic shares outstanding and all dilutive securities, including stock options, warrants, convertible notes and preferred stock, but does not include the
impact of potential common shares that would be anti-dilutive. These dilutive securities were anti-dilutive in 2001 and 2000.

Concentration
of Credit Risk

The
Company maintains cash balances at various financial institutions. Deposits not to exceed $100,000 for each institution are insured by the Federal Deposit Insurance Corporation.
At March 31,

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2001, the Company had uninsured cash and cash equivalents and restricted cash in the amount of $10,326,205.

Reclassifications

Certain
prior year amounts have been reclassified to conform to the current year presentation.

Notes to Unaudited Consolidated Financial Statements:

Note 1Description of Property

Youbet.com's executive and operating offices occupy approximately 30,000 square feet and are located at 5901 De Soto Avenue, Woodland Hills, California under a
lease that expires March 15, 2010. The base term of the lease is ten years with an option to extend an additional five years. Base rent payments are $60,078 per month with annual increases as
specified in the lease agreement. In conjunction with this lease agreement, the Company originally obtained a one-year $1,029,000 letter of credit, which is secured by cash. The Company is
obligated for the next ten years to obtain a letter of credit equal to the original amount of $1,029,000 less $107,867 per year for every year elapsed during the first five years and less $97,867 per
year for every year elapsed thereafter. As of March 31, 2001, Youbet.com had obtained a letter of credit in the amount of $920,805 which is classified as restricted cash in the Company's
accompanying unaudited financial statements.

Note 2Capitalized Software

As of March 31, 2001, the Company incurred approximately $2,543,000 in costs relating to the development of a new sport's platform. Management reviews
unamortized capitalized software on a quarterly basis and writes-off amounts capitalized when management believes the related assets have been impaired. Amortization is recognized when the
product is available for general release to the public.

Note 3Stockholders' Equity



Note 4Legal Proceedings

On June 4, 1999, a complaint was filed against the Company in the Court of Chancery of the State of Delaware in and for New Castle County entitled
George Von Opel v. Youbet.com Inc. (C.A. No. 17200 NC). In the complaint Mr. Von Opel alleges that the Company breached its contractual obligation pursuant to a Private Placement
Memorandum by failing to register the shares of common stock underlying 400,000 warrants issued by the Company to an affiliate of Mr. Von Opel. The complaint seeks specific performance of the
alleged obligation to register such shares and damages for alleged breach of contract in the amount of $8.7 million. The Company has answered the complaint and intends to defend itself
vigorously in the action. On August 19, 1999, Mr. Von Opel moved for

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summary judgment on the issue of liability, which on June 2, 2000, the court denied. The Company is proceeding with discovery and has noticed the deposition of Mr. Von Opel. As the
litigation is at an initial stage, an outcome cannot be predicted at this time.

From
time to time the Company receives correspondence from various state governmental agencies inquiring into the legality of the Company's activities. The Company recently received
such an inquiry from the Attorney General of the State of Michigan. The Company believes that its activities are in full compliance with applicable law.

Note 5Notes Payable

During the three months ended March 31, 2000, Youbet.com repurchased $4,000,000 of its 11% Senior Convertible Discount Notes ("Notes") for $2,977,600
which represented a discount to the accreted value of the notes at the date of purchase, therefore, a gain was realized on the difference between the amount paid and the accreted value of the notes on
the date of repurchase. The amount of the gain, net of the proportionate write-off of unamortized financing costs of $124,000, was approximately $430,000.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward Looking Statements

The following discussion of the financial condition and results of operations of Youbet.com, Inc. should be read in conjunction with the financial
statements and the related notes included elsewhere in this 10-Q. This discussion contains forward-looking statements that are based on the current beliefs and expectations of the
Company's management, as well as assumptions made by, and information currently available to, the Company's management. Such statements include those regarding general economic and
e-gaming industry trends. Because such statements involve risks and uncertainties, actual actions and strategies and the timing and expected results thereof may differ materially from
those expressed or implied by such forward-looking statements, and the Company's future results, performance or achievements could differ materially from those expressed in, or implied by, any such
forward-looking statements. Future events and actual results could differ materially from those set forth in or underlying the forward-looking statements.

Overview

Youbet.com
intends to establish itself as the leading global brand for legal online live event sports entertainment and wagering and other forms of legal online gaming. The Company
has initially focused its efforts primarily on the United States horse racing industry. 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 communication 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 communication allows wagers to be placed and acknowledged in seconds.

Youbet.com's
initial product, the You Bet Network, is a PC-based system, which utilizes the infrastructure 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. The Company also delivers a live simulcast of most of
these races directly to the subscriber's computer. In addition, subscribers can use the You Bet Network to transmit information and thereby facilitate wagers, using the system's
icon-driven menus to fill out an electronic betting ticket with a brief series of mouse-clicks. The information is then transmitted electronically to a licensed account wagering entity,
currently

8

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Ladbroke USA ("Ladbroke"). Ladbroke accepts and processes the wager from its hub in Pennsylvania. After processing the wager, Ladbroke sends an electronic confirmation to the bettor through the You
Bet Network. The round-trip time from information submission to acknowledgment is usually less than three seconds.

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.

Consolidated Results of OperationsThree Months Ended March 31, 2001 Compared To Three Months Ended March 31, 2000

Revenues

Revenues for the three months ended March 31, 2001 were $1,648,000, a decrease of $57,000 from $1,705,000 for the three months ended March 31,
2000. The decrease in revenues is due to Ladbroke not accepting wagers in 2001 from New Jersey customers at the request of the Attorney General of New Jersey. Revenue consists of the
$5.95 monthly subscription fee, the commission on the gross amount of each wager placed by its subscribers, and sales of handicapping information.

Operating Expenses

NETWORK OPERATIONSNetwork operations costs consist primarily of salaries, data center management and telecommunications including costs to support
the closed-loop private network. For the three months ended March 31, 2001, network operations costs decreased by $23,000 or 3% to $714,000 in 2001 from $737,000 in 2000. The
decrease was mainly due to decreases in non-cash compensation which was partially offset by increases in telecommunication costs.

RESEARCH
AND DEVELOPMENTResearch and development costs consist primarily of salaries. For the three months ended March 31, 2001, research and development costs
increased by $94,000 or 15% to $714,000 in 2001 from $620,000 in 2000. This increase resulted primarily from the hiring of developers and consultants and the continued development of the You Bet
Network. The Company will continue to invest in the development of the You Bet Network and other projects, which management believes are of value and critical to achieving its strategic objectives.

SALES
AND MARKETINGSales and marketing expenses consist primarily of marketing program expense and salaries. For the three months ended March 31, 2001, sales and
marketing expenses decreased by $570,000 or 35% to $1,064,000 in 2001 from $1,634,000 in 2000 mainly due to a reduction in expenditures on marketing programs.

GENERAL
AND ADMINISTRATIVEGeneral and administrative expenses consist principally of salaries, facilities expenses, legal, accounting, and investor relations. For the
three months ended March 31, 2001, general and administrative expenses decreased by $378,000 or 24% to $1,186,000 in 2001 from $1,564,000 in 2000. The decrease resulted primarily from decreases
in professional fees that were partially offset by increases in rents.

DEPRECIATION
AND AMORTIZATIONFor the three months ended March 31, 2001, depreciation and amortization increased by $284,000 or 136% to $493,000 in 2001 from
$209,000 in 2000. The increase was due to additional assets being placed in service relating to the You Bet Network and to the amortization of leasehold improvements relating to the Woodland Hills
facility.

9

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Other Income (Expense)

INTEREST INCOMEFor the three months ended March 31, 2001, interest income decreased by $609,000 or 78% to $176,000 in 2001 from $785,000 in
2000. The decrease is mainly due to lower cash balances being utilized for the period in 2001 as compared to 2000.

INTEREST
EXPENSEFor the three months ended March 31, 2001, interest expense decreased by $1,013,000 or 99% to $4,000 in 2001 from $1,017,000 in 2000. The decrease
in interest expense is due to the Company's repurchase of its notes during 2000.

AMORTIZATION
OF DEFERRED FINANCING COSTSFor the three months ended March 31, 2001, amortization of deferred financing costs decreased to $0 from $80,000 in 2000.
The decrease is due to the Company's write-off of deferred financing costs relating to the repurchase of its notes during 2000.

Extraordinary Item

NET GAIN ON NOTE REPURCHASEFor the three months ended March 31, 2001, net gain on note repurchase decreased to $0 in 2001 from $430,000 in
2000. The net gain in 2000 resulted from the repurchase of $4,000,0000 of the Company's notes for $2,978,000, which represented a discount to the accreted value of these notes at the date of
repurchase, therefore, a gain was realized on the difference between the amount paid and the accreted value of these notes at the date of repurchase. The amount of the gain, net of the proportionate
write-off of unamortized financing costs of approximately $124,000, was approximately $430,000.

Liquidity and Capital Resources

The Company has financed its operations primarily through the sale of its securities and convertible debt as Youbet.com has generated negative cash flow from
operations since inception. At March 31, 2001, Youbet.com had $10,720,124 in cash and cash equivalents including $920,805 in restricted cash. Youbet.com's principal commitments consist
primarily of approximately $3,100,000 in accounts payable and accruals.

Net
cash used in operating activities was $1,935,000 and $4,636,000 for the three months ended March 31, 2001 and 2000, respectively. The decrease in 2001 from 2000 in cash
used in operating activities of $2,701,000 was mainly due to 1) a decrease in the loss before extraordinary item of $1,064,000, 2) payment of settlement costs of $1,308,000 in connection
with the civil resolution with the Los Angeles County District Attorney and the Los Angeles Police Department in 2000, 3) a decrease in prepaids, other assets and receivables totaling $854,000,
4) an increase in other accrued expenses of $142,000, 5) a decrease in deferred revenues of $378,000 and 6) an increase in depreciation and amortization of $284,000. These changes
were partially offset by 1) an increase in accrued interest on notes by $1,016,000, 2) an increase in non-cash compensation of $119,000, 3) an increase in accrued
compensation of $115,000, and 4) an increase in amortization of deferred financing costs of $80,000.

Net
cash used in investing activities was $351,000 and $1,943,000 for the three months ended March 31, 2001 and 2000, respectively. The decrease in 2001 from 2000 in cash used
in investing activities of $1,592,000 was mainly due to 1) restricted cash used in 2000 of $924,000, 2) restricted cash released in 2001 of $108,000, and 3) the Company's purchase
of $459,000 in property and equipment in 2001, a decrease of $561,000 from 2000.

Net
cash used in financing activities was $9,000 and $2,851,000 for the three months ended March 31, 2001 and 2000, respectively. The decrease in 2001 from 2000 in cash used in
financing activities of $2,842,000 was due to the Company's repurchase of its 11% Convertible Senior Discount Notes in 2000 for $2,978,000, which was partially offset by a decrease of $139,000 in
proceeds from exercise of stock options and warrants.

10

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At March 31, 2001, the Company had net working capital of $7,572,515 compared to net working capital of $9,743,000 at December 31, 2000. The Company does not currently
have any material commitments for capital expenditures. However, Youbet.com anticipates that it will incur capital expenditures and lease commitments consistent with Youbet.com's anticipated changes
in operations and infrastructure, including various capital expenditures associated with the expansion of operations into foreign markets. The Company anticipates that, for the foreseeable future, its
operating expenses will be a material use of cash resources. The Company believes, with its cost reduction program, that its existing cash will be sufficient to meet its anticipated cash needs for
working capital and capital expenditures at least for the next twelve months.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The majority of the Company's cash equivalents are in bank accounts and money markets, and the Company does not believe it has significant market risk exposure
with regard to its investments.

Part II. Other Information

Item 1. Legal Proceedings

On June 4, 1999, a complaint was filed against Youbet.com in the Court of Chancery of the State of Delaware in and for New Castle County entitled George
Von Opel v. Youbet.com Inc. (C.A. No. 17200 NC). In the complaint Mr. Von Opel alleges that Youbet.com breached its obligation to register the shares of common stock underlying
400,000 warrants issued by Youbet.com to an affiliate of Mr. Von Opel. The complaint seeks specific performance of the alleged obligation to register such shares and damages for alleged breach
of contract in the amount of $8.7 million. The Company has answered the complaint and intends to defend itself vigorously in the action. Mr. Von Opel moved for summary judgment on the
issue of liability, which on June 2, 2000, the court denied. The Company is proceeding with discovery. As the litigation is at an initial stage, an outcome cannot be predicted at this time.

From
time to time the Company receives correspondence from various state governmental agencies inquiring into the legality of the Company's activities. The Company recently received
such an inquiry from the Attorney General of the State of Michigan. The Company believes that its activities are in full compliance with applicable law.

Item 2. Changes in Securities

Issuance
of Stock Options



Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of Youbet.com's stockholders during the quarter ended March 31, 2001.

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Item 5. Other Information

During February 2001, Youbet.com received notification from The Nasdaq Stock Market that it is not in compliance with the National Market's listing
maintenance standard regarding minimum bid prices. This standard requires that the Company's common stock maintain a minimum bid price of at least $1.00 per share. In order to comply with this
standard, the Company's common stock must have a minimum bid price of at least $1.00 for 10 consecutive trading days prior to May 21, 2001. If the Company is unable to demonstrate compliance
with this standard on or before May 21, 2001 the Nasdaq Stock Market will seek to delist the company's common stock from the Nasdaq National Market. At
that time the company may appeal the delisting to the Listing Qualifications Panel of The Nasdaq Stock Market.

Item 6. Exhibits and Reports On Form 8-K

| | (A)                                                                           |  | Exhibits           
| | ----------------------------------------------------------------------------- |  | -------------------
| | The following exhibit are submitted herewith:                                
| | None                                                                         
| | (B)                                                                           |  | Reports On Form 8-K
| | There were no reports filed on Form 8-K for the quarter ended March 31, 2001.

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SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.

|                   |  | YOUBET.COM, INC.
|------------------ |  | ----------------
|Date: May 10, 2001 |  | By:             
|Date: May 10, 2001 |  | By:             

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