<PAGE>

                                  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 MARCH 31, 2004


                         COMMISSION FILE NUMBER: 0-26015

                                   -----------

                                YOUBET.COM, INC.


             DELAWARE                                    95-4627253


              5901 DE SOTO AVENUE, WOODLAND HILLS, CALIFORNIA 91367

                                 (818) 668-2100





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 [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

As of May 3, 2004, the issuer had 29,769,703 shares of common stock, par value
$0.001 per share, issued and outstanding. The aggregate market value of the
issuer's common stock held by non-affiliates (assuming that the Registrant's
only affiliates are its officers, directors and 10% or greater stockholders) of
the issuer as of May 3, 2004 was approximately $113,334,881 based upon the
closing market price of $4.75 per common share on that date as reported on the
Nasdaq SmallCap Market.

<PAGE>

                                YOUBET.COM, INC.
                               INDEX TO FORM 10-Q
                              FOR THE QUARTER ENDED
                                 MARCH 31, 2004



                                                                            PAGE

PART I.      FINANCIAL INFORMATION

   Item 1.   Financial Statements
                Condensed Consolidated Balance Sheet as of March 31, 2004
                   (unaudited) and December 31, 2003                          3
                Condensed Consolidated Statements of Operations for the
                   three months ended March 31, 2004 and March 31,
                   2003 (unaudited)                                           4
                Condensed Consolidated Statements of Cash Flows for the
                   three months ended March 31, 2004 and March 31,
                   2003 (unaudited)                                           5
                Notes to Unaudited Condensed Consolidated Financial
                   Statements                                                 6
   Item 2.   Management's Discussion and Analysis of Financial Condition
             and Results of Operations                                       15
   Item 3.   Quantitative and Qualitative Disclosures About Market Risk.     20
   Item 4.   Controls and Procedures                                         20


PART II.     OTHER INFORMATION

   Item 1.   Legal Proceedings                                               20
   Item 2.   Changes in Securities, Use of Proceeds, and Issuer Purchases
             of Equity Securities                                            21
   Item 3.   Defaults Upon Senior Securities                                 21
   Item 4.   Submission of Matters to a Vote of Security Holders             21
   Item 5.   Other Information                                               21
   Item 6.   Exhibits and Reports on Form 8-K                                21


                                PRELIMINARY NOTE

This quarterly report on Form 10-Q is for the three-month period ended March 31,
2004. This quarterly report modifies and supersedes documents filed prior to
this quarterly report. The SEC allows Youbet to "incorporate by reference"
information that Youbet files with it, which means that Youbet can disclose
important information to you by referring you directly to those documents.
Information incorporated by reference is considered to be part of this quarterly
report. In addition, information that Youbet files with the SEC in the future
will automatically update and supersede information contained in this quarterly
report.

                                       2
<PAGE>

<TABLE>

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

                                               YOUBET.COM, INC.
                                     CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>

                                                                               MARCH 31,         DECEMBER 31,
                                                                                 2004               2003
                                                                            --------------      --------------
                                                                             (UNAUDITED)          (AUDITED)
<S>                                                                         <C>                 <C>
ASSETS:
   Current Assets:
       Cash and Cash Equivalents                                            $   8,359,904       $   8,273,926
       Restricted Cash, current (Note 2)                                        3,422,470           3,518,016
       Receivables (Note 3)                                                       170,925             140,657
       Interest and Other Receivables (Note 3)                                  1,595,010           1,270,759
       Prepaid Expenses                                                           802,426             884,409
                                                                            --------------      --------------
   Total Current Assets                                                     $  14,350,735       $  14,087,767
   Property and Equipment, net                                                  2,541,093           2,731,922
   Licensing Rights, net  (Note 4)                                                503,602           1,407,447
   Deferred Lease Costs                                                            28,283              29,331
   Deposits (Note 6)                                                               95,650             595,650
                                                                            --------------      --------------
       TOTAL ASSETS                                                         $  17,519,363       $  18,852,117
                                                                            ==============      ==============

LIABILITIES AND STOCKHOLDER'S EQUITY
   Current Liabilities:
       Accounts Payable - Trade                                             $     555,957       $     439,559
       Fees Payable to Related Party  (Note 4)                                  2,237,324           3,426,076
       Accounts Payable - Track Related  (Note 5)                               2,365,552           2,539,534
       Accrued Expenses                                                           849,434           1,756,918
       Customer Deposits                                                        2,500,771           2,356,004
       Accrued Compensation and Related Items                                     464,922             524,197
       Deferred Revenues                                                           86,184              79,519
                                                                            --------------      --------------
       TOTAL CURRENT LIABILITIES                                            $   9,060,144       $  11,121,807
                                                                            ==============      ==============

   Stockholders' Equity:
       Preferred Stock, $0.001 par value, authorized                                   --                  --
          1,000,000 shares, none outstanding
       Common Stock, $0.001 par value, authorized 100,000,000 shares
          29,777,946 and 28,377,443 shares outstanding as of March 31,
          2004 and December 31, 2003, respectively                          $      29,778       $      28,377
       Treasury Stock (623,683 shares at cost)                                 (1,828,709)         (1,828,709)
       Additional Paid In Capital                                             102,089,635         101,377,238
       Accumulated Deficit                                                    (91,831,485)        (91,846,596)
                                                                            --------------      --------------
       TOTAL STOCKHOLDERS' EQUITY                                               8,459,219           7,730,310
                                                                            --------------      --------------
       TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                           $  17,519,363       $  18,852,117
                                                                            ==============      ==============
</TABLE>

                                SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

                                                      3
<PAGE>

                                YOUBET.COM, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                                      QUARTER ENDED MARCH 31,
                                                 -------------------------------
                                                     2004              2003
                                                 -------------     -------------
REVENUES  (NOTES 4 AND 5)
   Commissions                                   $ 14,260,036      $ 10,845,220
   Subscription and Transaction Fees                  182,321            84,874
   Race Information                                    84,747            76,313
                                                 -------------     -------------
TOTAL REVENUES                                   $ 14,527,104      $ 11,006,407
OPERATING EXPENSES:
   Track Fees                                       7,133,091         5,883,606
   Licensing Fees - Related Party  (Note 4)         1,973,036         1,323,835
   Network Operations                                 521,609           378,653
   Research and Development                           415,841           393,286
   Sales and Marketing                                669,092           381,434
   General and Administrative                       2,719,198         2,180,593
   Depreciation and Amortization                    1,125,432         1,384,260
                                                 -------------     -------------
TOTAL OPERATING EXPENSES                         $ 14,557,299      $ 11,925,667
                                                 -------------     -------------
LOSS FROM OPERATIONS                             $    (30,195)     $   (919,260)
OTHER INCOME (EXPENSE):
   Interest Income                                     33,990             8,786
   Interest Expense                                    (1,434)         (395,150)
   Other Income                                        12,750            57,945
                                                 -------------     -------------
TOTAL OTHER INCOME (EXPENSE)                     $     45,306      $   (328,419)
                                                 -------------     -------------
NET INCOME (LOSS)                                $     15,111      $ (1,247,679)
                                                 =============     =============

EARNINGS (LOSS) PER SHARE - BASIC                $       0.00      $      (0.05)
                                                 -------------     -------------

EARNINGS (LOSS) PER SHARE - DILUTED              $       0.00      $      (0.05)
                                                 -------------     -------------



                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

                                       4
<PAGE>
<TABLE>

                                                    YOUBET.COM, INC.
                                     CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>

                                                                                          QUARTER ENDED MARCH 31,
                                                                                       ------------------------------
                                                                                           2004              2003
                                                                                       ------------      ------------
<S>                                                                                    <C>               <C>
INCREASE IN CASH AND CASH EQUIVALENTS
    CASH FLOWS FROM OPERATING ACTIVITIES:
        Net Income (Loss)                                                              $    15,111       $(1,247,679)
    ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH USED IN OPERATING ACTIVITIES:
        Depreciation and Amortization                                                    1,125,432         1,384,260
        Non-Cash Interest Expense                                                               --           358,638
        Stock-Based Compensation                                                            (7,006)           51,009
        Loss on Sale of Property and Equipment                                               7,891                --
    CHANGE IN OPERATING ASSETS AND LIABILITIES:
        Restricted Cash                                                                     (2,182)         (344,837)
        Receivables                                                                        (30,268)          210,458
        Interest and Other Receivables                                                    (324,251)            2,785
        Prepaid Expenses                                                                    81,983            50,544
        Deposits                                                                           501,047             1,048
        Account Payable - Trade                                                            116,398            (4,962)
        Fees Payable - Related Parties                                                  (1,188,751)         (934,131)
        Accounts Payable - Track Related                                                  (173,982)       (1,443,230)
        Accrued Expenses                                                                  (491,601)          865,597
        Customer Deposits and Other                                                        144,767           478,289
        Accrued Compensation and Related Items                                             (59,275)         (295,364)
        Deferred Revenues                                                                    6,665            37,761
                                                                                       ------------      ------------
           NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                            (278,023)         (829,814)
                                                                                       ------------      ------------
    CASH FLOWS FROM INVESTING ACTIVITIES:
        Restricted Cash                                                                     97,728            63,041
        Purchases of Property and Equipment                                                (38,649)         (160,106)
                                                                                       ------------      ------------
           NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES                              59,079           (97,065)
                                                                                       ------------      ------------
    CASH FLOWS FROM FINANCING ACTIVITIES:
        Proceeds from Exercise of Stock Options and Warrants                               304,922           253,164
        Proceeds from Notes Payable                                                             --         2,000,000
        Payments of Notes Payable                                                               --          (750,000)
                                                                                       ------------      ------------
           NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                             304,922         1,503,164
                                                                                       ------------      ------------
    NET INCREASE IN CASH AND CASH EQUIVALENTS                                               85,978           576,285
    CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD                             8,273,926         4,559,897
                                                                                       ------------      ------------
    CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD                                 $ 8,359,904       $ 5,136,182
                                                                                       ============      ============

    SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
        Cash Paid for Interest                                                         $     2,121       $    80,137
                                                                                       ============      ============

    NON-CASH INVESTING AND FINANCING ACTIVITIES:
        Issuance of Warrants for $2 million note                                       $        --       $   518,223
        Stock Issuance for Surrender of TVG's Additional Warrant (Note 9)                3,640,000                --
        Stock Issuance for TVG Legal Expense Reimbursement (Note 9)                        415,882                --


                                     SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
</TABLE>

                                                           5
<PAGE>

YOUBET.COM, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2004

NOTE 1:       ORGANIZATION AND BASIS OF PRESENTATION

     BUSINESS

         Youbet.com, Inc. ("Youbet") has established itself as a leading global
         brand name for online, live event sports entertainment and wagering.
         Wagering on live events, such as horse racing, car racing, soccer,
         football, and other sporting events is a large global industry which
         adapts well to the Internet. Youbet has focused on the United States
         horse race wagering market through its main product, Youbet
         Express(SM), which features online wagering, simulcast, and in-depth,
         up-to-the-minute information on horse racing. Youbet is working to
         expand the Youbet brand, its products, and its services throughout the
         United States and in select international markets. Youbet currently
         provides its customers with the ability to receive interactive,
         real-time audio/video broadcasts directly on their computers, access a
         comprehensive database of handicapping information and, in most states,
         wager on a wide selection of U.S. and international horse races.

         On August 2, 2001, Youbet received a multi-jurisdictional license from
         the State of Oregon Racing Commission to accept and place online and
         telephone horse racing pari-mutuel wagers. In each of August 2002 and
         2003, Youbet obtained a one year renewal of its Oregon license.

         On February 21, 2002, Youbet received a one-year out-of-state,
         multi-jurisdictional wagering hub Advance Deposit Wagering ("ADW")
         license from the State of California Horse Racing Board ("CHRB"). On
         February 22, 2003, Youbet received a two-year renewal of this license.
         On June 6, 2002, Youbet received a two-year in-state,
         multi-jurisdictional wagering hub ADW license from the State of
         California. On April 22, 2004, Youbet received a renewal of its
         in-state, multi-jurisdictional wagering hub ADW license through the end
         of 2004. All wagers are processed through Youbet Oregon, Inc., a
         wholly-owned subsidiary of Youbet.

     BASIS OF PRESENTATION

         In the opinion of management, the accompanying unaudited condensed
         financial statements for the three months ended March 31, 2004 and 2003
         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, 2004, the results of its operations for
         the three months ended March 31, 2004 and March 31, 2003, and its cash
         flows for the three months ended March 31, 2004 and 2003 in conformity
         with accounting principles generally accepted in the United States
         ("GAAP"). These financial statements have been prepared consistently
         with the accounting policies described in the Company's Annual Report
         on Form 10-KSB for the year ended December 31, 2003, as filed with the
         Securities and Exchange Commission on March 10, 2004, 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, 2004 are not
         necessarily indicative of the consolidated results of operations to be
         expected for the full fiscal year ending December 31, 2004. Certain
         information and footnote disclosures normally included in the financial
         statements presented in accordance with GAAP have been condensed or
         omitted.

                                       6
<PAGE>

         Youbet.com, Inc., a Delaware corporation, and its wholly owned
         subsidiary, Youbet Oregon, Inc., are collectively referred to herein as
         "Youbet.com", "Youbet", or the "Company". All intercompany accounts and
         transactions have been eliminated in consolidation.

     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 disclosure of contingent
         assets and liabilities as of the date of the financial statements and
         the reported amounts of revenues and expenses during the reporting
         period. Actual results could materially differ from these estimates.

     BASIC AND DILUTED EARNINGS PER SHARE

         Basic earnings per share is calculated by dividing net income by the
         weighted average number of common shares outstanding during the period.
         Diluted earnings per share is calculated by dividing net income 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 which would be
         anti-dilutive. As of March 31, 2004, total warrants outstanding were
         1,369,005 with exercise prices between $0.50 to $19.50 and total stock
         options outstanding were 6,756,594 with exercise prices between $0.50
         and $10.50. As of March 31, 2004 and 2003, because the average market
         price for Youbet's common shares was greater than the weighted average
         exercise prices for both the warrants and stock options, there were no
         dilutive securities excluded from the computation of diluted EPS.

     CONCENTRATION OF CREDIT RISK

         The Company maintains cash balances at various financial institutions.
         Deposits are insured up to $100,000 per account by the Federal Deposit
         Insurance Corporation. At March 31, 2004 and December 31, 2003, the
         Company had uninsured cash and cash equivalents and restricted cash of
         $11,814,121 and $10,320,727, respectively.

     RECLASSIFICATIONS

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

NOTE 2:        RESTRICTED CASH, CURRENT

     PLAYERS TRUST(SM)

         As of March 31, 2004, the balance of customer accounts maintained in
         Players Trust(SM) was $2,636,767, all of which is recorded as
         restricted cash, current. This amount was $124,102 in excess of
         customer deposits. As of December 31, 2003, the balance of customer
         accounts maintained in the Players Trust(SM) was $2,634,585, which was
         $116,427 in excess of customer deposits.

                                       7
<PAGE>

     OBLIGATIONS UNDER FACILITY LEASES

         As required under a lease agreement that expires March 15, 2010 for
         Youbet's executive and operating offices, Youbet posted a letter of
         credit supported by a restricted cash account in the amount of $707,804
         in September 2003. As of March 31, 2004 and December 31, 2003, the cash
         required to support the letter of credit was $710,011 and $707,804,
         respectively, and is classified as restricted cash, current.

     CREDIT CARD RESERVES

         The Company uses outside vendors to process its credit card and check
         transactions. These vendors require the Company to keep in reserve, for
         up to six months, a certain percentage of the total amounts processed
         as a reserve against any future potential losses. As of March 31, 2004
         and December 31, 2003, these reserves amounted to $75,692 and $175,627,
         respectively, all of which is recorded as restricted cash, current.

NOTE 3:       RECEIVABLES

     As of March 31, 2004, Receivables of $170,925 primarily consisted of $8,457
     due from Magna Entertainment Corporation ("Magna") for fees earned on
     handle generated through Magna's Call-A-Bet system, and $161,383 due from
     various tracks for settlement of wagers processed through the Company's
     Oregon hub.

     As of March 31, 2004, Interest and Other Receivables of $1,595,010
     primarily consisted of $1,149,368 due from Youbet's Directors and Officer's
     liability insurance carrier for reimbursement of litigation and arbitration
     expenses, and $345,642 due from Magna for underreported handle amounts to
     Youbet (See Note 5).

     As of December 31, 2003, Receivables of $140,657 primarily consisted of
     $29,202 due from Magna for fees earned on wagers processed through Magna's
     Call-A-Bet system (exclusive of the audit receivable described in Note 5)
     and $109,996 due from various tracks for settlement of wagers processed
     through Youbet's Oregon hub.

     As of December 31, 2003, Interest and Other Receivables of $1,270,759
     primarily consisted of $851,653 due from Youbet's Directors and Officer's
     liability insurance carrier for reimbursement of litigation and arbitration
     expenses, and $138,400 due from Magna for underreported handle amounts.

NOTE 4:       LICENSING RIGHTS - RELATED PARTY

     In May 2001, Youbet entered into a track content and patent license
     agreement (the "License Agreement") and a warrant issuance agreement with
     ODS Technologies, L.P., a subsidiary of Gemstar-TV Guide International
     ("Gemstar"), doing business as Television Games Network ("TVG"). These
     agreements relate to the grant by TVG to Youbet of a non-exclusive license
     to use telephones and certain simulcast audio, video, and data content for
     the purpose of streaming such content online and the agreement of
     racetracks to accept wagers based on such content, and to use TVG's
     patented systems for making pari-mutuel wagers on horse races online.

                                       8
<PAGE>

     The License Agreement remains in effect until May 2011 (subject to certain
     extensions), but may be terminated prior to that time should Youbet cease
     to operate its Oregon account wagering hub or another account wagering
     facility approved by TVG or in the event Youbet brings any legal action
     against TVG or any of TVG's affiliate. Either TVG or Youbet may terminate
     the License Agreement in the event that the other party materially breaches
     the License Agreement without cure upon notice.

     In consideration of the rights granted to Youbet under the License
     Agreement, Youbet has agreed to pay to TVG fees based on the handle
     generated by Youbet from wagering activity and issued to TVG warrants to
     purchase Youbet common stock, as described below.

     Youbet pays three distinct types of fees to TVG. First, Youbet pays to TVG
     fees based on wagers made by Youbet customers. These fees are calculated as
     a percentage of total handle wagered by Youbet customers and vary based on
     where such customer wagers are processed. Second, Youbet pays TVG certain
     milestone payments. These payments are calculated based on transaction or
     subscription fees charged to by Youbet to its customers. Third, Youbet pays
     a portion of TVG's host track fees and racing association fees with respect
     to account wagers placed by Youbet customers on races conducted at TVG
     exclusive tracks or within a certain distance of TVG exclusive tracks.

     Youbet issued to TVG an initial warrant (the "Initial TVG Warrant"), on May
     18, 2001, and recorded the fair value of the Initial TVG Warrant
     ($2,910,000 using the Black-Scholes method) as a deferred asset captioned
     "Licensing Rights". Accumulated amortization as of March 31, 2004 and
     December 31, 2003 was $2,773,924 and $2,531,413, respectively. The Initial
     TVG Warrant was exercised during the quarter ended June 30, 2002, resulting
     in cash proceeds to Youbet of $3,885 and issuance of 3,884,650 shares of
     Youbet common stock to TVG.

     Youbet also issued to TVG an additional warrant (the "Additional Warrant"),
     on September 20, 2001, and recorded the fair value of the Additional
     Warrant ($7,054,000 using the Black-Scholes method) as a deferred asset
     captioned "Licensing Rights". Accumulated amortization as of March 31, 2004
     and December 31, 2003 was $6,686,832 and $6,025,497, respectively.

     Pursuant to rights granted under the settlement agreement dated February,
     23, 2004 (See Note 9), on March 31, 2004, TVG notified Youbet that it was
     surrendering the Additional Warrant. In accordance with the settlement
     agreement, Youbet issued one million shares of its common stock valued at
     $3.64 per share, the fair value on the date of issuance, in consideration
     for the tendered unexercised warrant. Finally, the settlement called for
     Youbet to reimburse TVG for the legal expenses it incurred during the
     dispute up to $725,000. Youbet issued 124,144 shares of common stock to TVG
     valued at $3.35 per share, the fair value on the date of issuance, for a
     total value of $415,882 in February 2004 towards satisfaction of such legal
     expense reimbursement. Youbet is obligated to satisfy the remainder of this
     obligation on July 2, 2004.

     The estimated remaining aggregate amortization expense related to Licensing
     Rights through May 2004 is $503,602.

     We periodically review the carrying value of these rights based upon
     estimates of future cash flows. While management believes its estimates of
     future cash flows are reasonable, different assumptions regarding such cash
     flows could materially affect this valuation.

                                       9
<PAGE>

NOTE 5:       AGREEMENT WITH MAGNA AND INDEPENDENT TRACKS

     In addition to revenue generated from its relationship with TVG as
     discussed in Note 4, Youbet generates revenue under agreements with Magna,
     one of the largest owner/operators of premier horse racetracks in the
     United States and various other independent tracks.

     In June 1997, Youbet entered into a Telecommunication Facilitation
     Agreement with Magna. Under the Telecommunication Facilitation Agreement
     Youbet provides Magna with an interactive graphics interface into Youbet
     Express(SM) through which Youbet customers who have established accounts
     with Magna's Call-A-Bet System may communicate with Magna to transmit
     wagering information. Effective December 26, 2003, the arrangement with
     Magna was modified to restrict wagering through Youbet only to Magna's
     California tracks, Santa Anita, Bay Meadows, and Golden Gate Fields.

     Pursuant to the terms of the Telecommunication Facilitation Agreement,
     Youbet audited Magna's records for proper accounting of commissions owed to
     Youbet and determined that Magna underreported handle amounts and, as a
     result, has underpaid Youbet in excess of $692,000. Youbet has recorded a
     receivable for this amount and has reserved a major portion of the
     receivable. At March 31, 2004 and December 31, 2003, approximately $345,000
     and $138,000 of this receivable was recorded as cumulative revenue,
     respectively (See Note 3).

     Pari-mutuel racetrack operators typically retain a portion of all wagers as
     their commission prior to distributing payoffs to the winners. In
     accordance with various agreements with Magna and independent racetracks,
     Youbet receives a pre-arranged fee from each racetrack for wagers delivered
     to their respective pari-mutuel pools. Through the introduction of the
     Total Access product, Youbet currently has independent simulcast agreements
     with over 90 tracks that are paid a host fee for their signal. These host
     fees are based on handle generated by Youbet members to the respective
     tracks.

     For the three months ended March 31, 2004 and 2003, $201,894 and $484,259,
     respectively, of the Company's revenues were generated through the Magna
     Telecommunication Facilitation Agreement.

NOTE 6:       DEPOSITS

     As of March 31, 2004, deposits primarily included (1) $60,078 security
     deposit for Youbet's Woodland Hills office, (2) $10,000 charge back deposit
     for credit card processing, and (3) $15,835 deposit for satellite
     equipment.

     As of December 31, 2003, deposits primarily included (1) $500,000 deposit
     for licensing with the California Horse Racing Board, (2) $60,078 security
     deposit for Youbet's Woodland Hills office, (3) $10,000 charge back deposit
     for credit card processing, and (4) $15,835 deposit for satellite
     equipment.

                                       10
<PAGE>

NOTE 7: EARNINGS PER SHARE

The following table is a reconciliation of the weighted average shares used in
the computation of basic and diluted earnings per share for the periods
presented:

<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED MARCH 31,
                                            2004                                                  2003
                     --------------------------------------------------------------------------------------------------------
                                          WEIGHTED                                               WEIGHTED
                           NET             AVERAGE                             NET               AVERAGE
                         INCOME            SHARES                  EPS        (LOSS)              SHARES            EPS
                     --------------------------------------------------------------------------------------------------------
         <S>         <C>                  <C>               <C>         <C>                     <C>             <C>
         Earnings    $    15,111          28,549,772        $    0.00   $    (1,247,679)        23,519,239      $     (0.05)
         per share -
         basic
         Effect               --           4,286,671               --                --                 --                --
         of
         dilutive
         securities
         Earnings    $    15,111          32,836,443        $    0.00   $    (1,247,679)        23,519,239      $     (0.05)
         per share -
         diluted
</TABLE>

NOTE 8:       STOCKHOLDERS' EQUITY

     The Company has issued various stock options and warrants in non-capital
     raising transactions for services rendered and to be rendered, and as
     financing costs. The Company accounts for stock options and warrants
     granted to employees and non-employees in accordance with Statement of
     Financial Accounting Standards No. 123. The Company has calculated the fair
     value of such warrants and stock options according to the Black-Scholes
     pricing model.

     All securities described below were issued under an exemption to the
     registration requirements of the Securities Act of 1933, as amended,
     pursuant to Section 4(2) thereof and Regulation D.

     ISSUANCE OF WARRANTS

         Information with respect to common stock purchase warrants issued is
         summarized as follows:
<TABLE>
<CAPTION>
                                                                                         WEIGHTED AVERAGE
                                                                     WARRANTS             EXERCISE PRICE
                                                               ----------------------   --------------------
         <S>                                                             <C>                      <C>
         BALANCE, DECEMBER 31, 2003                                       17,861,874              $2.54
             Warrants Terminated                                         (16,432,969)              2.50
             Warrants Exercised                                              (59,900)              1.94
                                                               ----------------------
         WARRANTS EXERCISABLE AT MARCH 31, 2004                            1,369,005              $3.08
                                                               ======================
</TABLE>

                                       11
<PAGE>

         Additional information about outstanding warrants to purchase the
         Company's common stock at March 31, 2004 is as follows:
<TABLE>
<CAPTION>
                                                           WARRANTS OUTSTANDING AND EXERCISABLE
                                                 ---------------------------------------------------------
                                                                      WEIGHTED AVG.           WEIGHTED
                                                                        REMAINING             AVERAGE
                                                     NUMBER          CONTRACTUAL LIFE         EXERCISE
                                                   OF SHARES            (IN YEARS)             PRICE
                                                 ---------------  -----------------------  ---------------
         <S>                                          <C>            <C>                       <C>
         RANGE OF EXERCISE PRICES:
              $0.01 - 0.99                            1,077,399            1.31                $0.74
              $2.00 - 4.99                               64,606      Not determinable           2.87
              $5.00 - 19.50                             227,000            0.13                14.25
                                                 ---------------
                   TOTAL                              1,369,005                                $3.08
                                                 ===============
</TABLE>

     STOCK OPTION ARRANGEMENTS

         As of March 31, 2004, under the Company's 1998 Stock Option Plan, there
         were 8,269,030 stock options granted and outstanding out of a total
         approved pool of 8,500,000 options.

     ISSUANCE OF STOCK OPTIONS

         During the three months ended March 31, 2004, the Company granted
         various stock options, as follows:

               o     Stock options were granted to employees to purchase 506,500
                     shares of common stock at exercise prices ranging from
                     $2.49 to $3.64, the fair market value at the date of grant.
                     These options vest ratably over four years and are
                     exercisable for a period of five years.

         Information with respect to activity under the Company's Stock Option
         Plans is summarized below.
<TABLE>
<CAPTION>
                                                               STOCK OPTIONS         WEIGHTED AVERAGE
                                                                                      EXERCISE PRICE
                                                             --------------------  ----------------------
         <S>                                                           <C>                <C>
         BALANCE, DECEMBER 31, 2003                                    6,581,704          $1.15
             Options Granted                                             506,500           2.89
             Options Exercised                                          (216,459)          0.87
             Options Forfeited                                          (115,151)          0.55
                                                             --------------------
         BALANCE, MARCH 31, 2004                                       6,756,594           1.30
                                                             ====================
         OPTIONS EXERCISABLE (VESTED) AT MARCH 31, 2004                5,354,621          $1.18
                                                             ====================
</TABLE>

                                       12
<PAGE>

         Additional information about outstanding options to purchase the
         Company's common stock at March 31, 2004 is as follows:
<TABLE>
<CAPTION>
                                                OPTIONS OUTSTANDING                      OPTIONS EXERCISABLE
                                -------------------------------------------------- -------------------------------
                                                      WEIGHTED
                                                       AVERAGE         WEIGHTED                       WEIGHTED
                                                      REMAINING        AVERAGE                        AVERAGE
             RANGE OF EXERCISE        NUMBER OF      CONTRACTUAL      EXERCISE          NUMBER OF     EXERCISE
                  PRICES               SHARES      LIFE (IN YEARS)      PRICE            SHARES        PRICE
             -----------------------------------------------------------------------------------------------------
             <S>                       <C>              <C>            <C>               <C>           <C>
             $0.50 - $0.99             4,198,472        7.10           $ 0.65            3,516,305     $ 0.64

             $1.00 - $1.99               312,749        2.80             1.26              190,943       1.12

             $2.00 - $4.99             2,215,373        7.10             2.49            1,617,373       2.28

             $5.00 - $10.50               30,000        5.50             5.31               30,000       5.31
                                -----------------                                  ----------------
                    TOTAL              6,756,594        6.89           $ 1.30            5,354,621     $ 1.18
                                =================                                  ================
</TABLE>

         On August 1, 2001, the Board of Directors approved an option repricing
         plan whereby each current non-executive employees' previously issued
         stock options at a strike price above $1.00, were repriced to the then
         current market price of the common stock ($1.00). The Board of
         Directors believed that many of the stock options previously granted by
         the Company no longer provided the performance incentive intended by
         the option because the exercise price of many of the Company's
         outstanding stock options was well in excess of the market price of the
         common stock. Pursuant to the repricing plan, 378,774 options were
         repriced to $1.00. Each repriced option retained its expiration date
         and vesting schedule. As of March 31, 2004, 127,807 of the $1.00
         repriced options remain vested and unexercised and 32,316 of the $1.00
         repriced options remain unvested.

         As of March 31, 2004, the Company had one stock-based employee
         compensation plan, the 1998 Stock Option Plan. The Company accounts for
         stock options issued to officers and employees under the recognition
         and measurement principles of APB Opinion No. 25, "Accounting for Stock
         Issued to Employees", and related interpretations. No stock-based
         employee compensation cost is reflected in net income, as all options
         granted under the plan had an exercise price equal to the market value
         of the underlying common stock on the date of grant. Options granted to
         outside directors and consultants are accounted for in accordance with
         "Statement of Financial Accounting Standards No. 123".

         If compensation expense for stock options issued to officers and
         employees had been determined based upon the fair value at the grant
         date consistent with the methodology prescribed under Statement of
         Financial Accounting Standards No. 123, the net loss and basic loss per
         share would have been as shown below. The fair value of stock options
         granted under the Company's plan was estimated on the date of grant
         using the Black-Scholes option pricing model using the following
         weighted average assumptions:

<TABLE>
<CAPTION>
                                                   THREE MONTHS ENDED MARCH 31,

                                                   2004                    2003
                                          -----------------------   -------------------
             <S>                                  <C>                     <C>
             Expected Life in Years                4.86                    6.1
             Risk Free Interest Rate               4.0%                    5.0%
             Dividend Yield                          0%                      0%
             Expected Volatility                  73.5%                   73.3%
</TABLE>

                                       13
<PAGE>

         The weighted average fair value at the date of grant for stock options
         granted during the three months ended March 31, 2004 was $2.89. No
         warrants were granted during the three month period ended March 31,
         2004.
<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED MARCH 31,
                                                            2004              2003
                                                       ---------------   ---------------
              <S>                                       <C>              <C>
              AS REPORTED NET INCOME (LOSS)             $      15,111    $   (1,247,679)

                 Add:  Stock-based employee
                 compensation expense included in
                 reported income, net of related tax
                 effects                                      (10,168)           40,799

                 Less:  Total stock based employee
                 compensation expense determined under
                 fair value based methods for all
                 awards, net of related tax effects        (1,433,785)         (405,152)
                                                       ---------------   ---------------
              PRO FORMA NET LOSS                       $   (1,428,842)   $   (1,612,032)
                                                       ===============   ===============

              NET LOSS PER SHARE:
                 As Reported                           $        (0.00)   $        (0.05)
                 Pro Forma                             $        (0.05)   $        (0.07)
</TABLE>

NOTE 9:       LEGAL PROCEEDINGS

     On February 23, 2004, Youbet.com, Inc. and TVG agreed to settle their
     disputes. As part of this settlement, Youbet agreed not to seek stockholder
     approval of certain charter and bylaw provisions, and TVG dropped all
     pending litigation and the related arbitration. The companies also agreed
     to recognize the dilutive effects of several specific securities
     transactions on the Additional Warrant and gave TVG the right to agree to
     surrender the Additional Warrant at any time prior to April 1, 2004 in
     exchange for one million shares of Youbet common stock. Finally, the
     settlement called for Youbet to reimburse TVG for the legal expenses it
     incurred during the dispute up to $725,000. Pursuant to this settlement
     agreement, Youbet issued 124,144 shares of common stock valued at $3.35 per
     share, the fair value on the date of issuance, for a total value of
     $415,882 to TVG in February 2004 towards satisfaction of the $725,000 legal
     expense reimbursement. We are obligated under the settlement agreement to
     satisfy the remainder of this obligation on July 2, 2004.

     Pursuant to rights granted under the settlement agreement dated February,
     23, 2004, TVG agreed, on March 31, 2004, to surrender the Additional
     Warrant to Youbet in exchange for one million shares of Youbet common
     stock. Youbet issued one million shares of its common stock valued at $3.64
     per share, the fair value on the date of issuance, for a total value of
     $3,640,000 in consideration for surrendering the unexercised Additional
     Warrant.

     Youbet from time to time is involved in litigation arising in the ordinary
     course of its business. At March 31, 2004, Youbet was not a party to any
     material litigation outside the ordinary course of business.

                                       14
<PAGE>

ITEM 2.        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
               RESULTS OF OPERATIONS.

     FORWARD LOOKING STATEMENTS

         The following discussion and analysis of Youbet's financial condition
         and results of operations should be read in conjunction with Youbet's
         Consolidated Financial Statements and other financial information
         included herein. This Management's Discussion and Analysis of Financial
         Condition and Results of Operations and other sections of this report
         contain forward-looking statements that are based on the current
         beliefs and expectations of management, as well as assumptions made by,
         and information currently available to, management. Such statements
         include those regarding general economic and e-gaming industry trends.
         Such statements involve risks and uncertainties, including the timely
         development and market acceptance of products and technologies,
         successful integration of acquisitions, the ability to secure external
         sources of financing on acceptable terms, the ability to reduce
         operating expense and other factors described in our filings with the
         Securities and Exchange Commission. Actual actions and strategies and
         the timing and expected results may differ materially from those
         expressed or implied by such forward-looking statements, and Youbet'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, Inc. was formed as a Delaware corporation on November 13,
         1995.

         Youbet has established itself as a leading, global brand name for
         online, live event sports entertainment and wagering. Wagering on live
         events, such as horse racing, car racing, soccer, football, and other
         sporting events is a large global industry, which adapts well to the
         Internet. Youbet has focused on the United States horse race wagering
         market through its main product, Youbet Express(SM), which features
         online wagering, simulcast, and in-depth, up-to-the-minute information
         on horse racing. Youbet is working to expand the Youbet.com(SM) brand,
         its products, and its services throughout the United States and in
         select international markets. Youbet currently provides its customers
         with the ability to receive interactive, real-time audio/video
         broadcasts directly on their computers, access a comprehensive database
         of handicapping information and, in most states, wager on a wide
         selection of U.S. and international horse races.

         Since the introduction of simulcasting in 1978 and the passage of the
         Interstate Horse Wagering Act, horse wagering has migrated away from
         the horse track. Handicappers prefer to place wagers at either remote
         sites or by phone because it is more convenient. This trend is expected
         to continue for the foreseeable future. Currently, approximately 84% of
         all horse racing wagers are placed from remote locations.

         Off-track wagering is typically captured through intertrack simulcasts,
         off-track betting (OTB) facilities, telephone-based live operator and
         interactive voice recognition (IVR), and PC-based and wireless
         transmissions. This shift from at-the-track to off-track wagering was
         driven by racing enthusiasts' desire for convenient, remote access to a
         wide range of horse racing events, the ability to deliver this service
         through developments in electronic systems, and the concept of advance


                                       15
<PAGE>

         deposit wagering (ADW). ADW is accomplished when a customer opens an
         account with a state-licensed entity and then deposits funds into that
         account for future wagering. Customers may then use their funds plus
         any realized winnings for on-going wagering. Customers using OTB
         facilities, including our ADW service, receive the same odds as they
         would receive if the were physically at the track.

         Similar to most forms of gaming, live event wagering is most enjoyable
         when there are a wide variety of wagering options available.
         Simultaneously covering the action at more than one hundred domestic
         and international horse tracks, Youbet exhibits dozens of races every
         day. Through personal computers and hand-held wireless devices, our
         web-based technology provides substantially more gaming action than is
         possible through any other live event wagering alternative. Our
         proprietary interactive system completes the wagering process,
         including exotic selections, much faster than face-to-face or phone
         transactions with winning outcomes instantly credited to the customer's
         account for future events or prompt disbursement. As we consider
         expansion into gaming venues beyond horse racing, these advanced gaming
         platforms and wagering products may be leveraged into new markets.

         The convenience of remote wagering has encouraged new and existing
         customers to become more engaged with the sport of horse racing. We
         believe that its marketing activities and user-friendly products have
         attracted consumers who have rarely or never wagered, but have now
         found an efficient, friendly method in which to experiencing the thrill
         of wagering.

     CRITICAL ACCOUNTING POLICIES

         REVENUES

           Youbet records gross commission proceeds as Revenues and records the
           related costs under operating expenses as Track Fees and Licensing
           Fees - Related Party. In addition, Youbet recognizes net commissions
           earned on wagers placed at third-party wagering facilities as
           Revenue. Youbet records on a monthly basis the current portion of
           paid subscriptions as Revenue and the balance as Unearned Revenue.
           Youbet also records as Revenue sales of handicapping information on a
           per use basis.

         LICENSING RIGHTS

           The company recorded deferred licensing rights based on the fair
           value of the Initial and Additional TVG warrants issued, using the
           Black-Scholes option pricing model (see Note 4 to the accompanying
           consolidated financial statements). The licensing rights are being
           amortized over a three year period. At March 31, 2004, the
           accumulated amortization of the license rights was $9,460,756. These
           licensing rights will be fully amortized by May 2004. We periodically
           review the carrying value of these rights based upon our estimates of
           future cash flows. While we believe our estimates of future cash
           flows are reasonable, different assumptions regarding such cash flows
           could materially affect our valuation.

                                       16
<PAGE>

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2004 COMPARED TO THE
THREE MONTHS ENDED MARCH 31, 2003

     Revenues increased 32% to $14,527,104 for the quarter ended March 31, 2004
     compared to $11,006,407 in the first quarter of 2003. Gross handle grew 18%
     from $60,966,241 for the first quarter 2003 to our largest first quarter
     handle of $71,766,491 for the three months ended March 31, 2004. The handle
     growth was primarily due to increases in new customer accounts,
     successfully targeted marketing campaigns and promotions, enhancements in
     Web content and functionality, and our robust content offering. Although
     Magna restricted Youbet's wagering activity to California tracks only,
     Youbet was still able to achieve an increase in total handle from
     year-over-year in the first quarter of 2004. Our revenue improvement was
     driven by our growth in handle and the maximization of revenue yield by
     offering our customers incentives to wager on tracks that generate the
     greatest revenue yield to Youbet. Revenue from subscription packages
     increased to $182,321 for the quarter ended March 31, 2004 compared to
     $84,874 for the quarter ended March 31, 2003.

     OPERATING EXPENSES

         TRACK FEES: Track Fees increased 21% to $7,133,091 in 2004, compared to
         $5,883,606 in the first quarter of 2003. The increase was primarily due
         to an increase in handle and revenues. Track Fees consist of amounts
         paid and payable to various tracks, the California Horse Racing Board,
         the Oregon Racing Commission, and various tote fees.

         LICENSING FEES - RELATED PARTY: Licensing Fees - Related Party
         represents amounts paid and payable as a result of our licensing
         agreement with TVG (See Note 4 to the accompanying consolidated
         financial statements). For the three months ended March 31, 2004, these
         fees increased 49% to $1,973,036 compared to $1,323,835 for the first
         quarter of 2003 primarily due to increased wagering on TVG tracks.

         NETWORK OPERATIONS: Network Operations expense increased 38% to
         $521,609 in 2004, compared to $378,653 in the first quarter of 2003.
         The increase was due to increased number of personnel and data center
         expenses. Network Operations expense consists of costs for salaries,
         data center management, and telecommunications.

         RESEARCH AND DEVELOPMENT: Research and Development expense increased 6%
         to $415,841 in 2004, compared to $393,286 in the first quarter of 2003.
         The increase was primarily due to increased personnel costs, partially
         offset by reduced consulting fees. We will continue to invest in the
         development of its network infrastructure and to support continued
         maintenance and technology upgrades, which could further increase our
         Research and Development expenses.

         SALES AND MARKETING: Sales and Marketing expense increased 75% to
         $669,092 in 2004, compared to $381,434 in the first quarter of 2003.
         The increase was primarily due to our Kentucky Derby campaign, whereby
         we increased print and online media expenses during the first quarter
         of 2004, in addition to receiving a credit of $91,500 in the first
         quarter of 2003 for advertising fees. Sales and Marketing expense
         consists of costs for salaries, marketing and advertising, racing
         operations, and member services.

                                       17
<PAGE>

         GENERAL AND ADMINISTRATIVE: General and Administrative expense
         increased 25% to $2,719,198 in 2004, compared to $2,180,593 in the
         first quarter of 2003. The increase was primarily due to increases in
         fully burdened salaries, performance related bonuses, our 401K matching
         program, outside legal and consulting expenses, and investor relations;
         partially offset by decreased bad debt expense. General and
         administrative expense consists primarily of salaries, benefits,
         insurances, facilities expenses, legal, accounting, and investor
         relations.

         DEPRECIATION AND AMORTIZATION: Depreciation and Amortization decreased
         19% to $1,125,432 in 2004 compared to $1,384,260 in the first quarter
         of 2003. Depreciation and Amortization primarily consists of
         amortization of licensing rights related to the TVG license agreement
         (See Note 4).

     OTHER INCOME (EXPENSE)

         INTEREST INCOME: Interest Income increased 287% to $33,990 in 2004
         compared to $8,786 in the first quarter of 2003. $13,173 of the
         increase was due to interest income received on the $500,000 California
         Horse Racing Board deposit that was refunded in the first quarter of
         2004. The balance of the increase was due to higher balances of cash in
         banks.

         INTEREST EXPENSE: Interest Expense decreased to $1,434 in 2004,
         compared to $395,150 in the first quarter of 2003. The decrease was
         primarily due to the retirement of previously issued unsecured notes
         and the related amortization of the note discount during the first
         quarter of 2003.

         OTHER INCOME: Other income of $12,750 primarily represents collection
         of previously written-off receivables of $12,605

LIQUIDITY AND CAPITAL RESOURCES

     During the first quarter of 2004, we funded our operations primarily
     through working capital, in addition to proceeds from the exercise of stock
     option and warrants. As of March 31, 2004, we had net working capital of
     $5,290,591, compared to $2,965,960 at December 31, 2003. As of March 31,
     2004, we had $8,359,904 in cash and cash equivalents and $3,422,470 in
     restricted cash. Our principal recurring cash commitments consist of
     payroll and benefits, business insurance, real estate leases, data center
     operations, and telecommunications. Management believes that its ongoing
     efforts to reduce costs and operate more efficiently, combined with the
     growth in gross handle, has improved cash flow to a level needed to support
     future operations. However, we may from time to time seek additional
     capital to fund operations, reduce our liabilities, and fund our expansion
     plans consistent with our anticipated changes in operations and
     infrastructure.

     Net cash used in operating activities was $278,023 and $829,814 for the
     three months ended March 31, 2004 and 2003, respectively. The
     year-over-year decrease of $551,791 in cash used in operating activities
     was primarily due to (1) net income of $15,111 reported in the current
     quarter, representing a variance of $1,262,790 from a net loss of
     $1,247,679 reported in the prior year quarter, (2) changes in the Player's
     Trust(SM) restricted cash, which increased $2,182 in the current quarter,


                                       18
<PAGE>

     representing a variance of $342,655 from the increase in restricted cash
     noted in the prior year quarter, (3) changes in deposits, which decreased
     $501,047 in the current quarter, representing a variance of $499,999 from
     the increase in deposits noted in the prior year quarter, (4) changes in
     accounts payable - track related, which decreased $173,982 in the current
     quarter, representing a variance of $1,269,248 from the decrease in
     accounts payable - Track related noted in the prior year quarter, and (5)
     changes in accrued compensation and related items, which decreased $59,275
     in the current quarter, representing a variance of $236,089 from the
     decrease in accrued compensation and related items noted in the prior year
     quarter. These variances were partially offset by (1) a variance of
     $358,638 from the decrease in non-cash interest expense noted in the prior
     year quarter (2) changes in accounts receivable, which increased $30,268 in
     the current quarter, representing a variance of $240,726 from a decrease in
     accounts receivable noted in the prior year quarter, (3) changes in
     interest and other receivables, which increased $324,251 in the current
     quarter, representing a variance of $327,036 from a decrease in interest
     and other receivables noted in the prior year quarter, (4) changes in
     accrued expenses, which decreased $907,484 in the current quarter,
     representing a variance of $1,357,198 from an increase in accrued expenses
     noted in the prior year quarter, and (5) changes in customer deposits,
     which increased $144,767 in the current quarter, representing a variance of
     $333,522 from the increase in customer deposits noted in the prior year
     quarter.

     The decrease in deposits since December 31, 2003 was the result of Youbet
     obtaining in February 2004 a surety bond secured by a letter of credit,
     which the California Horse Racing Board upon its receipt, released a
     $500,000 cash deposit, plus interest, back to Youbet. Accounts payable -
     track related decreased mostly due to a decrease in the Magna payable
     caused by Magna restricting our access to their California tracks only. The
     increase in interest and other receivables was primarily due to an increase
     in our Directors and Officer's liability policy insurance claim, related to
     the TVG litigation & arbitration expenses (See Note 3 to the accompanying
     consolidated financial statements). Accrued expenses decreased primarily
     due to a decrease in accrued bonuses and legal expenses.

     Net cash provided by investing activities for the three months ended March
     31, 2004 was $59,079 compared to $97,065 of net cash used in investing
     activities in the prior year quarter. The year-over-year increase of
     $156,144 relates to (1) changes in property plant and equipment, which
     decreased $38,649 in the current period, representing a variance of
     $121,457 from the prior year quarter, and (2) changes in non-Player's
     Trust(SM) restricted cash, which decreased $97,728 in the current quarter,
     representing a variance of $34,687 from the decrease in restricted cash
     noted in the prior year quarter.

     Net cash provided by financing activities was $304,922 and $1,503,164 for
     the three months ended March 31, 2004 and 2003, respectively. The
     year-over-year decrease of $1,198,242 in cash provided by financing
     activities was due to (1) changes in proceeds from exercise of stock
     options and warrants which increased $304,922 in the current quarter,
     representing a variance of $51,758 from the increase noted in the prior
     year quarter, and (2) the decrease of net cash proceeds received from notes
     payable of $1,250,000 from the prior year quarter.

     Youbet settled a dispute with its largest stockholder, TVG, in February
     2004. This settlement called for Youbet to reimburse TVG for the legal
     expenses it incurred during the dispute up to $725,000. Youbet issued
     124,144 shares of common stock as partial satisfaction of this obligation
     in Februray 2004 and is obligated under the settlement agreement to satisfy
     the remainder of this obligation on July 2, 2004. We have filed an
     insurance claim to recover these amounts, among other things, and in the
     event we do not receive payment prior to July 1, 2004, we have the option
     of satisfying the remaining obligation by issuing additional shares of
     Youbet common stock.

                                       19
<PAGE>

     TVG held a warrant to acquire 51% of Youbet's common stock. In connection
     with the February 2004 settlement, TVG agreed, on March 31, 2004, to
     surrender its warrant to Youbet in exchange for one million shares of
     Youbet common stock. On March 31, 2004, TVG also requested that Youbet file
     a registration statement covering all five million shares of common stock
     held by TVG. Youbet is in the process of preparing a shelf registration in
     accordance with TVG's registration rights set forth in the warrant issuance
     agreement, and at this time, TVG has not advised us of any specific method
     of distribution or of its timing for any sales of Youbet common stock.

ITEM 3.       QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

     Our exposure to market risk and related changes in interest rates relates
     primarily to our investment portfolio. As of March 31, 2004, our portfolio
     of investments included $8,359,904 in cash and cash equivalents and
     $3,422,470 of restricted cash. Due to the conservative nature of our
     investment portfolio, we believe that a sudden 10% change in interest rates
     would not have a material effect on the value of the portfolio since the
     average yield on our investments is less than 1% at March 31, 2004. The
     impact on our future interest income will depend largely on the gross
     amount of our investment portfolio. We do not expect our operating results
     or cash flows to be affected to any significant degree by a sudden change
     in market interest rates.

ITEM 4.       CONTROLS AND PROCEDURES

     As of March 31, 2004, our management, including our Chief Executive Officer
     and our Chief Financial Officer, evaluated the effectiveness of the design
     and operation of our disclosure controls and procedures (as defined in Rule
     13a-15(e) promulgated under the Securities and Exchange Act of 1934, as
     amended). Based on that evaluation, our management, including the Chief
     Executive Officer and our Chief Financial Officer, concluded that our
     disclosure controls and procedures were effective in timely alerting
     management, including our Chief Executive Officer and our Chief Financial
     Officer, of material information that we are required to include in
     periodic Securities and Exchange Commission filings.

     There have been no changes in our internal control over financial reporting
     that occurred during the quarter ended March 31, 2004 that have materially
     affected, or are reasonably likely to materially affect, our internal
     control over financial reporting.

PART II.      OTHER INFORMATION

ITEM 1.       LEGAL PROCEEDINGS

     On February 23, 2004, Youbet.com, Inc. and TVG agreed to settle their
     disputes. As part of this settlement, Youbet agreed not to seek stockholder
     approval of certain charter and bylaw provisions, and TVG dropped all
     pending litigation and the related arbitration. The companies also agreed
     to recognize the dilutive effects of several specific securities
     transactions on the Additional Warrant and gave TVG the right to agree to
     surrender the Additional Warrant at any time prior to April 1, 2004 in
     exchange for one million shares of Youbet common stock. Finally, the


                                       20
<PAGE>

     settlement called for Youbet to reimburse TVG for the legal expenses it
     incurred during the dispute up to $725,000. Pursuant to this settlement
     agreement, Youbet issued 124,144 shares of common stock to TVG in February
     2004 towards partial satisfaction of the $725,000 legal expense
     reimbursement. We are obligated under the settlement agreement to satisfy
     the remainder of this obligation on July 2, 2004.

     Pursuant to rights granted under the settlement agreement dated February,
     23, 2004, TVG agreed, on March 31, 2004, to surrender the Additional
     Warrant to Youbet in exchange for one million shares of Youbet common
     stock. Youbet issued one million shares of its common stock valued at $3.64
     per share, the fair value on the date of issuance, for a total value of
     $3,640,000 in consideration for surrendering the unexercised Additional
     Warrant.

     Youbet from time to time is involved in litigation arising in the ordinary
     course of its business. At March 31, 2004, Youbet was not a party to any
     material litigation outside the ordinary course of business.

ITEM 2.       CHANGES IN SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF
              EQUITY SECURITIES

     None

ITEM 3.       DEFAULTS UPON SENIOR SECURITIES

     None.

ITEM 4.       SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     None

ITEM 5.       OTHER INFORMATION

     None

ITEM 6.       EXHIBITS AND REPORTS ON FORM 8-K

     (a) Exhibits

         Exhibit  3.1 Certificate of Incorporation of Youbet.com, as amended
                      through November 12, 2001 (incorporated by reference to
                      Exhibit 3.1 to the Form 10-Q of Youbet.com. Inc. for the
                      quarter ended September 30, 2003).

         Exhibit 3.2  Amended and Restated Bylaws of Youbet.com
                      (incorporated by reference to Exhibit 3.1 to the Form
                      8-K of Youbet.com, Inc. filed February 23, 2004).

         Exhibit 10.1 Employment agreement dated as of January 1, 2004 by and
                      between Youbet.com, Inc. and Gary W. Sproule

         Exhibit 10.2 Settlement Agreement, dated as of February 19, 2004,
                      between Youbet.com, Inc. and ODS Technologies, L.P. d/b/a
                      TVG Network (incorporated by reference to Exhibit 10.1 to
                      the Form 8-K of Youbet.com, Inc. filed February 23, 2004).

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<PAGE>

         Exhibit 10.3 Form of Supplement to Employment Agreement
                      (incorporated by reference to Exhibit 10.2 to the Form
                      8-K of Youbet.com, Inc. filed February 23, 2004).

         Exhibit 31.1 Certification of Chief Executive Officer Pursuant to Rule
                      13a-14(a) of the Securities Exchange Act of 1934

         Exhibit 31.2 Certification of Chief Financial Officer Pursuant to Rule
                      13a-14(a) of the Securities Exchange Act of 1934

         Exhibit 32.1 Certification Pursuant to Rule 13a-14(b) of the Securities
                      Exchange Act of 1934

     (b) Reports on Form 8-K

         Form 8-K, dated December 29, 2003 and filed January 1, 2004, reporting
         under Items 5 and 7 the early retirement of $2 million aggregate
         principal amount of notes payable.

         Form 8-K, dated January 14, 2004 and filed January 20, 2004, reporting
         under Items 5 and 7 the delays in court and arbitration proceedings
         concerning Youbet's definitive proxy statement and TVG's warrants.

         Form 8-K, dated January 28, 2004 and filed February 2, 2004, reporting
         under Items 5 and 7 additional delays in court and arbitration
         proceedings concerning Youbet's definitive proxy statement and TVG's
         warrants.

         Form 8-K, dated and furnished February 12, 2004, reporting under Items
         7 and 12 Youbet.com, Inc.'s financial results for the fourth quarter
         and fiscal year ended December 31, 2003.

         Form 8-K, dated and furnished February 18, 2004, reconciling under
         Items 7 and 12 EBITDA to net loss for the three years ended December
         31, 2003.

         Form 8-K, dated February 19, 2004 and filed February 23, 2004,
         reporting under Items 5 and 7 the settlement of disputes with TVG.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.

                                      YOUBET.COM, INC.

         May 4, 2004         By:  /s/ Charles F. Champion
                                      ------------------------------------------
                                      Charles F. Champion
                                      President and Chief Executive Officer

         May 4, 2004         By:  /s/ Gary W. Sproule
                                      ------------------------------------------
                                      Gary W. Sproule
                                      Chief Financial Officer


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