SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-Q

(Mark One)

     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
     ACT OF 1934
                  For the quarterly period ended March 31, 1997

                                       OR


     TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(D)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934

                        For the transition period from to

                       Commission file number 33-13789 LA




                           YOU BET INTERNATIONAL, INC.
             (Exact name of Registrant as specified in its charter)

                               Delaware 87-042246
                  (State or other jurisdiction (I.R.S. employer
              of incorporation or organization) identification no.)


                            1950 Sawtelle, Suite 180
                              Los Angeles, CA 90025
                                 (310) 444-3300

                  (Address, including zip code, of Registrant's
                    principal executive offices and telephone
                          number, including area code)



Indicate  by check mark  whether the  Registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  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      No

The number of shares  outstanding  of the  Registrant's  Common Stock on May 15,
1997 was 8,288,333 shares.

                                       1
<PAGE>


                           YOU BET INTERNATIONAL, INC.

                                      INDEX

PART I  Financial Information                                          Page No.

Item 1. Financial Statements

        Consolidated Balance Sheets as of March 31, 1997
        and December 31, 1996                                              3
        Consolidated Statements of Operations for the Three
        Months Ended March 31, 1997 and 1996                               4
        Consolidated Statements of Cash Flows for the Three
        Months ended March 31, 1997 and 1996                               5

        Notes to Consolidated Financial Statements                         6

Item 2. Management's Discussion and Analysis of Results of Operations
        and Financial Condition                                            10


PART II  Other Information


Item 6.           Exhibits and Reports on Form 8-K

Signatures


                                       2
<PAGE>
<TABLE>
<CAPTION>


                                              YOU BET INTERNATIONAL, INCORPORATED
                                                 CONSOLIDATED BALANCE SHEETS
                                              MARCH 31, 1997 AND DECEMBER 31, 1996

                                                                  March 31, 1997                December 31, 1996
<S>                                                                      <C>                              <C>
ASSETS

     Current Assets
         Cash and cash equivalents                                        $6,000                        $  87,000
         Accounts Receivable                                               7,000                                0
         Prepaid Expenses                                                114,000                          156,000
         Other Current Assets                                             31,000                                0
                                                      ---------------------------      ---------------------------

     Total Current Assets                                                158,000                          243,000

     Fixed Assets - net of depreciation                                  935,000                        1,013,000
       Other Assets                                                       55,000                           55,000
                                                      ---------------------------      ---------------------------

Total Assets                                                          $1,148,000                     $  1,311,000
                                                      ===========================      ===========================

LIABILITIES AND STOCKHOLDERS EQUITY

LIABILITIES

     Current Liabilities
         Accounts Payable                                               $783,000                       $  828,000
         Accrued Salaries and related items                              586,000                          192,000
         Other accrued expenses                                          200,000                          265,000
         Bridge Loan payable                                             746,000                          200,000
         Income Taxes payable                                              2,000                            4,000
         Current portion of capitalized lease                            196,000                          100,000
         obligations

     Total Current Liabilities                                         2,513,000                        1,589,000

       Capitalized lease obligations                                     135,000                          127,000
                                                      ---------------------------      ---------------------------
     Total Liabilities                                                 2,648,000                        1,716,000
                                                      ---------------------------      ---------------------------

STOCKHOLDERS' EQUITY

     Common Stock (par value $ .001)                                       8,000                            8,000
     Additional Paid-in Capital                                        4,411,000                        4,411,000
     Retained Deficit Balance                                        (5,667,000)                      (4,547,000)
     Deferred Expenses                                                 (252,000)                        (277,000)
                                                      ---------------------------      ---------------------------

Total Stockholders' Equity                                           (1,500,000)                        (405,000)
                                                      ---------------------------      ---------------------------

Total Liabilities and Stockholders' Equity                            $1,148,000                    $   1,311,000
                                                      ===========================      ===========================

</TABLE>
                                       3
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<TABLE>
<CAPTION>


                                              YOU BET INTERNATIONAL, INCORPORATED
                                             CONSOLIDATED STATEMENTS OF OPERATIONS
                                       FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996


                                                                    March 31, 1997                   March 31, 1996
                                                        ---------------------------      ---------------------------
<S>                                                                        <C>                              <C>

CONSULTING INCOME                                                           $2,000               $                -

EXPENSES
         Research and Development                                          453,000                          211,000
         Sales and Marketing                                               171,000                           74,000
         General and Administrative                                        464,000                          189,000
                                                        ---------------------------      ---------------------------

     Total Expenses                                                      1,088,000                          474,000
                                                        ---------------------------      ---------------------------

     LOSS FROM OPERATIONS                                              (1,086,000)                        (474,000)

     INTEREST EXPENSE                                                     (34,000)                          (2,000)

     INTEREST INCOME                                                             -                           30,000
                                                        ---------------------------      ---------------------------

     LOSS BEFORE PROVISION FOR
         INCOME TAXES                                                  (1,120,000)                        (446,000)

     PROVISION FOR INCOME TAXES                                                  -                                -
                                                        ---------------------------      ---------------------------

     NET LOSS                                                         $(1,120,000)                   $    (446,000)
                                                        ===========================
                                                                                         ===========================




     WEIGHTED AVERAGE COMMON
         SHARES OUTSTANDING                                              8,283,333                        8,053,333
                                                        ===========================      ===========================

     NET LOSS PER COMMON SHARE                                             $(0.14)                 $         (0.06)
                                                        ===========================      ===========================

</TABLE>
                                       4
<PAGE>
<TABLE>
<CAPTION>


                                              YOU BET INTERNATIONAL, INCORPORATED
                                             CONSOLIDATED STATEMENTS OF CASH FLOWS
                                       FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996


                                                                            March 31, 1997             March 31, 1996
<S>                                                                                <C>                        <C> 

     CASH FLOWS FROM OPERATING ACTIVITIES                                     $(1,120,000)             $    (446,000)
         Net Loss
         Adjustments  to  reconcile  net loss to net cash  (used  in)  operating
              activities:
              Depreciation                                                          74,000                      7,000
              Amortization of deferred compensation                                 26,000                     26,000
              Disposition of equipment                                               3,000                          -
              Accounts Receivable                                                    1,000                      5,000
              Prepaid Assets                                                         4,000                   (91,000)
              Other current assets                                                       -                      1,000
              Accounts Payable                                                    (46,000)                  (114,000)
              Other Current Liabilities                                            349,000                      8,000
                                                                      ---------------------     ----------------------

                  Net cash used in operating activities                          (709,000)                  (604,000)
                                                                      ---------------------     ----------------------

     NET CASH USED IN INVESTING ACTIVITIES:
         Acquisition of equipment                                                        -                  (184,000)

     CASH FLOWS FROM FINANCING ACTIVITIES:
         Proceeds from issuance of stock                                                 -                    455,000
         Offering costs                                                                  -                  (106,000)
         Proceeds from capitalized lease obligation                                150,000
         Payments on capitalized lease obligations                                (47,000)
         Proceeds from bridge loan facility                                        525,000                          -
         Common stock subscribed                                                         -                  (305,000)
                                                                      ---------------------     ----------------------

              Net cash provided by financing activities                            628,000                     44,000
                                                                      ---------------------     ----------------------

     NET INCREASE IN CASH AND CASH EQUIVALENTS                                    (81,000)                  (744,000)

     CASH AND CASH EQUIVALENTS
         BEGINNING OF YEAR                                                          87,000                  3,298,000
                                                                      ---------------------     ----------------------

     CASH AND CASH EQUIVALENTS, END OF YEAR                                         $6,000             $    2,554,000
                                                                      =====================     ======================

</TABLE>
                                       5
<PAGE>


                       YOU BET INTERNATIONAL, INCORPORATED

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1

         The  unaudited  consolidated  financial  statements of the Company have
been prepared in accordance with generally  accepted  accounting  principles for
the interim  financial  information,  and  accordingly,  they do not include all
information and footnotes required by generally accepted  accounting  principles
for complete  financial  statements.  The  accompanying  consolidated  financial
statements  should be read in  conjunction  with the more detailed  consolidated
financial  statements  and related  footnotes  included in the Company's  Annual
Report  on Form  10-K  for the year  ended  December  31,  1996  filed  with the
Securities and Exchange Commission.

         In the opinion of management,  the accompanying  unaudited consolidated
financial   statements  contain  all  adjustments  (which  include  only  normal
recurring  accruals),  necessary to present fairly the financial position of the
Company  as of March 31,  1997 and the  results of its  operations  and its cash
flows for the three  months  ended  March 31, 1997 and 1996,  respectively.  The
results of  operations  for the  periods  ended  March 31, 1997 and 1996 are not
necessarily  indicative  of the  results  expected  for the entire  year  ending
December 31, 1997.

NOTE 2

         In November  1995, the Company's  Board of Directors  approved the 1995
Stock  Option  Plan and the 1995 Stock  Option Plan for  Non-employee  Directors
(collectively  the "1995  Plans").  The 1995 Plans  provide for the  granting of
awards  of  incentive  stock  options,  nonqualified  stock  options,  and stock
appreciation  rights.  The aggregate  number of shares of common stock available
for issuance under the 1995 Plans is 15% of the total number of shares of common
stock  outstanding  from time to time.  A total of  1,022,614  options have been
issued in 1996 which are exercisable at $2.50-$4.00  per share through  December
2006 and vest in four equal installments. A total of 176,735 options have vested
at March 31, 1997. Compensation totaling $417,825 was recorded upon the issuance
of the options which is being amortized over the vesting period of the options.


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

         The information set forth below should be read in conjunction  with the
unaudited interim condensed  financial  statements and notes thereto included in
Part I - Item 1 of this Quarterly  Report and with  Management's  Discussion and
Analysis of  Financial  Condition  and Results of  Operations  contained  in the
Company's  Annual  Report on Form 10-K for the year ended  December 31, 1996, as
filed with the Securities and Exchange Commission.

GENERAL

         The  Company  has for the past  year,  used its  resources  to focus on
developing  its product  software,  computer  network  service and  establishing
alliances  inside of horse racing.  The Company's  computer  network  service is
ready for deployment,  key partnerships have been established and the product is
in Alpha  Testing.  However  the  Company is  currently  experiencing  cash flow
difficulties,  which has impacted  the ability of the Company to  implement  its
business plan.

         The Company has been  offering to  accredited  investors  (the  "Bridge
Offering")  certain  Bridge Units,  each such Bridge Unit  consisting of $50,000
principal  amount of 15% Secured  Convertible  Notes (the "15% Notes"or  "Bridge
Notes") and 20,000 Common Stock Purchase  Warrants (the  "Warrants").  As of May
15,  1997,  the  Company  has been  able to  effectuate  the sale of  $1,125,000
principal amount of Bridge Units. (see Liquidity and Capital Resource section).
                                       6
<PAGE>

         Management believes that the historical financial  information relating
to the Company is not  indicative of the operations of the Company in the future
for the following reasons:

          In 1994 and 1995, the Company has pursued most of its ongoing business
         activity through consulting  projects relating to on-line marketing and
         wagering.  It is not anticipated  that consulting  assignments  will be
         sought  or  significant  consulting  revenue  will be  received  in the
         current year or subsequent periods.

          In mid-1995 and fiscal year 1996 the Company  focused  exclusively  on
         the research and  development  of The You Bet!  Racing  Network and the
         recruitment of key employees.

          It is  anticipated  that future  years  (1997 and  beyond)  that costs
         associated  with  providing  the service will be much more  significant
         with relation to development  costs. In addition the Company expects to
         earn  revenues in the last two  quarters of 1997 and beyond  which will
         offset development and operating cost.

EXPENSES

Research and Development

         Research and Development  costs increased  $242,000 to $453,000 for the
quarter  ending March 31, 1997 as compared to the March 31, 1996,  primarily due
to  increased   development  and  network  operations  staff  required  for  the
development of the software,  infrastructure and the virtual private network for
the Company's You Bet! Racing Network service.

Sales and Marketing

         Sales and  Marketing  expense  increased  $97,000 to  $172,000  for the
quarter  ending March 31, 1997 as compared to the March 31, 1996,  primarily due
to the hiring of a Vice-President of Marketing to establish  corporate marketing
strategies and the design and implementation of the beta marketing program.

General and Administrative

         General and Administrative costs increased $275,000 to $464,000 for the
quarter  ending March 31, 1997 as compared to the March 31, 1996,  primarily due
to the  hiring  of  executive  management,  administrative  salaries,  legal and
accounting fees, depreciation and deferred compensation amortization.

Interest Income and Expense

         Interest  income  decreased  $30,000 for the quarter  ending  March 31,
1997,  primarily the result of less available cash to invest.  Interest  expense
increased  $32,000 to $34,000 for the quarter ending March 31, 1997, as a result
of interest on bridge loans and capital lease financing (see next section).

LIQUIDITY AND CAPITAL RESOURCES

Current Cash Position

         The Company is currently  experiencing  certain liquidity problems that
are  expected to continue  until the  Company  completes  some form of long term
financing. In response to this situation,  the Company has reduced the number of
its employees,  agreed to defer  compensation to certain of its senior officers,
and  otherwise  reduced  operating  and  capital  expenditures.  The Company has
$101,000 in cash and cash  equivalents and $1,966,000 of short-term  payables as
of May 15, 1997. The short term payables include $1,125,000 in bridge notes (See
1996  offerings)  which may be  converted  into common stock at the note holders
option.
                                       7
<PAGE>

         The Company is dependent  upon the proceeds of long term financing (see
1997 offering) for the continuation of its current testing and marketing efforts
relating to The You Bet! Racing Network (YBRN) software and for the continuation
and  expansion of the Company's  development  activities  and planned  marketing
expenditures.  If adequate  funds are not  available  to satisfy  short-term  or
long-term  requirements,  management  will be  required to consider a variety of
other options including seeking joint venture partners, selling or licensing all
or a portion of its proprietary  technology,  curtailing product development and
delaying  the  roll-out  of its first  product,  as well as other  cost  cutting
actions, including suspending all or a portion of its activities.

         The Company  expects  that the cash on hand coupled with the cash to be
raised from the new private  placement (see 1997 offering),  assuming it will be
successful,  will be sufficient for operating expenses and capital  expenditures
through at least June 1998.  No assurance  can be given that the Company will be
successful  in raising  additional  funds.  If the Company is not  successful in
raising this  additional  financing,  management  will be required to consider a
variety of other options including  seeking joint venture  partners,  selling or
licensing all or a portion of its  proprietary  technology,  curtailing  product
development  and delaying the  roll-out of its first  product,  as well as other
cost cutting actions, including suspending all or a portion of its activities.

         The  Company's  need  for  capital  (beyond  that  contemplated  in the
anticipated private placement) during the next year or more will vary based upon
a number of factors,  including  the rate at which demand for products  expands,
the level of sales and marketing  activities for its products,  and the level of
effort needed to develop and commercialize additional applications. In addition,
the Company's  business  plans may change or  unforeseen  events may occur which
require  the  Company to raise  additional  funds.  Additional  funds may not be
available on terms  acceptable to the Company when the Company needs such funds.
The unavailability of additional funds when needed could have a material adverse
effect on the Company.

         The Company has been  offering to  accredited  investors  (the  "Bridge
Offering")  certain  Bridge Units,  each such Bridge Unit  consisting of $50,000
principal  amount of 15% Secured  Convertible  Notes (the "15% Notes" or "Bridge
Notes") and 20,000 Common Stock Purchase Warrants (the  "Warrants").  No minimum
subscription  is  required  and the  Company  intends  to accept  any  qualified
subscriptions.  The principal amount of, and interest on, the 15% Notes shall be
due and  payable on the  earlier  to occur of (i) a public or private  financing
raising in excess of  $5,000,000  of net cash  proceeds to the Company  (ii) the
first  anniversary  of the  Initial  Closing  Date,  and  shall  be  secured  by
substantially  all of the  assets of the  Company.  Each  Warrant  (the  "Bridge
Warrants")  entitles the holder thereof to acquire one share (each such share, a
"Warrant Share") of Common Stock at the exercise price per share of $2.50 during
the period  commencing  two business  days  following  the  effective  date (the
"Effective  Date")  of the  registration  statement  relating  to a sale  of the
Company's securities.

         The Company has been able to continue  operations on a limited basis by
deferring  salaries,  delaying  payable  payments  and  funding  from the bridge
facility.  To  date,  the  Company  has  been  able to  effectuate  the  sale of
$1,125,000 principal amount of Bridge Units.

 1997 Offering

         On March 17, 1997 the Company  initiated a private  placement where the
Company is seeking to raise up to $10,000,000 in gross proceeds before deduction
of expected placement fees and expenses, through a private placement of Units to
persons  who are not U.S.  persons,  as defined  in  Regulation  S, in  offshore
transactions, as defined in Regulation S (the "Offering").

         Concurrently, the Company is also seeking to offer in the United States
identical  Units as is  offered  for this  Offering  for the same Unit  price of
$25,000 per Unit,  each Unit  consisting of 10,000 Shares of the Company's $.001
par Common Stock and 5,000 callable Series D Warrants, each Warrant allowing its
holder to  purchase a Share of Common  Stock for $5.25 per Share for a period of
up to two years from the date of issue (the "Domestic Offering"). The concurrent
Domestic  Offering in the United States will only be to accredited  investors as
defined in Rule 501 of Regulation D promulgated  under the Securities Act. In no
event, however, will the aggregate amount of subscriptions for this Offering and
for the  Domestic  Offering be  accepted  for an amount in excess of the maximum
                                       8
<PAGE>

$10,000,000  (4,000,000  Shares of Common Stock and 2,000,000 Series D Warrants)
amount of this Offering (without regard for the Over-Allotment option).

         The Company intends to have an initial closing  ("Initial  Closing") of
this Offering under this Private  Placement  Memorandum  when an aggregate of at
least  240 Units  have been  subscribed  for at an  aggregate  price of at least
$6,000,000.   See  "Description  of  Securities"  herein  for  a  more  detailed
description of the Shares and Warrants included in the Units. After such Initial
Closing, the Offering may continue with the intent of raising up to an aggregate
of $10,000,000  from the sale of up to an aggregate of 400 Units,  not including
any  Over-Allotment  amount,  from  either the  Domestic  Offering  and/or  this
Offering.

         The net proceeds  available for use by the Company from the sale of the
Units being offered  hereby will vary  depending on the number of Units sold. If
only the minimum aggregate number of Units is sold, the net cash proceeds to the
Company are  estimated to be  $5,275,000  after  deducting the placement fee and
expenses estimated at an aggregate of $725,0000. If the maximum aggregate number
of Units is sold,  the net cash  proceeds  to the Company  are  estimated  to be
$8,875.00  after  deducting  the  placement  fee and  expenses  estimated  at an
aggregate of $1,125,000.  The net proceeds are expected to be used for the final
stage  development of the You Bet!  Racing  Network  software;  Private  Network
installation,  expansion and usage; marketing activities such as service launch,
customer  acquisition,   web-site  creation  and  maintenance,  and  promotional
programs for frequent  users,  repay  short-term  loans;  certification  for the
product software and service;  new accounting and management  software;  and for
general corporate purposes.

Use of Cash for the Quarter ending March 31, 1997

During the quarter ended March 31, 1997, the Company's  cash position  decreased
$81,000 to $6,000 as of March 31, 1997 compared to $87,000 at December 31, 1996.
Net cash decreased  $81,000 from December 31, 1996 to March 31, 1997 as a result
of $81,000 used in operating activities.

Cash used in operating activities consisted of research and development costs of
$453,000,  marketing  costs of  $171,000,  general and  administrative  costs of
$464,000.  In  addition,  prepaid  expenses  decreased  $4,000  as a  result  of
prepaying the office lease, and accounts payable and other liabilities increased
by $303,000. Other operating activities generated $2,000.

Cash flows from financing  activities  totaled  $525,000,  used  principally for
operating expenditures.

The Company has entered into a capital  lease that  provides for a $100,000 sale
and  leaseback of equipment  previously  purchased by the Company and a $150,000
line for new equipment  purchases in the third quarter 1996. The lease terms are
30 month,  20% security deposit of which 1/3 is returned after each year with an
effective interest rate of approximately 15% per annum.

The Company also entered into a capital  lease that provides a $160,000 line for
new equipment purchases in the first quarter 1997. The lease terms are 36 month,
with no security  deposits and an effective  interest rate of approximately  15%
per annum.


                                       9
<PAGE>


Part II:          Other Information

Item 6:           Exhibits and Reports on Form 8-K:

(a)      Exhibits

         The following exhibits are filed herewith:  None


                                       10
<PAGE>


                                   SIGNATURES

Pursuant  to the  requirements  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.

                                               YOU BET INTERNATIONAL, INC.


                                           By: /s/ David Marshall
                                              -------------------
                                              DAVID MARSHALL
                                              Chairman of the Board,
                                              President, and Chief
                                              Executive Officer




Signature                    Capacity                         Date

/s/ David Marshall
-------------------          Chairman of the Board            May 15, 1997
DAVID MARSHALL               President, Chief Executive
                             Officer and Director


/s/ Barry Peters
-------------------          Chief Financial Officer          May 15, 1997
BARRY PETERS


                                      11