<PAGE>



                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   -----------

                                   Form 10-QSB



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

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2003


                       COMMISSION FILE NUMBER: 33-13789LA

                                   -----------

                                YOUBET.COM, INC.


         DELAWARE                                       95-4627253

              5901 De Soto Avenue, Woodland Hills, California 91367

                                 (818) 668-2100





Check 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 X No

                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 27,205,739 as of July 31, 2003.

Transitional Small Business Disclosure Format (check one): Yes [ ]   No [X]


<PAGE>




                                YOUBET.COM, INC.
                              INDEX TO FORM 10-QSB
                              FOR THE QUARTER ENDED
                                  JUNE 30, 2003



<TABLE>
<CAPTION>
                                                                                                                 Page
PART I.      FINANCIAL INFORMATION
<S>                                                                                                               <C>
   Item 1.   Financial Statements
                Condensed  Consolidated  Balance  Sheet  as  of  June  30,  2003
                (unaudited)  and  December  31,  2002 3  Condensed  Consolidated
                Statements  of  Operations  for the three  months ended June 30,
                2003 and June 30, 2002 (unaudited)                                                                4
                Condensed Consolidated Statements of Operations for the six months ended June 30, 2003
                     and June 30, 2002 (unaudited)                                                                5
                Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2003
                     and June 30, 2002 (unaudited)                                                                6
                Notes to Unaudited Condensed Consolidated Financial Statements                                    7
   Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations               19
   Item 3.   Controls and Procedures                                                                             25


PART II.     OTHER INFORMATION

   Item 1.   Legal Proceedings                                                                                   26
   Item 2.   Changes in Securities                                                                               27
   Item 3.   Defaults Upon Senior Securities                                                                     27
   Item 4.   Submission of Matters to a Vote of Security Holders                                                 27
   Item 5.   Other Information                                                                                   27
   Item 6.   Exhibits and Reports on Form 8-K                                                                    28

   Signatures                                                                                                    28
   Exhibit 10.1: Settlement Agreement and Release                                                                29
   Exhibit 31.1: Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                         32
   Exhibit 31.2: Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                         33
   Exhibit 32: Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                          34
</TABLE>



                                       2
<PAGE>




Part I. Financial Information
Item 1. Financial Statements

                                Youbet.com, Inc.
                      Condensed Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                             June 30,         December 31,
                                                                               2003               2002
                                                                          -------------       -------------
                                                                           (Unaudited)          (Audited)
ASSETS:
   Current Assets:
<S>                                                                       <C>                 <C>
       Cash and Cash Equivalents                                          $   7,277,469       $   4,559,897
       Restricted Cash, current (Note 2)                                      2,981,775           2,351,421
       Receivables (Note 3)                                                     897,382             790,686
       Rrepaid Expenses                                                         695,332             436,119
       Interest and Other Receivables                                            21,281              23,682
                                                                          -------------       -------------
   Total Current Assets                                                   $  11,873,239       $   8,161,805
   Property and Equipment, net                                                3,126,577           3,953,912
   Licensing Rights, net  (Note 4)                                            3,215,138           5,022,830
   Deferred Lease Costs                                                          31,426              33,521
   Deposits (Note 6)                                                          1,300,785           1,300,785
                                                                          -------------       -------------
       TOTAL ASSETS                                                       $  19,547,165       $  18,472,853
                                                                          =============       =============

LIABILITIES AND STOCKHOLDER'S EQUITY
   Current Liabilities:
       Fees Payable to Related Party  (Note 4)                            $   2,997,145       $   2,113,540
       Accounts Payable - Track Related  (Note 5)                             2,336,182           4,293,289
       Customer Deposits                                                      2,622,780           1,477,255
       Accrued Expenses                                                         730,802             729,735
       Accounts Payable - Trade                                                 592,983             604,417
       Accrued Compensation and Related Items  (Note 8)                         440,530             532,796
       Deferred Revenues                                                         65,736              26,577
       Notes Payable, face $750,000, net of unamortized
          discount of  $97,807 at 12/31/02                                           --             652,193
                                                                          -------------       -------------
   Total Current Liabilities                                              $   9,786,158       $  10,429,802

       Notes Payable, face $2,000,000, net of unamortized
          discount of $419,784  (Note 7)                                      1,580,216                  --
                                                                          -------------       -------------
       TOTAL LIABILITIES                                                  $  11,366,374       $  10,429,802
                                                                          =============       =============

   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
          26,897,439 and 23,422,600 shares outstanding
          as of June 30, 2003 and December 31, 2002, respectively         $      26,897       $      23,422
       Treasury Stock                                                        (1,785,109)                 --
       Additional Paid In Capital                                           100,013,260          95,863,660
       Accumulated Deficit                                                  (90,074,257)        (87,844,031)
                                                                          -------------       -------------
       TOTAL STOCKHOLDERS' EQUITY                                         $   8,180,791       $   8,043,051
                                                                          -------------       -------------
       TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                         $  19,547,165       $  18,472,853
                                                                          =============       =============
</TABLE>


                 See Accompanying Notes to Financial Statements



                                       3
<PAGE>




                                Youbet.com, Inc.
                 Condensed Consolidated Statement of Operations
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                             Three Months Ended June 30,
                                                          -------------------------------
                                                              2003               2002
                                                          ------------       ------------
Revenues  (Notes 4 and 5)
<S>                                                       <C>                <C>
   Commissions                                            $ 13,540,750       $  5,963,570
   Subscription Fees                                           157,785                133
   Race Information                                             83,141             47,182
                                                          ------------       ------------
Total Revenues                                            $ 13,781,676       $  6,010,885
Operating Expenses:
   Track Fees                                                6,225,483          2,432,108
   Licensing Fees - Related Party  (Note 4)                  2,864,017          1,292,372
   Network Operations                                          507,108            503,501
   Research and Development                                    565,976            547,066
   Sales and Marketing                                         612,286            601,138
   General and Administrative                                2,400,773          1,672,327
   Depreciation and Amortization                             1,499,382          1,400,108
                                                          ------------       ------------
Total Operating Expenses                                  $ 14,675,025       $  8,448,620
                                                          ------------       ------------
Loss From Operations                                      $   (893,349)      $ (2,437,735)
                                                          ============       ============
Other Income (Expense):
   Interest Income                                              11,719              6,551
   Interest Expense                                           (120,568)          (144,832)
   Other Income                                                 19,652                (17)
                                                          ------------       ------------
Total Other Income (Expense)                              $    (89,197)      $   (138,298)
                                                          ------------       ------------
Net Loss                                                  $   (982,546)      $ (2,576,033)
                                                          ============       ============

Basic and Diluted Loss per Share:
   Net Loss per Common Share                              $      (0.04)      $      (0.13)
                                                          ------------       ------------
   Weighted Average No. of Common Shares Outstanding        25,708,819         20,562,473
                                                          ============       ============
</TABLE>


                 See Accompanying Notes to Financial Statements



                                       4
<PAGE>




                                Youbet.com, Inc.
                 Condensed Consolidated Statement of Operations
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                              Six Months Ended June 30,
                                                          -------------------------------
                                                              2003               2002
                                                          ------------       ------------
Revenues  (Notes 4 and 5)
<S>                                                       <C>                   <C>
   Commissions                                            $ 24,385,970          8,532,539
   Subscription Fees                                           242,659                445
   Race Information                                            159,454             95,115
                                                          ------------       ------------
Total Revenues                                            $ 24,788,083       $  8,628,099
Operating Expenses:
   Track Fees                                               12,079,310          2,889,108
   Licensing Fees - Related Party  (Note 4)                  4,187,852          1,731,409
   Network Operations                                          946,010            995,436
   Research and Development                                  1,066,157          1,036,449
   Sales and Marketing                                         869,819          1,185,217
   General and Administrative                                4,567,902          3,335,897
   Depreciation and Amortization                             2,883,642          2,798,904
                                                          ------------       ------------
Total Operating Expenses                                  $ 26,600,692       $ 13,972,420
                                                          ------------       ------------
Loss From Operations                                      $ (1,812,609)      $ (5,344,321)
                                                          ============       ============
Other Income (Expense):
   Interest Income                                              20,505             23,017
   Interest Expense                                           (515,718)          (150,240)
   Other Income                                                 77,597                (17)
                                                          ------------       ------------
Total Other Income (Expense)                              $   (417,616)      $   (127,240)
                                                          ------------       ------------
Net Loss                                                  $ (2,230,225)      $ (5,471,561)
                                                          ============       ============

Basic and Diluted Loss per Share:
   Net Loss per Common Share                              $      (0.09)      $      (0.27)
                                                          ------------       ------------
   Weighted Average No. of Common Shares Outstanding
                                                            24,614,029         20,053,042
                                                          ============       ============
</TABLE>



                 See Accompanying Notes to Financial Statements



                                       5
<PAGE>


                                Youbet.com, Inc.
                 Condensed Consolidated Statement of Cash Flows
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                Six Months Ended June 30,
                                                                              -----------------------------
                                                                                 2003              2002
                                                                              -----------       -----------
Increase (Decrease) In Cash and Cash Equivalents
    Cash Flows from Operating Activities:
<S>                                                                           <C>               <C>
       Net Loss                                                               $(2,230,225)      $(5,471,561)
    Adjustments to Reconcile Net Loss to Net Cash Provided by (Used in)
    Operating Activities:
       Depreciation and Amortization                                            2,883,642         2,798,904
       Amortization of Fair Value of Warrants Issued for Financing Costs               --             2,395
       Non-Cash Interest Expense                                                  423,416                --
       Stock-Based Compensation                                                   183,393           218,518
       Settlement with Vendors                                                         --           123,963
    Change in Operating Assets and Liabilities:
       Restricted Cash                                                           (915,415)               --
       Receivables                                                               (106,696)         (835,204)
       Prepaid Expenses                                                          (259,213)          131,444
       Interest and Other Receivables                                               2,401            33,242
       Deposits                                                                     2,095          (497,905)
       Fees Payable - Related Parties                                             883,605         1,046,323
       Accounts Payable - Track Related                                        (1,957,107)        1,550,271
       Customer Deposits                                                        1,145,525           768,582
       Accrued Expenses                                                             1,067           464,728
       Account Payable - Trade                                                    (11,434)         (232,551)
       Accrued Compensation and Related Items                                     (92,266)          347,434
       Deferred Revenues                                                           39,159              (153)
                                                                              -----------       -----------
           Net Cash Provided by (Used in) Operating Activities                $    (8,053)      $   448,430
                                                                              -----------       -----------
    Cash Flows from Investing Activities:
       Restricted Cash                                                            285,061                --
       Purchases of Property and Equipment                                       (248,615)          (32,314)
                                                                              -----------       -----------
           Net Cash Provided by (Used in) Investing Activities                $    36,446       $   (32,314)
                                                                              -----------       -----------
    Cash Flows from Financing Activities:
       Proceeds from Exercise of Stock Options and Warrants, net                1,439,179             3,885
       Proceeds from Notes Payable                                              2,000,000           750,000
       Payments of Notes Payable                                                 (750,000)               --
                                                                              -----------       -----------
           Net Cash Provided by Financing Activities                          $ 2,689,179       $   753,885
                                                                              -----------       -----------
    Net Increase in Cash and Cash Equivalents                                 $ 2,717,572       $ 1,170,001
    Cash and Cash Equivalents at the Beginning of the Period                    4,559,897         3,560,740
                                                                              -----------       -----------
    Cash and Cash Equivalents at the End of the Period                        $ 7,277,469       $ 4,730,741
                                                                              ===========       ===========

    Supplemental Disclosure of Cash Flow Information:
       Cash Paid for Interest                                                 $   117,903       $     4,411
       Reclassification of Restricted Cash to Deposits                                 --           920,805
                                                                              ===========       ===========

    Non-Cash Investing and Financing Activities:
       Issuance of Warrants with Notes Payable                                $   518,223                $-
       Issuance of Warrants for Licensing Rights                                       --           437,137
                                                                              ===========       ===========
</TABLE>


                 See Accompanying Notes to Financial Statements



                                       6
<PAGE>


YOUBET.COM, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2003

Note 1: Organization and Basis of Presentation

     Business

         Youbet.com,  Inc.  ("Youbet.com",   "Youbet",  or  the  "Company")  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.
         The Company has focused on the United States horse race wagering market
         through its main  product,  Youbet  ExpressSM,  which  features  online
         wagering,  simulcast,  and in-depth,  up-to-the-minute  information  on
         horse racing.  The Company is working to expand the  Youbet.com  brand,
         its products,  and its services throughout the United States and select
         international  markets.  The Company  currently  provides its customers
         with  the  ability  to  receive  interactive,   real-time   audio/video
         broadcasts  directly  into  their  computers,  access  a  comprehensive
         database of handicapping  information  and, in most states,  wager on a
         wide selection of U.S., Canadian, and Australian horse races.

         In 2002,  greater than 80% of all United  States horse race wagers were
         placed through an off-track  facility.  Off-track wagering is typically
         captured  through  inter-track  simulcasts,   off-track  betting  (OTB)
         facilities,   telephone-based   live  operator  and  interactive  voice
         recognition  (IVR),  and  PC-based  and  wireless  transmissions.  This
         dramatic  shift from  at-the-track  to off-track  wagering is 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  relatively new
         concept of advance 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.

     Basis of Presentation

         In the opinion of  management,  the  accompanying  unaudited  condensed
         financial  statements  for the three and six months ended June 30, 2003
         and 2002  include  all  adjustments  (consisting  of  normal  recurring
         accruals) which  management  considers  necessary to present fairly the
         financial  position of the Company as of June 30, 2003,  the results of
         its  operations  for the three and six months  ended June 30,  2003 and
         2002,  and its cash  flows for the six months  ended June 30,  2003 and
         2002 in conformity with accounting principles generally accepted in the
         United  States.   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, 2002, as
         filed with the  Securities  and Exchange  Commission on April 15, 2003,
         and should be read in conjunction  with this  Quarterly  Report on Form
         10-QSB. The consolidated results of operations for the six months ended
         June  30,  2003  are not  necessarily  indicative  of the  consolidated
         results of  operations  to be expected  for the full fiscal year ending
         December  31,  2003.  Certain  information  and  footnote   disclosures
         normally included in the consolidated financial statements presented in
         accordance with accounting  principles generally accepted in the United
         States have been condensed or omitted.



                                       7
<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 accounting
         principles  generally accepted in the United States 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 Loss Per Share

         Basic loss per share is calculated by dividing net loss by the weighted
         average number of common shares outstanding during the period.  Diluted
         loss per share is  calculated  by dividing net loss by the basic shares
         outstanding  and all  dilutive  securities,  including  stock  options,
         warrants,  convertible notes, and preferred stock, but does not include
         the impact of potential common shares which would be anti-dilutive.  As
         of June 30, 2003,  total  warrants  outstanding  were  19,005,175  with
         exercise  prices  between  $0.50 to  $19.50  and  total  stock  options
         outstanding  were  5,418,660  with  exercise  prices  between $0.26 and
         $5.88.

     Concentration of Credit Risk

         The Company maintains cash balances at various financial  institutions.
         Deposits not exceeding $100,000 for each institution are insured by the
         Federal Deposit  Insurance  Corporation.  At June 30, 2003 and December
         31,  2002,  the Company had  uninsured  cash and cash  equivalents  and
         restricted cash of $10,011,359 and $4,440,698, respectively.

     Reclassifications

         Certain prior period amounts have been  reclassified  to conform to the
         current  period  presentation  with no  change in  previously  reported
         stockholders equity or net loss.

     Recent Accounting Pronouncement

         In  May  2003,  the  FASB  issued  Statement  of  Financial  Accounting
         Standards No. 150,  "Accounting for Certain Financial  Instruments with
         Characteristics  of  both  Liabilities  and  Equity"  (FAS  150).  This
         statement  affects  the  classification,   measurement  and  disclosure
         requirements  of the following  three types of  freestanding  financial
         instruments:  1)  manditorily  redeemable  shares,  which  the  issuing
         company  is  obligated  to buy  back  with  cash or  other  assets;  2)
         instruments  that do or may  require the issuer to buy back some of its
         shares in exchange for cash or other assets, which includes put options
         and forward purchase contracts;  and 3) obligations that can be settled
         with  shares,  the  monetary  value of which is fixed,  tied  solely or
         predominantly to a variable such as a market index, or varies inversely
         with the value of the issuers' shares. In general, FAS 150 is effective
         for all financial  instruments  entered into or modified  after May 31,
         2003,  and otherwise is effective at the beginning of the first interim
         period  beginning  after June 15, 2003.  The adoption of FAS 150 is not
         expected  to have an impact  on the  Company's  consolidated  financial
         position or disclosures.



                                       8
<PAGE>

Note 2:       Restricted Cash, Current

     Players Trust/SM/

         As of June 30, 2003,  the balance of customer  accounts  maintained  in
         Players  TrustSM was  $2,480,219 all of which is recorded as restricted
         cash,  current.  This  amount was  $17,373 in excess of amounts  due to
         customers.

         As of December 31, 2002, the balance of customer accounts maintained in
         Players  TrustSM was  $1,564,804 all of which is recorded as restricted
         cash,  current.  This  amount was  $3,292 in excess of  amounts  due to
         customers.

     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 June 30, 2003
         and  December  31,  2002,  these  reserves  amounted  to  $175,273  and
         $430,858,  respectively,  all of which is recorded as restricted  cash,
         current.

     Oregon Racing Commission

         The Company placed a Letter of Credit with the Oregon Racing Commission
         in the  amount of  $250,000  to secure  customer  deposits  on hand for
         Oregon residents. As of June 30, 2003 and December 31, 2002, the letter
         of credit is recorded as restricted cash, current.

Note 3: Receivables

     As of June 30,  2003,  receivables  of  $897,382  primarily  consist of (1)
     $331,786 due from Magna Entertainment Corporation for fees earned on handle
     generated through Magna's  Call-A-Bet system, (2) $347,526 due from various
     tracks for settlement of wagers processed through the Company's Oregon hub,
     and (3) $215,734 due from the Company's landlord.

     As of December 31, 2002,  receivables of $790,686  primarily consist of (1)
     $302,000 due from Magna Entertainment Corporation for fees earned on wagers
     processed through Magna's  Call-A-Bet system, (2) $377,000 due from various
     tracks for settlement of wagers processed through the Company's Oregon Hub,
     and (3) $107,867 due from the Company's landlord.

Note 4: Licensing Rights - Related Party

     TVG Licensing Fees

         In May 2001,  Youbet  entered into a track  content and patent  license
         agreement (the "License  Agreement") and a warrant  issuance  agreement
         with 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



                                       9
<PAGE>

         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.  Among other things, the agreements call for Youbet to issue to
         TVG two  warrants to purchase  common stock of the Company as described
         below.

         The License  Agreement remains in effect until the later of (i) May 18,
         2011,  (ii) the date of  expiration  of the last to  expire  of the TVG
         patents  licensed to Youbet under the  agreement,  or (iii) the date on
         which  the  last of TVG's  agreements  with  the TVG  Exclusive  Tracks
         expires  (unless  extended,  TVG's  agreements  with the TVG  Exclusive
         Tracks  expire  before May 18,  2011).  The  License  Agreement  may be
         terminated  before  the  expiration  of its term (a) by TVG,  if Youbet
         ceases to operate its Oregon  account  wagering hub or another  account
         wagering  facility  approved by TVG at any time  thereafter  during the
         term;  (b) by TVG,  in the event that  Youbet  brings any legal  action
         against  TVG or any of TVG's  affiliates,  including  Gemstar-TV  Guide
         International,  unless it is finally determined in such action that TVG
         (or its affiliate) acted in bad faith with respect to any claim that is
         the subject of the legal  action;  and (c) by either  Youbet or TVG, 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 to issue to TVG the
         warrants to purchase  Youbet  common stock on the terms and  conditions
         set forth in the Warrant  Issuance  Agreement,  as described below. The
         TVG fees are as follows:

         o        With respect to wagers  processed  through an account wagering
                  facility  other than Magna,  5.5% of the total handle on races
                  conducted  at the  TVG  Exclusive  Tracks  which  may  include
                  Aqueduct,  Arlington International,  Belmont Park, Calder Race
                  Course,  Churchill Downs, Del Mar, Ellis Park,  Emerald Downs,
                  Fairplex Park,  Hollywood Park, Hoosier Park,  Keeneland,  Los
                  Alamitos,  Oak Tree/Santa  Anita,  Portland  Meadows,  Prairie
                  Meadows,  Ruidoso Downs, Saratoga,  Saratoga Harness,  Suffolk
                  Downs,  Turf  Paradise,  and  Turfway  Park.  For  purposes of
                  determining  these and other fees  payable  under the  License
                  Agreement  with respect to the TVG  Exclusive  Tracks,  tracks
                  owned,  controlled  or  operated by Magna will be deemed to be
                  TVG  Exclusive  Tracks to the extent  that TVG enters into any
                  agreement  with any such track which  provides for TVG to have
                  simulcast  and  account  wagering  rights  on races  from such
                  track.  These  Magna  tracks  include  nine  tracks  currently
                  available on the Youbet network.

         o        With  respect  to  wagers  processed  through  Magna  on races
                  conducted at the TVG Exclusive  Tracks,  the entire commission
                  or other  consideration  paid to Youbet  with  respect to such
                  wagers.

         o        With respect to wagers  conducted at four  designated  non-TVG
                  Exclusive  Tracks,  3.0% of the total handle (including wagers
                  processed through Magna).

                  The License  Agreement  also  provides that Youbet will pay to
                  TVG the following fees:

         o        At  such  time  as  Youbet  opens  its  own  account  wagering
                  facility, with respect to wagers accepted or processed through
                  an account  wagering  facility  other than Magna,  Youbet will
                  charge customers a transaction fee of 25 cents per



                                       10
<PAGE>

                  wager,  with the  first  $3.00 of such fees per  customer  per
                  month being  retained by Youbet,  the next $3.00 per  customer
                  per month  being paid to TVG,  and any  remaining  amounts per
                  customer per month being split equally between the parties.

         o        Commencing  with the opening of Youbet's own account  wagering
                  facility,  with respect to account  wagers  processed  through
                  Magna, Youbet will, at its election, charge customers either a
                  transaction   fee  per   wager  of  25  cents  or  a   monthly
                  subscription  fee of not less than  $5.95 and will  split such
                  fees equally with TVG. Youbet is permitted to defer payment of
                  these fees until such time as it achieves  positive  cash flow
                  sufficient to pay the deferred fees. Also, Youbet is permitted
                  to modify or waive  transaction  fees for  certain  customers,
                  provided  that it shares  any such  fees  from such  customers
                  equally with TVG.

         o        Commencing  with the first  calendar  quarter in which  Youbet
                  achieves  positive  cash  flow,  as  defined  in  the  License
                  Agreement,  and  then and  thereafter  only to the  extent  of
                  positive cash flow, 50% of gross advertising  revenues and 50%
                  of the amount by which gross operating  margin  (revenues less
                  direct  costs) from monthly  e-commerce  revenues  exceeds the
                  gross  operating  margin  from  e-commerce  revenues  for  the
                  calendar month of April 2001.

         o        With respect to account  wagers on races  conducted at the TVG
                  Exclusive Tracks from Youbet customers in the states where the
                  TVG exclusive  tracks are located,  (i) pay source market fees
                  and host track fees in accordance with the agreements  between
                  TVG  and  the  applicable   racing   associations   and  other
                  participants  in  the  horse  racing  industry  and  (ii)  pay
                  applicable  state taxes and fees to the National  Thoroughbred
                  Racing  Association,  subject  to a cap of one  percent of the
                  total handle.

         o        With respect to account  wagers on races  conducted at the TVG
                  Exclusive  Tracks from Youbet  customers in other states,  (i)
                  pay host track fees in accordance with the agreements  between
                  TVG  and  the  applicable   racing   associations   and  other
                  participants  in  the  horse  racing  industry  and  (ii)  pay
                  applicable state taxes.

         o        With respect to account  wagers on races  conducted at non-TVG
                  Exclusive Tracks from Youbet customers with an account address
                  within a 25-mile  radius of any TVG  Exclusive  Track,  Youbet
                  will pay to TVG 10% of all such account  wagers,  and TVG will
                  retain 50% of such amount and divide the remaining 50% between
                  the TVG Exclusive  Tracks and Youbet's  partner tracks located
                  within the 25-mile radius.

         The  Company  issued  to TVG  an  initial  warrant  (the  "Initial  TVG
         Warrant"),  on May  18,  2001  (the  time  the  Warrant  Agreement  was
         executed)  entitling  TVG to purchase an  aggregate  of up to 3,884,650
         shares of Youbet  common  stock (the  "Initial  Warrant  Shares") at an
         exercise  price of $0.001 per share  exercisable  for a period of three
         years.  The Company recorded the fair value of the Initial TVG Warrant,
         ($2,910,000),  using the  Black-Scholes  method,  as a  deferred  asset
         captioned  "Licensing  Rights" and is being amortized over three years,
         the estimated life of the licensed technology. Accumulated amortization
         as of June 30, 2003 was  $2,046,391.  The Initial Warrant was exercised
         during the quarter  ended June 30, 2002,  resulting in cash proceeds to
         the Company of $3,885 and  issuance of 3,884,650  shares of  Youbet.com
         common stock.

         The Company issued to TVG an additional  warrant (the  "Additional  TVG
         Warrant"),  on September  20, 2001 (the time the Warrant  Agreement was
         approved  by the  stockholders)



                                       11
<PAGE>

         entitling  TVG to  purchase  from the Company at any time prior to 5:00
         p.m. Pacific  Standard Time on May 18, 2004, for an aggregate  exercise
         price  of  $41,082,422  (subject  to  adjustment  as  provided  in  the
         Additional TVG Warrant) a number of shares of common stock which,  when
         aggregated with the Initial TVG Warrant Shares,  is equal to 51% of the
         sum  of  (i)  the  total  number  of  shares  of  Youbet  common  stock
         outstanding on the date the  Additional TVG Warrant is exercised,  plus
         (ii) the total number of shares of common stock  issuable upon exercise
         of the Additional  TVG Warrant,  plus (iii) the total number of Initial
         Warrant  Shares then issuable upon exercise of the Initial TVG Warrant.
         The Company  recorded  the fair value of the  Additional  TVG  Warrant,
         ($7,054,000),  using the  Black-Scholes  method,  as a  deferred  asset
         captioned "Licensing Rights" which is being amortized over three years.
         Accumulated amortization as of June 30, 2003 was $4,702,827.

         The Company is obligated to issue additional  warrants to TVG (in order
         to maintain  TVG's  rights in acquiring  51% of the  Company)  upon the
         exercise of any stock options or warrants, or if the Company issues any
         additional securities. The number of warrants to be issued to TVG would
         be equivalent  to the number of stock options or warrants  exercised or
         the number of additional securities issued. In addition, the Additional
         TVG Warrant contains provisions for adjusting the exercise price in the
         event that (i) Youbet  makes  certain  additional  issuances  of common
         stock or securities exercisable for or convertible into common stock at
         a price  less than the  defined  reference  price per share  ($2.50 per
         share) on which the  aggregate  exercise  price of the  Additional  TVG
         Warrant is based,  or (ii) engages in certain  issuer tender offers for
         the repurchase of shares of its common stock.  To date, the Company has
         acknowledged  adjustments  to  the  aggregate  exercise  price  of  the
         Additional  TVG Warrant  which have  resulted in an adjusted  aggregate
         exercise price of $40,041,566.

         Remaining estimated aggregate amortization expense related to Licensing
         Rights for the next two years is:

                        2003            $       1,807,691
                        2004                    1,407,447
                                        -----------------
                        Total           $       3,215,138
                                        =================

         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.

Note 5: Agreement with Magna and Independent Tracks

     In  addition  to  revenue  generated  from  its  relationship  with  TVG as
     discussed in Note 4, the Company  generates  revenue under  agreements with
     Magna and various independent tracks.

     Magna   Entertainment    Corporation    (Magna),   one   of   the   largest
     owners/operators   of  premier  horse  racetracks  in  the  United  States,
     acquires,  develops,  and operates horse racetracks and related pari-mutuel
     wagering  operations.  Magna tracks  include  Santa Anita Park,  Gulfstream
     Park,  Lone Star Park, Bay Meadow,  Golden Gate Fields,  Portland  Meadows,
     Remington Park, Thistle Down, Great Lakes Downs, The Meadows, and Flamboro.



                                       12
<PAGE>

     In  June  1997,  Youbet  entered  into  a  Telecommunication   Facilitation
     Agreement  with  Mountain  Laurel  Racing,  Inc.  and  Washington  Trotting
     Association,   Inc.,  both  subsidiaries  of  Ladbroke  USA  (collectively,
     "Ladbroke").  During  2001,  Ladbroke  was  acquired  by  Magna.  Under the
     agreement  as  modified,  the Company  provides  Magna with an  interactive
     graphics interface into Youbet ExpressSM through which Youbet customers who
     have established  accounts with Magna's  Call-A-Bet  System may communicate
     with Magna to transmit wagering information.

     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 65 tracks that are paid a host fee for their  signal.  These fees
     are based on handle generated by Youbet members to the respective tracks.

     For the three months ended June 30, 2003 and 2002,  $118,004 and  $659,236,
     respectively,  of the Company's  revenues were generated  through the Magna
     simulcast  agreement.  Similar  revenues  for the six months ended June 30,
     2003 and 2002, were $356,815 and $1,577,897, respectively.

Note 6: Deposits

     As of June 30, 2003 and December 31, 2002,  deposits  primarily include (1)
     $705,071  lease  deposit for the Company's  Woodland  Hills  facility,  (2)
     500,000 deposit for licensing with the California  Horse Racing Board,  (3)
     $60,078  security  deposit for the Company's  Woodland Hills facility,  (4)
     $10,000 for the Global Cash reserve  deposit,  (5) $15,835 contract deposit
     for  Stargate  Pennsylvania  facility,  (6)  $8,251 for  corporate  housing
     deposit,  (7)  $1,350  deposit  for UPS,  and (8) $200  deposit  for office
     furniture.

Note 7: Notes Payable

     The Company entered into a Securities Purchase Agreement on March 21, 2002,
     whereby the Company  issued  one-year  secured  notes (the  "Notes") in the
     aggregate  principal  amount of $750,000 at an interest  rate of 12% to the
     Company's  new Chairman of the Board and Chief  Executive  Officer,  and to
     seven other investors for their $750,000 loan to the Company. In connection
     with  issuance  of the Notes,  the  Company  issued  five-year  warrants to
     purchase  750,000 shares of the Company's common stock at an exercise price
     of $0.50 per share.  The warrants  expire five years from the issuance date
     and contain certain  registration  rights and a cashless  exercise feature.
     Using the  Black-Scholes  model, the Company recorded the fair value of the
     warrants issued,  $437,137,  as a note discount and were amortized over one
     year as interest expense. Accumulated amortization of discount on the Notes
     was $339,330 as of December 31, 2002.  On January 24, 2003,  the Notes were
     retired  ahead of schedule  and $80,137  for all accrued  interest  through
     February 8, 2003, was paid.

     The Company entered into a second Securities Purchase Agreement on February
     11, 2003,  whereby the Company issued two-year unsecured notes (the "Second
     Notes") in the aggregate principal amount of $2,000,000 at an interest rate
     of 10% to several investors (the "Investors").  Interest is accrued monthly
     and paid  quarterly;  principal is due on February 11, 2005. In addition to
     the  issuance  of the  Second  Notes,  the  Company  agreed  to  cause  the
     assignment to the Investors of a portion of



                                       13
<PAGE>

     warrants previously issued by the Company.  In this connection,  holders of
     the Company's C and M warrants (the "Holders") were offered the opportunity
     to assign a portion of their  warrants to the  investors  on the  following
     basis:  (a) the per share  exercise  price of warrants  held by the Holders
     would be reduced to $.8075;  (b) the term of the warrants would be extended
     to February 11, 2005; and (c) the number of warrant shares  retained by the
     Holders would be reduced to 20% of the warrant  shares that were  currently
     issuable  pursuant to the exercise of the warrants (the  "Retained  Warrant
     Shares").  The warrant shares other than the Retained  Warrant Shares would
     be  either   cancelled  by  the  Company  or  assigned  to  the  Investors.
     Year-to-date,  warrants to acquire  693,194 shares of the Company's  Common
     Stock were cancelled,  the number of Retained  Warrant Shares was 2,034,963
     and warrants to purchase an aggregate of 1,334,000  shares were assigned to
     the  Investors at an exercise  price of $0.8075 per share  (representing  a
     discount of 15% from the closing market price of the Company's Common Stock
     of $0.95 on the date of the Securities Purchase Agreement).  The fair value
     of the 542,296 retained warrants of approximately  $227,000 was recorded as
     an expense in the current  year.  The relative  fair value of the 1,334,000
     assigned  warrants of approximately  $518,223 was recorded as a discount to
     the face value of the note that will be amortized as interest  expense over
     the two year life of the notes. Accumulated amortization of discount on the
     Second Notes was $98,439 as of June 30, 2003.

Note 8: Accrued Compensation and Related Items

     On July 8, 1999, the Board approved the  recommendation of the Compensation
     Committee to grant to David Marshall (through his wholly-owned  subsidiary)
     and Russell  Fine a bonus award of $300,000,  payable  $75,000 to each upon
     the  Company  achieving  15,000  subscribers  and  $75,000 to each upon the
     Company achieving 25,000 subscribers. As of March 31, 2003, the Company had
     accrued a total of  $300,000  ($150,000  to each of  Messrs.  Marshall  and
     Fine). The bonuses were paid on April 21, 2003.

     The Board  approved the  recommendation  of the  Compensation  Committee to
     grant to Charles Champion an increase in annual  compensation from $200,000
     to $340,000 in connection  with Mr.  Champion's  promotion to President and
     Chief Executive Officer of the Company effective  September 1, 2002 through
     March 2005. The increase in compensation is being accrued until the Company
     achieves and sustains positive cashflow for at least two consecutive fiscal
     quarters.  As of June 30, 2003,  compensation  payable to Mr.  Champion was
     $116,670.

Note 9: 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 in accordance with Accounting Principles Board Opinion
     No.  25  and  non-employees  in  accordance  with  Statement  of  Financial
     Accounting  Standards No. 123 (SFAS 123).  The Company has  calculated  the
     fair value of warrants and stock options  accounted for in accordance  with
     SFAS 123 according to the Black-Scholes pricing model.

     Issuance of Warrants

         During  the six months  ended June 30,  2003,  in  connection  with the
         Second Notes, the Company assigned  warrants to the lenders to purchase
         up to 1,334,000  shares of common stock at an exercise price of $0.8075
         per share (See Note 7).



                                       14
<PAGE>

          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, 2002                                      21,792,078            $2.61
             Warrants Issued                                              1,344,727             0.80
             Warrants Expired                                            (1,933,451)            2.59
             Warrants Exercised                                          (2,198,179)            0.92
                                                               ---------------------   ---------------------
         Warrants Exercisable at June 30, 2003                           19,005,175           $2.44
                                                               =====================
</TABLE>


          In order to maintain TVG's rights in acquiring 51% of the Youbet,  the
          Company is  obligated  to issue  additional  warrants  to TVG upon the
          exercise of specified  stock  options or  warrants,  or if the Company
          issues any additional securities. (See Note 4)

          Additional  information  about  outstanding  warrants to purchase  the
          Company's common stock at June 30, 2003 is as follows:

<TABLE>
<CAPTION>
                                                                     Warrants Outstanding and Exercisable
                                                           ---------------------------------------------------------
                                                                                Weighted Avg.           Weighted
                                                                                  Remaining             Average
                                                               Number          Contractual Life         Exercise
                                                             of Shares            (in years)             Price
                                                           ---------------  -----------------------  ---------------
                   Range of Exercise Prices:
<S>                     <C>                                       <C>                <C>                 <C>
                        $0.50                                     325,000            3.73                $    0.50
                        $0.8075                                 1,915,600            1.62                     0.81
                        $2.50                                  16,517,575            0.88                     2.50
                        $3.125 - 5.25                              22,000      Not determinable               3.84
                        $7.93 - 19.50                             225,000            0.90                    14.33
                                                           ---------------                           ---------------
                             Total                             19,005,175                                $    2.44
                                                           ===============                           ===============
</TABLE>

     Stock Option Arrangements

         As of June 30,  2003,  under the 1998  Stock  Option  Plan,  there were
         6,378,483  stock  options  granted  out of a total  approved  amount of
         8,500,000.

     Issuance of Stock Options

          During the six months ended June 30, 2003, the Company granted various
          stock options, as follows:

          o    Stock  options  were  granted to  employees  to purchase  230,550
               shares of common stock at exercise  prices  ranging from $0.77 to
               $2.97, the fair market value at the date of grant.  These options
               vest over four years,  and are  exercisable  for a period of five
               years.

          o    Stock options were granted to a non-employee Director to purchase
               40,000 shares of common stock at an exercise price of $0.74,  the
               fair market  value on the date of the grant.  These  options vest
               ratably over a 12-month  period and are  exercisable for a period
               of ten years.



                                       15
<PAGE>

          o    Stock options were granted to an ex-director  to purchase  13,334
               shares of common stock at an exercise  price of $0.68,  below the
               $1.50  market  value at the date of  grant.  These  options  were
               granted to correct a prior award.  They vest  immediately and are
               exercisable for a period of one year.

          Information  with respect to activity under the Company's Stock Option
          Plans is summarized below.

<TABLE>
<CAPTION>
                                                                                               Weighted Average
                                                                         Stock Options          Exercise Price
                                                                      ---------------------  ----------------------
<S>                                                                              <C>                 <C>
         Balance, December 31, 2002                                              6,598,075           $0.84
             Options Granted                                                       283,884            1.68
             Options Exercised                                                  (1,276,660)           0.94
             Options Cancelled                                                    (101,381)           1.83
             Options Forfeited                                                     (85,258)           4.27
                                                                      ---------------------
         Balance, June 30, 2003                                                  5,418,660            0.82
                                                                      =====================
         Options Exercisable (Vested) at June 30, 2003                           3,914,404           $0.80
                                                                      =====================
</TABLE>


         Additional  information  about  outstanding  options  to  purchase  the
         Company's common stock at June 30, 2003 is as follows:

<TABLE>
<CAPTION>
                                               Options Outstanding                      Options Exercisable
                                -------------------------------------------------- -------------------------------
                                                Weighted Average
                                                    Remaining         Weighted                        Weighted
              Range of Exercise   Number of     Contractual Life      Average        Number of        Average
                   Prices           Shares         (in years)      Exercise Price      Shares      Exercise Price
             -----------------------------------------------------------------------------------------------------
<S>          <C>     <C>             <C>              <C>              <C>              <C>            <C>
             $0.26 - $0.99           4,669,761        7.10             $ 0.65           3,437,548      $ 0.64

             $1.00 - 2.15              479,176        3.29               1.19             276,183        1.00

             $2.50                     118,100        1.54               2.50             118,100        2.50

             $2.70 - 3.87              101,623        4.03               2.97              32,573        3.07

             $5.31 - 5.88               50,000        4.08               5.37              50,000        5.37
                                ---------------                                    ---------------
                    TOTAL            5,418,660        6.56             $ 0.82           3,914,404      $ 0.80
                                ===============                                    ===============
</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.  For the six months  ended June 30,  2003,  the
         company  recognized  non-cash   compensation  expense  of  $100,109  as
         required by the variable  accounting  provisions of APB Opinion No. 25,
         Accounting  for Stock  Issued to  Employees  (APBO 25) for the  options
         subject to the repricing plan.



                                       16
<PAGE>

         As  of  June  30,  2003,  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 APBO 25 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  non-employees  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  Plans was estimated on the date of grant
         using the  Black-Scholes  option  pricing  model  using  the  following
         weighted average assumptions:

<TABLE>
<CAPTION>
                                                             Six Mos.
                                                           Ended 6/30/03         2002          2001
                                                        --------------------  -----------   -----------
<S>                                                             <C>              <C>           <C>
             Expected Life in Years                             5.3              8.6           6.3
             Risk Free Interest Rate                            4.3%             5.2%          5.2%
             Dividend Yield                                       0%               0%            0%
             Expected Volatility                               78.3%           109.5%        135.8%
</TABLE>


         The weighted  average fair value at the date of grant for stock options
         and  warrants  granted  during the six months  ended June 30,  2003 was
         $1.06 per option and $0.75 per warrant.

<TABLE>
<CAPTION>
                                                          Six Months Ended         Six Months Ended
                                                            June 30, 2003            June 30, 2002
                                                       ------------------------   --------------------
<S>                                                         <C>                         <C>
              As Reported Net Loss                          $     (2,230,225)           $ (5,471,561)
                 Add:  Stock-based employee
                 compensation expense included in
                 reported income, net of related tax
                 effects                                    $        147,638                  86,519
                 Less:  Total stock based employee
                 compensation expense determined under
                 fair value based methods for all
                 awards, net of related tax effects                 (830,514)             (1,323,535)
                                                       ----------------------   --------------------
              Pro Forma Net Loss                            $     (2,913,101)           $ (6,881,615)
                                                       ======================   ====================

              Net Loss per Share:
                 As Reported                                $          (0.09)             $    (0.27)
                 Pro Forma                                  $          (0.12)             $    (0.34)
</TABLE>


         The Company recorded $1,785,109 for the fair value of 608,701 shares of
         Treasury  Stock  received in  exchange  for the  exercise of  1,800,100
         common stock options and warrants.




                                       17
<PAGE>

Note 10: Legal Proceedings and Guarantees

Legal Proceedings

     Youbet  currently and from time to time is involved in litigations  arising
     in the ordinary  course of its business.  Youbet can give no assurance that
     the  resolution  of any  particular  claim or  proceeding  would not have a
     material  adverse  effect on its  results of  operations,  cash  flows,  or
     financial condition.

     On June 4, 1999, a complaint  was filed against the Company in the Court of
     Chancery  of the State of Delaware  in and for New Castle  County  entitled
     George Von Opel v.  Youbet.com,  Inc. (C.A. No. 17200 NC). In the complaint
     Mr. Von Opel alleges that the Company  breached its contractual  obligation
     pursuant  to a Private  Placement  Memorandum  by failing to  register  the
     shares of common stock underlying 400,000 warrants issued by the Company to
     an affiliate of Mr. Von Opel. The complaint  seeks specific  performance of
     the  alleged  obligation  to  register  such shares and damages for alleged
     breach of contract in the amount of $8.7 million.  The Company answered the
     complaint.  On August 19, 1999, Mr. Von Opel moved for summary  judgment on
     the issue of liability,  which on June 2, 2000,  the court denied.  On June
     25,  2003,  the Delaware  Court  granted a  Stipulated  Dismissal,  without
     prejudice, and the case is closed.

     On October 13, 1999, a search  warrant was served on the Company by the Los
     Angeles Police  Department in connection with an  investigation  by the Los
     Angeles Police Department and the Los Angeles District  Attorney's  Office.
     On January 14, 2000, the Company  reached a civil  resolution  with the Los
     Angeles County District Attorney and the Los Angeles Police Department. The
     Company entered into a final judgment  pursuant to stipulation and modified
     final judgment with the District Attorney resulting in the entry of a civil
     judgment and injunction in which the Company  admitted no wrongdoing and no
     factual or legal  findings were made. On July 28, 2003, the Court issued an
     order extinguishing and dissolving  substantially all of the aforementioned
     final judgment  pursuant to stipulation and the modified final judgment and
     ordering the remainder thereof to automatically  extinguish and dissolve on
     January 13, 2004.

     During the second  quarter of 2003,  the Company  was  advised  that Joseph
     Hasson, Vice President of Corporate Development, had traded in the stock of
     the Company.  While such conduct was unintentional and without knowledge of
     the  requirements  and  provisions  of Section  16(b),  such  activity  was
     determined  by the Company to be in  violation  of the  prohibition  of the
     short-swing profit provisions of Section 16 of the Securities  Exchange Act
     of 1934. In accordance with a settlement agreement dated June 27, 2003, Mr.
     Hasson  disgorged  his purported  short-swing  profit to the Company in the
     amount of $19,652.

Guarantees

     In  November  2002,  the FASB issued FIN No. 45,  ("FIN 45"),  "Guarantor's
     Accounting and Disclosure  Requirements for Guarantees,  including Indirect
     Guarantees of Indebtedness of Others - an interpretation of FASB Statements
     No. 5, 57 and 107 and  rescission of FIN 34". The following is a summary of
     the agreements  that the Company has determined are within the scope of FIN
     45.

     Under its bylaws and certain  consulting  and  employment  agreements,  the
     Company has agreed to  indemnify  its officers  and  directors  for certain
     events or  occurrences  arising as a result of the  officer  or  director's
     serving in such capacity. The term of the indemnification period is for the


                                       18
<PAGE>

     officer's or director's  lifetime.  The maximum  potential amount of future
     payments the Company could be required to make under these  indemnification
     agreements  is unlimited.  However,  the Company has a director and officer
     liability  insurance  policy  that  limits its  exposure  and enables it to
     recover a portion of any future  amounts paid. As a result of its insurance
     policy  coverage,  the Company  believes the estimated  fair value of these
     indemnification  agreements is minimal and has no liabilities  recorded for
     these agreements as of June 30, 2003.

     The Company  enters into  indemnification  provisions  under its agreements
     with other  companies  in its  ordinary  course of  business.  Under  these
     provisions the Company  generally  indemnifies  the  indemnified  party for
     losses  suffered or incurred  by the  indemnified  party as a result of the
     Company's activities.  These  indemnification  provisions generally survive
     termination  of the  underlying  agreement.  The Company  has not  incurred
     material  costs to  defend  lawsuits  or  settle  claims  related  to these
     indemnification agreements. As a result, the Company believes the estimated
     fair value of these agreements is minimal.  Accordingly, the Company has no
     liabilities recorded for these agreements as of June 30, 2003.


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 or Plan of
          Operation and other  sections of this report  contain  forward-looking
          statements that are based on the current  beliefs and  expectations of
          the  Company's  management,  as  well  as  assumptions  made  by,  and
          information  currently  available to, the Company's  management.  Such
          statements  include  those  regarding  general  economic  and e-gaming
          industry   trends.   Because  such   statements   involve   risks  and
          uncertainties,  actual  actions  and  strategies  and the  timing  and
          expected results thereof may differ materially from those expressed or
          implied by such forward-looking  statements,  and the Company's future
          results,  performance or  achievements  could differ  materially  from
          those   expressed   in,  or  implied  by,  any  such   forward-looking
          statements.  Future events and actual results could differ  materially
          from those set forth in or underlying the forward-looking statements.

          This Quarterly Report on Form 10-QSB for the six months ended June 30,
          2003 contains  "forward-looking"  statements within the meaning of the
          Federal  securities laws. These  forward-looking  statements involve a
          number of risks and  uncertainties,  including the timely  development
          and  market  acceptance  of  products  and  technologies,   successful
          integration of acquisitions,  the ability to secure additional sources
          of  financing,  the  ability  to reduce  operating  expense  and other
          factors  described in the  Company's  filing with the  Securities  and
          Exchange Commission.  The actual results that the Company achieves may
          differ  materially  from any  forward-looking  statements  due to such
          risks  and  uncertainties.  The  forward-looking  statements  in  this
          Quarterly Report on Form 10-QSB for the six months ended June 30, 2003
          are subject to risks and uncertainties that could cause actual results
          to differ materially from those results expressed in or implied by the
          statements contained herein.



                                       19
<PAGE>


     Overview

         Youbet.com,  Inc.  ("Youbet.com",   "Youbet",  or  the  "Company")  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.
         The Company has focused on the United States horse race wagering market
         through its main  product,  Youbet  ExpressSM,  which  features  online
         wagering,  simulcast,  and in-depth,  up-to-the-minute  information  on
         horse racing.  The Company is working to expand the  Youbet.com  brand,
         its products,  and its services throughout the United States and select
         international  markets.  The Company  currently  provides its customers
         with  the  ability  to  receive  interactive,   real-time   audio/video
         broadcasts  directly  into  their  computers,  access  a  comprehensive
         database of handicapping  information  and, in most states,  wager on a
         wide selection of U.S. horse races in addition to select Canadian,  and
         Australian horse races.

         In 2002,  greater than 80% of all United  States horse race wagers were
         placed through an off-track  facility.  Off-track wagering is typically
         captured  through  inter-track  simulcasts,   off-track  betting  (OTB)
         facilities,   telephone-based   live  operator  and  interactive  voice
         recognition  (IVR),  and  PC-based  and  wireless  transmissions.  This
         dramatic 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  relatively new
         concept of advance 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.

         Pari-mutuel  racetrack  operators  typically  retain a  portion  of all
         wagers  as  their  commission  prior  to  distributing  payoffs  to the
         winners.  In accordance with the TVG and Magna  Agreements (see Notes 4
         and 5 to the consolidated  financial statements) and various agreements
         with  independent  racetracks,  Youbet receives a pre-arranged fee from
         each  racetrack for wagers  delivered to their  respective  pari-mutuel
         pools. In the aggregate,  these fees represent Youbet's primary revenue
         stream.  The Company  expects the majority of its future revenues to be
         in the form of fees from  wagering.  Additional  revenues are generated
         from   monthly   subscription   fees  and  the  sale  of   handicapping
         information.  Youbet  also  expects  additional  future  revenues  from
         advertising  at the  Youbet  ExpressSM  website,  advertising  on  live
         simulcasts, and the sale of sports information and merchandise.

         Management  believes  that its  ongoing  efforts  to  reduce  costs and
         operate  more  efficiently,  combined  with the  growth  of its  Oregon
         wagering hub and the receipt of licensing  from  California in February
         2002, has improved  working capital to a level needed to support future
         operations.  However,  the  Company  may  from  time  to  time  require
         additional capital to fund operations, reduce its liabilities, and fund
         its expansion plans consistent with the Company's  anticipated  changes
         in operations and infrastructure.



                                       20
<PAGE>

     Critical Accounting Policies

     Revenues

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

     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 consolidated financial statements).
     The  licensing  rights are being  amortized  over a three year  period.  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.

Results of  Operations  for the Three Months Ended June 30, 2003 Compared to the
Three Months Ended June 30, 2002

     Revenues  increased 129% to  $13,781,676  for the second quarter ended June
     30, 2003 as  compared  to  $6,010,885  in the second  quarter of 2002.  The
     Company experienced a growth of 22% in its customer base, a 40% increase in
     the amount of days a customer  wagers per month and a significant  increase
     in dollar amount per wager as compared to June 30, 2002.  Gross handle grew
     substantially  from $39,572,694 for the second quarter 2002, to $73,338,576
     for  the  most  recent  quarter  with   record-breaking   gross  handle  of
     $28,187,683  in  May  2003.  These  results  were  primarily  due to (1) an
     increase in wagering  activity at the  Company's  Oregon  wagering hub, (2)
     customer  account  growth (3)  increased  awareness  of Youbet in the horse
     racing  industry  due to  co-marketing  agreements  with  Churchill  Downs,
     Maryland  Jockey Club,  Hollywood  Park,  and the  California  Authority of
     Racing Fairs, and (4) enhancements in Web content and functionality.

     The Company records gross proceeds from its wholly-owned subsidiary, Youbet
     Oregon,  Inc.,  as revenues  and records  the  related  costs as fees.  The
     Company also  recognizes as revenue net fees earned on wagers  generated at
     third party wagering facilities ("Magna").

     Operating Expenses

         TRACK FEES:  Track Fees increased to $6,225,483 in 2003, as compared to
         $2,432,108  in 2002.  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,  and the Oregon
         Racing Commission.

         LICENSING  FEES  -  RELATED  PARTY:  Licensing  Fees  -  Related  Party
         represents  amounts paid and payable as a result of the agreement  with
         TVG (See  Note 4 to the  consolidated  financial  statements).  For the
         three  months  ended  June 30,  2003,  Licensing  Fees - Related  Party
         increased to $2,864,017 as compared to $1,292,372 in 2002 primarily due
         to increased wagering on TVG tracks.



                                       21
<PAGE>

         NETWORK  OPERATIONS:  Network  Operations  increased  1% to $507,108 in
         2003,  as compared to $503,501 in 2002.  The increase was primarily due
         to additional repair and maintenance costs.  Network Operations consist
         of costs for salaries, data center management, and telecommunications.

         RESEARCH AND  DEVELOPMENT:  Research and Development  increased 3.5% to
         $565,976 in 2003,  as compared  to $547,066 in 2002.  The Company  will
         continue to invest in the  development  of its  network  infrastructure
         which  management  believes to be necessary in achieving  its strategic
         objectives.

         SALES AND  MARKETING:  Sales and Marketing  increased 2% to $612,286 in
         2003,  as compared to $601,138 in 2002.  The increase was primarily due
         to increased expenses associated with marketing programs and salaries.

         GENERAL AND ADMINISTRATIVE: General and Administrative increased 44% to
         $2,400,773 in 2003 as compared to $1,672,327 in 2002.  The increase was
         primarily  due to an increase in  salaries,  stock-based  compensation,
         professional   fees,   and   administrative   expenses.   General   and
         Administrative  consists primarily of salaries,  benefits,  insurances,
         facilities expenses, legal, accounting, and investor relations.

         DEPRECIATION AND AMORTIZATION:  Depreciation and Amortization increased
         7%  to   $1,499,382   in  2003  as  compared  to  $1,400,108  in  2002.
         Depreciation  and  Amortization  primarily  consists of amortization of
         licensing  rights  related  to the  TVG  Agreement  (See  Note 4 to the
         consolidated financial statements).

     Other Income (Expense)

         INTEREST  INCOME:  Interest Income  increased 79% to $11,719 in 2003 as
         compared to $6,551 in 2002.  The increase was  primarily  due to higher
         balances of cash and cash equivalents.

         INTEREST  EXPENSE:  Interest  Expense  decreased to $120,568 in 2003 as
         compared to $144,832 in 2002. The decrease was primarily due to a lower
         effective  interest rate on the newly issued unsecured note as compared
         to 2002 (See Note 7 to the consolidated financial statements).

         OTHER INCOME: Other Income represents a recovery on a legal matter (See
         Note 10 to the consolidated financial statements).

Results of Operations for the Six Months Ended June 30, 2003 Compared to the Six
Months Ended June 30, 2002

     Revenues  increased 187% to  $24,788,083  for the six months ended June 30,
     2003 as compared to $8,628,099 in 2002. The Company experienced a growth of
     22% in its  customer  base, a 40% increase in the amount of days a customer
     wagers per month and a  significant  increase in dollar amount per wager as
     compared to June 30, 2002. Gross handle grew substantially from $66,629,595
     for the first six months in 2002, to $134,304,817 for the current year with

                                       22
<PAGE>

     record-breaking gross handle of $28,187,683 in May 2003. These results were
     primarily  due to (1) an  increase in  wagering  activity at the  Company's
     Oregon wagering hub, (2) customer account growth (3) increased awareness of
     Youbet in the horse racing  industry due to  co-marketing  agreements  with
     Churchill Downs,  Maryland Jockey Club,  Hollywood Park, and the California
     Authority  of Racing  Affairs,  and (4)  enhancements  in Web  content  and
     functionality.

     The Company records gross proceeds from its wholly-owned subsidiary, Youbet
     Oregon,  Inc.,  as revenues  and records  the  related  costs as fees.  The
     Company also  recognizes as revenue net fees earned on wagers  generated at
     third party wagering facilities ("Magna").

     Operating Expenses

         TRACK FEES: Track Fees increased to $12,079,310 in 2003, as compared to
         $2,889,108  in 2002.  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,  and the Oregon
         Racing Commission.

         LICENSING  FEES  -  RELATED  PARTY:  Licensing  Fees  -  Related  Party
         represents  amounts paid and payable as a result of the agreement  with
         TVG (See Note 4 to the consolidated financial statements).  For the six
         months ended June 30, 2003, Licensing Fees - Related Party increased to
         $4,187,852 as compared to $1,731,409 in 2002 primarily due to increased
         wagering on TVG tracks.

         NETWORK  OPERATIONS:  Network  Operations  decreased  5% to $946,010 in
         2003,  as compared to $995,436 in 2002.  The decrease was primarily due
         reduced expenses  associated with salaries.  Network Operations consist
         of costs for salaries, data center management, and telecommunications.

         RESEARCH  AND  DEVELOPMENT:  Research and  Development  increased 3% to
         $1,066,157 in 2003, as compared to $1,036,449 in 2002. The Company will
         continue to invest in the  development  of its  network  infrastructure
         which  management  believes to be necessary in achieving  its strategic
         objectives.

         SALES AND MARKETING:  Sales and Marketing  decreased 27% to $869,819 in
         2003, as compared to $1,185,217 in 2002. The decrease was primarily due
         to reduced expenses associated with marketing programs and salaries.

         GENERAL AND ADMINISTRATIVE: General and Administrative increased 37% to
         $4,567,902 in 2003 as compared to $3,335,897 in 2002.  The increase was
         primarily  due to an increase in  salaries,  stock-based  compensation,
         professional   fees,   and   administrative   expenses.   General   and
         Administrative  consists primarily of salaries,  benefits,  insurances,
         facilities expenses, legal, accounting, and investor relations.

         DEPRECIATION AND AMORTIZATION:  Depreciation and Amortization increased
         3%  to   $2,883,642   in  2003  as  compared  to  $2,798,904  in  2002.
         Depreciation  and  Amortization  primarily  consists of amortization of
         licensing rights related to the TVG Agreement (See Note 4).



                                       23
<PAGE>


     Other Income (Expense)

         INTEREST  INCOME:  Interest Income  decreased 11% to $20,505 in 2003 as
         compared to $23,017 in 2002.  The decrease was  primarily  due to lower
         interest rates in 2003 as compared to 2002.

         INTEREST  EXPENSE:  Interest  Expense  increased to $515,718 in 2003 as
         compared to $150,240 in 2002.  The  increase was  primarily  due to (1)
         expense  associated  with the  reissuance of Series C and M Warrants in
         the first  quarter and (2) accrued  interest on newly issued  unsecured
         notes and amortization of the note discount (See Note 7).

         OTHER INCOME:  Other Income represents the write-off of $57,945 related
         to the settlement of a disputed invoice with a vendor and a recovery on
         a legal matter (See Note 10 to the consolidated financial statements).

Liquidity and Capital Resources

     The Company has financed its operations  primarily  through the sale of its
     securities,  convertible  debt,  and private debt  placements.  At June 30,
     2003, the Company had net working  capital of $2,087,081  compared to a net
     working  capital  deficit of $2,267,997  at December 31, 2002.  The Company
     incurred net losses from  operations for the six months ended June 30, 2003
     and year ended  December  31, 2002.  As of June 30,  2003,  the Company had
     $7,277,469 in cash and cash  equivalents and $2,981,775 in restricted cash.
     The Company's  principal  recurring cash commitments consist of payroll and
     benefits,  business insurance, and real estate leases.  Management believes
     that its  ongoing  efforts to reduce  costs and operate  more  efficiently,
     combined with the growth of its Oregon wagering hub and revenues  resulting
     from the  receipt of  licensing  from  California  in  February  2002,  has
     improved cash flow to a level needed to support future operations. However,
     the  Company  may  from  time  to  time  seek  additional  capital  to fund
     operations, reduce its liabilities, and fund its expansion plans consistent
     with the Company's anticipated changes in operations and infrastructure.

     The Company entered into a Securities Purchase Agreement on March 21, 2002,
     whereby the Company  issued  one-year  secured  notes (the  "Notes") in the
     aggregate  principal  amount of $750,000 at an interest  rate of 12% to the
     Company's then Chairman of the Board and Chief  Executive  Officer,  and to
     seven other  investors for their  $750,000  investment  in the Company.  On
     January 24, 2003,  the Notes were retired ahead of schedule and $80,137 for
     all accrued interest through February 8, 2003, was paid. In connection with
     issuance of the Notes,  the Company issued  five-year  warrants to purchase
     750,000 shares of the Company's  common stock at an exercise price of $0.50
     per share.  The  warrants  expire  five years  from the  issuance  date and
     contain certain  registration  rights and cashless exercise feature.  Using
     the  Black-Scholes  model,  the  Company  recorded  the  fair  value of the
     warrants issued,  $437,137,  as a note discount and were amortized over one
     year as interest expense. On January 24, 2003, the Notes were retired ahead
     of schedule and $80,137 for all accrued  interest through February 8, 2003,
     was paid.

     The Company entered into a second Securities Purchase Agreement on February
     11, 2003,  whereby the Company issued two-year unsecured notes (the "Second
     Notes") in the aggregate principal amount of $2,000,000 at an interest rate
     of 10% to several investors (the "Investors").  Interest is accrued monthly
     and paid  quarterly;  principal is due on February 11, 2005. In addition to


                                       24
<PAGE>

     the  issuance  of the  Second  Notes,  the  Company  agreed  to  cause  the
     assignment to the Investors of a portion of warrants  previously  issued by
     the Company. In this connection,  holders of the Company's C and M warrants
     (the  "Holders")  were offered the opportunity to assign a portion of their
     warrants  to the  investors  on the  following  basis:  (a) the  per  share
     exercise  price of warrants held by the Holders would be reduced to $.8075;
     (b) the term of the warrants  would be extended to February  11, 2005;  and
     (c) the number of warrant  shares  retained by the Holders would be reduced
     to 20% of the warrant shares that were currently  issuable  pursuant to the
     exercise of the  warrants  (the  "Retained  Warrant  Shares").  The warrant
     shares other than the Retained  Warrant Shares would be either cancelled by
     the Company or assigned to the Investors.  As of April 4, 2003, warrants to
     acquire 693,194 shares of the Company's  Common Stock were  cancelled,  the
     number of Retained Warrant Shares was 2,034,963 and warrants to purchase an
     aggregate of 1,334,000 shares were assigned to the Investors at an exercise
     price of $0.8075 per share (representing a discount of 15% from the closing
     market  price  of the  Company's  Common  Stock of $0.95 on the date of the
     Securities Purchase Agreement).  Using the Black-Scholes model, the Company
     recorded  the fair  value of the  warrants  assigned,  $518,223,  as a note
     discount to be amortized  over two years as interest  expense.  Accumulated
     amortization  of  discount  on the Second  Notes was $98,439 as of June 30,
     2003.

     Net cash used in operating  activities  was $8,053 for the six months ended
     June 30, 2003 compared to $448,430 provided by operating activities for the
     six months ended June 30, 2002. The decrease was primarily due to increased
     working capital needs due to reduction in accounts payable - track related,
     fees payable - related parties,  accrued compensation and accrued expenses.
     The net working capital  increase was partially offset by a decrease in net
     loss and an increase in non-cash interest expense.

     Net cash  provided by investing  activities  was $36,446 for the six months
     ended June 30, 2003  compared to $32,314 used in investing  activities  for
     the six months ended June 30, 2002.  The  increase was  primarily  due to a
     decrease  in  investing  related  restricted  cash offset by an increase in
     purchases of property and equipment.

     Net cash provided by financing activities was $2,689,179 for the six months
     ended June 30, 2003 and  $753,885  for the six months  ended June 30, 2002.
     During the  six-month  period  ended June 30,  2003,  the Company  received
     $1,439,179  net in cash from the exercise of stock  options and warrants as
     well as $2,000,000 proceeds from issuance of second notes payable offset by
     a $750,000  payment of a prior notes payable.  During the six months period
     ended June 30, 2002, the Company received  $750,000  proceeds from issuance
     of notes payable.

Item 3. Controls and Procedures

As of June 30, 2003, 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.



                                       25
<PAGE>

There have been no changes in our internal control over financial reporting that
occurred during the quarter ended June 30, 2003 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

     Youbet currently and from time to time is involved in litigation arising in
     the ordinary course of its business.  Youbet can give no assurance that the
     resolution of any particular  claim or proceeding would not have a material
     adverse  effect on its  results of  operations,  cash flows,  or  financial
     condition.

     On June 4, 1999, a complaint  was filed against the Company in the Court of
     Chancery  of the State of Delaware  in and for New Castle  County  entitled
     George Von Opel v.  Youbet.com,  Inc. (C.A. No. 17200 NC). In the complaint
     Mr. Von Opel alleges that the Company  breached its contractual  obligation
     pursuant  to a Private  Placement  Memorandum  by failing to  register  the
     shares of common stock underlying 400,000 warrants issued by the Company to
     an affiliate of Mr. Von Opel. The complaint  seeks specific  performance of
     the  alleged  obligation  to  register  such shares and damages for alleged
     breach of contract in the amount of $8.7 million.  The Company answered the
     complaint.  On August 19, 1999, Mr. Von Opel moved for summary  judgment on
     the issue of liability,  which on June 2, 2000,  the court denied.  On June
     25,  2003,  the Delaware  Court  granted a  Stipulated  Dismissal,  without
     prejudice, and the case is closed.

     On October 13, 1999, a search  warrant was served on the Company by the Los
     Angeles Police  Department in connection with an  investigation  by the Los
     Angeles Police Department and the Los Angeles District  Attorney's  Office.
     On January 14, 2000, the Company  reached a civil  resolution  with the Los
     Angeles County District Attorney and the Los Angeles Police Department. The
     Company entered into a final judgment  pursuant to stipulation and modified
     final judgment with the District Attorney resulting in the entry of a civil
     judgment and injunction in which the Company  admitted no wrongdoing and no
     factual or legal  findings were made. On July 28, 2003, the Court issued an
     order extinguishing and dissolving  substantially all of the aforementioned
     final judgment  pursuant to stipulation and the modified final judgment and
     ordering the remainder thereof to automatically  extinguish and dissolve on
     January 13, 2004.

     During the second  quarter of 2003,  the Company  was  advised  that Joseph
     Hasson, Vice President of Corporate Development, had traded in the stock of
     the Company.  While such conduct was unintentional and without knowledge of
     the  requirements  and  provisions  of Section  16(b),  such activity is in
     violation  of the  prohibition  of the  short-swing  profit  provisions  of
     Section 16 of the  Securities  Exchange Act of 1934. In  accordance  with a
     settlement  agreement  dated  June  27,  2003,  Mr.  Hasson  disgorged  his
     purported short-swing profit to the Company in the amount of $19,652.




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<PAGE>


Item 2. Changes in Securities

     Issuance of Stock Options

         During the six months ended June 30, 2003, the Company  granted various
         stock options, as follows:

         o        Stock  options were  granted to employees to purchase  230,550
                  shares of common stock at exercise  prices  ranging from $0.77
                  to $2.97,  the fair market  value at the date of grant.  These
                  options vest over four years, and are exercisable for a period
                  of five years.

         o        Stock  options  were  granted to a  non-employee  Director  to
                  purchase 40,000 shares of common stock at an exercise price of
                  $0.74,  the fair market value on the date of the grant.  These
                  options  vest   ratably   over  a  12-month   period  and  are
                  exercisable for a period of ten years.

     Issuance of Warrants

         During  the six months  ended June 30,  2003,  in  connection  with the
         Second Notes, the Company issued warrants to the lenders to purchase up
         to 1,334,000 shares of common stock at an exercise price of $0.8075 per
         share (See Note 7 to the consolidated financial statements).

Item 3. Defaults Upon Senior Securities

     None.

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

     No matters were submitted to a vote of Youbet.com's stockholders during the
     fiscal quarter ended June 30, 2003.

Item 5. Other Information

     Effective  August 5,  2003,  the  Board of  Directors  unanimously  elected
     Charles Champion,  the Company's Chief Executive Officer and President,  to
     the additional position of Chairman of the Board.

     The election  follows the  resignation  of Lawrence Lucas as a Director and
     Chairman  of the  Board.  Mr.  Lucas is  leaving  the Board to launch a new
     venture in the  international  gaming industry that could produce strategic
     business  opportunities  for the  Company  in the  future.  Mr.  Lucas will
     continue to serve as an advisor to the Company.




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<PAGE>

Item 6. Exhibits and Reports On Form 8-K

     (a) Exhibits

         Exhibit 10:    Settlement Agreement and Release
         Exhibit 31.1   Certification   Pursuant   to   Section   302  of  the
                        Sarbanes-Oxley  Act of 2002
         Exhibit 31.2   Certification  Pursuant  to Section   302  of  the
                        Sarbanes-Oxley Act of 2002
         Exhibit 32:    Certifications   Pursuant   to  Section  906  of  the
                        Sarbanes-Oxley Act of 2002

     (b) Reports on Form 8-K

         Form 8-K dated May 15,  2003  related to the  Company's  first  quarter
         earnings press release.


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.

      August 8, 2003                 By: /s/ Charles F. Champion
                                         --------------------------------------
                                         Charles F. Champion
                                         President and Chief Executive Officer

      August 8, 2003                 By: /s/ Gary W. Sproule
                                         --------------------------------------
                                         Gary W. Sproule
                                         Chief Financial Officer


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