<PAGE>

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

                                   -----------

                                   Form 10-QSB

(Mark One)



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

                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002

                                       OR

[_]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
     OF 1934

                  FOR THE TRANSITION PERIOD FROM _____ TO_____

                       COMMISSION FILE NUMBER: 33-13789LA

                                   -----------

                                YOUBET.COM, INC.

             (Exact name of registrant as specified in its charter)

                DELAWARE                                   95-4627253
      (State or other jurisdiction                      (I.R.S. Employer
    of incorporation or organization)                Identification Number)


               5901 De Soto Avenue, Los Angeles, California 91367
          (Address of principal executive offices, including zip code)

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

                                   -----------

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

     As of May 14, 2002, the issuer had 19,537,950 shares of common stock issued
and outstanding.

<PAGE>

                                YOUBET.COM, INC.
                              INDEX TO FORM 10-QSB
                              FOR THE QUARTER ENDED
                                 MARCH 31, 2002


<TABLE>
<CAPTION>
                                                                                                                        Page
<S>                                                                                                                     <C>
PART I.   FINANCIAL INFORMATION

Item 1.   Financial Statements
               Consolidated Balance Sheets as of March 31, 2002 and December 31, 2001 .............................         3
               Consolidated Statements of Operations for the three months ended March 31, 2002
                  and March 31, 2001 ..............................................................................         4
               Consolidated Statements of Cash Flows for the three months ended March 31, 2002
                  and March 31, 2001 ..............................................................................         5
               Notes to Unaudited Consolidated Financial Statements ...............................................         6
Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations ...................        13
Item 3.   Quantitative and Qualitative Disclosures About Market Risk ..............................................        17

PART II.  OTHER INFORMATION
Item 1.   Legal Proceedings .......................................................................................        18
Item 2.   Changes in Securities ...................................................................................        18
Item 4.   Submission of Matters to a Vote of Security Holders .....................................................        19
Item 5.   Other Information .......................................................................................        19
Item 6.   Exhibits and Reports on Form 8-K ........................................................................        19
Signatures ........................................................................................................        20
</TABLE>

                                        2

<PAGE>

Part I. Financial Information
Item 1. Financial Statements

                                YOUBET.COM, INC.
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                         March 31, 2002      December 31, 2001
                                                                                      -----------------      -----------------
                                                                                          (Unaudited)            (Audited)
<S>                                                                                   <C>                    <C>
ASSETS

Current assets:
Cash and cash equivalents                                                                 $  3,038,060         $   3,560,740
Restricted cash, current portion (Notes 2 and 3)                                               143,802               107,867
Receivables                                                                                    464,815               278,235
Interest and other receivables                                                                  26,110                59,468
Prepaid expenses                                                                               227,821               433,636
                                                                                      ----------------         -------------
     Total current assets                                                                    3,900,608             4,439,946
                                                                                      ----------------         -------------
Property and equipment                                                                       9,880,689             9,846,011
Less: Accumulated depreciation and amortization                                             (4,461,660)           (3,966,710)
                                                                                      ----------------         -------------
     Property and equipment, net                                                             5,419,029             5,879,301
                                                                                      ----------------         -------------
Licensing rights, net (Note 4)                                                               7,734,367             8,638,213
Restricted cash, net of current portion (Note 2)                                                     -               812,938
Deposits and other (Note 1 and 2)                                                            1,534,931               115,175
                                                                                      ----------------         -------------
     Total assets                                                                         $ 18,588,935         $  19,885,573
                                                                                      ================         =============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable                                                                          $  1,848,397         $   1,627,588
Accrued expenses                                                                             1,535,138             1,302,106
Customer deposits                                                                              530,208               361,500
Accrued compensation and related items (Note 8)                                                423,253               335,113
Deferred revenues                                                                                8,131                 8,097
Notes payable (face $750,000), net of discount of $434,742 (Note 5)                            315,258                     -
                                                                                      ----------------         -------------
     Total current liabilities                                                               4,660,385             3,634,404
                                                                                      ----------------         -------------
     Total liabilities                                                                       4,660,385             3,634,404
Commitments and contingencies (Notes 1, 5, and 7)
Stockholders' equity:
Preferred stock, $.001 par value--Authorized 1,000,000 shares, none outstanding                      -                     -
Common stock, $.001 par value--Authorized 100,000,000 shares, 19,537,950
     shares outstanding as of December 31, 2001 and March 31, 2002                              19,538                19,538
Additional paid-in capital                                                                  95,657,333            95,084,423
Accumulated deficit                                                                        (81,748,321)          (78,852,792)
                                                                                      ----------------         -------------
     Total stockholders' equity                                                             13,928,550            16,251,169
                                                                                      ----------------         -------------
     Total liabilities and stockholders' equity                                           $ 18,588,935         $  19,885,573
                                                                                      ================         =============
</TABLE>

     See accompanying notes to unaudited consolidated financial statements.

                                        3

<PAGE>

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

<TABLE>
<CAPTION>
                                                                                 Three Months Ended March 31,
                                                                        -----------------------------------------------
                                                                                 2002                     2001
                                                                        ----------------------   ----------------------
<S>                                                                     <C>                      <C>
Revenues                                                                $            2,617,215   $            1,647,765
Operating expenses:
   Network operations                                                                  491,935                  714,471
   Research and development                                                            489,383                  713,523
   Sales and marketing                                                               1,659,456                1,063,930
   General and administrative                                                        1,484,230                1,185,788
   Depreciation and amortization                                                     1,398,796                  493,358
                                                                        ----------------------   ----------------------
     Total operating expenses                                                        5,523,800                4,171,070
                                                                        ----------------------   ----------------------
Loss from operations                                                                (2,906,585)              (2,523,305)

Other income (expense):
   Interest income                                                                      16,464                  176,058
   Interest expense                                                                     (5,407)                  (3,792)
   Other                                                                                     -                   (2,087)
                                                                        ----------------------   ----------------------
     Total other income                                                                 11,057                  170,179
                                                                        ----------------------   ----------------------
Net loss                                                                $           (2,895,528)  $           (2,353,126)
                                                                        ======================   ======================
Basic and diluted:
   Net loss per common share                                            $                (0.15)  $                (0.12)
                                                                        ======================   ======================
   Weighted average number of common shares outstanding                             19,537,950               19,520,850
                                                                        ======================   ======================
</TABLE>

     See accompanying notes to unaudited consolidated financial statements.

                                        4

<PAGE>

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

<TABLE>
<CAPTION>
                                                                                             Three Months Ended March 31,
                                                                                            ------------------------------
                                                                                                2002              2001
                                                                                            ------------      ------------
<S>                                                                                         <C>               <C>
Increase (Decrease) in Cash and Cash Equivalents
Cash flows from operating activities:
     Net loss                                                                               $ (2,895,528)     $ (2,353,126)
Adjustments to reconcile net loss to net cash used in operating activities:
     Depreciation and amortization                                                             1,398,796           493,358
     Amortization of fair value of warrants issued for financing costs                             2,395                 -
     Non-cash compensation                                                                       135,772            (5,090)
     Loss on disposal of assets                                                                        -             3,296
Change in operating assets and liabilities:
     Receivables                                                                                (186,580)          169,034
     Prepaid expenses                                                                            205,815           (22,092)
     Other current assets                                                                       (110,444)          253,403
     Deposits                                                                                   (498,951)           41,702
     Accounts payable                                                                            220,809          (589,678)
     Customer deposits                                                                           168,708                 -
     Accrued compensation and related items                                                       88,140           (98,916)
     Other accrued expenses                                                                      233,032           171,526
     Deferred revenues                                                                                33             1,552
                                                                                            ------------      ------------
          Net cash used in operating activities                                               (1,238,003)       (1,935,031)
                                                                                            ------------      ------------

Cash flows from investing activities:
     Restricted cash                                                                                   -           107,867
     Purchases of property and equipment                                                         (34,677)         (458,780)
                                                                                            ------------      ------------
          Net cash used in investing activities                                                  (34,677)         (350,913)
                                                                                            ------------      ------------

Cash flows from financing activities:
     Proceeds from notes payable                                                                 750,000                 -
     Payments on capitalized lease obligations                                                         -            (8,909)
                                                                                            ------------      ------------
          Net cash provided by (used in) financing activities                                    750,000            (8,909)
                                                                                            ------------      ------------
Net decrease in cash and cash equivalents                                                       (522,680)       (2,294,853)
Cash and cash equivalents at the beginning of the period                                       3,560,740        12,094,172
                                                                                            ------------      ------------
Cash and cash equivalents at the end of the period                                          $  3,038,060      $  9,799,319
                                                                                            ============      ============

Supplemental disclosure of cash flow information
     Cash paid for Interest                                                                 $        639      $      3,792
     Reclassification of Restricted Cash to Deposits (Note 2)                               $    920,805      $          -
                                                                                            ============      ============

Non-cash investing and financing activities:
   Non-cash compensation                                                                    $          -      $        893
   Fair value of warrants issued for financing costs                                        $    437,137      $          -
                                                                                            ============      ============
</TABLE>

     See accompanying notes to unaudited consolidated financial statements.

                                        5

<PAGE>

                                YOUBET.COM, INC.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                        THREE MONTHS ENDED MARCH 31, 2002

Note 1-Organization and Basis of Presentation

Business

     Youbet.com, Inc. ("Youbet.com" or the "Company") has established itself as
one of the leading global brand names for online live event sports entertainment
and wagering. Wagering on live events, such as horse racing, car racing, soccer,
football, etc, is a large global industry which adapts well to the Internet
space. The Company has initially focused on the United States horse wagering
market and its principal product, the You Bet Network, a PC-based system which
allows a customer to transmit information and thereby process wagers. The
Company is working to expand the Youbet.com brand, product and services in the
United States and overseas market. The Company currently provides its United
States network members the ability to watch, access a comprehensive database of
handicapping information and, in most states, the ability to wager on a wide
selection of coast-to-coast thoroughbred, quarter horse, and harness horse
racing, via its exclusive virtual private network. The You Bet Network is
completely interactive and provides a real-time interactive audio video
environment.

     The Company believes it is an innovator in the online live event wagering
industry and intends to exploit the opportunities available to it in the United
States and to pursue international markets aggressively. Future developments
include enhancement and improvement of its existing products and technologies,
development of new products and international expansion. To enhance and improve
the You Bet Network, the Company has developed a web-based application "Youbet
Express" which was launched in March 2001, and a state of the art phone wagering
system which was launched in September 2001. Additionally, the Company is
looking into improving its web content management and exploring other revenue
streams.

     On August 2, 2001, the Company received a multi-jurisdictional license from
the State of Oregon horse racing authorities for the acceptance and placement of
wagers. The acceptance and placement of wagers is processed through Youbet
Oregon, Inc., a wholly owned subsidiary of the Company. The Company commenced
operations in Oregon during the third quarter of 2001.

     On February 21, 2002, Youbet.com received a license from the California
Horse Racing Board authorizing the acceptance by the Company of online and
telephone horse racing pari-muteul wagering from California residents. The
acceptance and placement of wagers will be processed through Youbet Oregon, Inc.
The Company also accepts and process wagers through another licensed
account-wagering entity owned by Magna Entertainment, Corp., ("Magna"). In
connection with obtaining this license, the Company placed a $500,000 cash
deposit with the California Horse Racing Board which is classified as deposits
in the accompanying unaudited consolidated financial statements.

                                        6

<PAGE>

Going Concern

     The accompanying unaudited consolidated financial statements have been
prepared assuming that the Company will continue as a going concern, which
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. The Company has suffered significant recurring
operating losses and needs to raise additional funds to accomplish its
objectives. These matters raise substantial doubt about the Company's ability to
continue as a going concern. The Company believes that its previous efforts to
reduce costs and operate more efficiently, combined with the opening of the
Oregon wagering hub in September 2001, and the Company receipt of licensing from
California in February 2002, will improve cash flows. However, the Company will
require additional capital to fund operations and pay down its liabilities, as
well as to fund its expansion plans consistent with Youbet.com's anticipated
changes in operations and infrastructure. During March 2002, the Company
successfully raised $750,000 in debt financing (see Note 5). The Company is
exploring various alternatives to raise this additional capital, but there can
be no assurances that the Company will be successful in this regard. To the
extent that the Company is unable to secure the capital necessary to fund its
future cash requirements on a timely basis and/or under acceptable terms and
conditions, the Company may not have sufficient cash resources to maintain
operations. In such event, the Company may be required to consider a formal or
informal restructuring or reorganization. No adjustments have been made to the
unaudited consolidated financial statements that might result from the outcome
of this uncertainty.

Basis of Presentation

     In the opinion of management, the accompanying unaudited financial
statements for the three months ended March 31, 2002 and 2001 include all
adjustments (consisting of normal recurring accruals) which management considers
necessary to present fairly the financial position of the Company as of March
31, 2002, the results of its operations for the three months ended March 31,
2002 and March 31, 2001, and its cash flows for the three months ended March 31,
2002 and March 31, 2001 in conformity with generally accepted accounting
principles ("GAAP"). These financial statements have been prepared consistently
with the accounting policies described in the Company's Annual Report on Form
10-K for the year ended December 31, 2001, as filed with the Securities and
Exchange Commission on April 15, 2002 and should be read in conjunction with
this Quarterly Report on Form 10-QSB. The results of operations for the three
months ended March 31, 2002 are not necessarily indicative of the consolidated
results of operations to be expected for the full fiscal year ending December
31, 2002. Certain information and footnote disclosures normally included in the
financial statements presented in accordance with GAAP have been condensed or
omitted.

Use of Estimates

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses

                                        7

<PAGE>

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 antidilutive.

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 March 31, 2002, and December 31, 2001, the
Company had uninsured cash and cash equivalents, and restricted cash of
$2,797,900 and $4,228,800 respectively.

Reclassifications

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

Note 2-Description of Property

     Youbet.com's executive and operating offices occupy approximately 30,000
square feet and are located at 5901 De Soto Avenue, Los Angeles, California
under a lease that expires March 15, 2010. The base term of the lease is ten
years with an option to extend an additional five years. Base rent payments are
$60,078 per month with annual increases as specified in the lease agreement. In
conjunction with this lease agreement, the Company obtained a one-year
$1,029,000 letter of credit, which was secured by cash. The Company is obligated
for the next ten years to obtain a letter of credit equal to the original amount
of $1,029,000 less $107,867 per year for every year elapsed during the first
five years and less $97,867 per year for every year elapsed thereafter. As of
December 31, 2001, Youbet.com had obtained a letter of credit in the amount of
$920,805, which is classified as restricted cash in the Company's accompanying
audited consolidated financial statements. The Company did not renew the letter
of credit when it expired on March 28, 2002 and as such the landlord drew
$920,805 against the letter of credit and is holding the monies as a deposit.
Management intends to obtain a new letter of credit to replace the prior one.
Upon replacement of the letter of credit, the landlord will refund the
aforementioned deposit to the Company.

     On July 1, 2001 the Company entered into a lease agreement for its Oregon
facility. The base term of the lease is three years. Base rent payments are
$2,103 per month with annual increases as specified in the lease agreement.

Note 3-Restricted Cash

     The Company uses several vendors to process its credit card and check
transactions. Some of these vendors require that the Company keep in reserve,
for up to six months, a certain percentage of the total amounts

                                        8

<PAGE>

processed as a security against any future potential losses. These reserves
amounted to $143,802 and are classified as restricted cash as of March 31, 2002.

Note 4-Agreement with TVG

     In May 2001, Youbet.com entered into a track content and patent license
agreement (the "License Agreement") and a warrant issuance agreement (the
"Warrant Agreement") with TVG. These agreements relate to the grant by TVG to
Youbet.com of a non-exclusive license to use telephones and certain simulcast
audio, video and data content for the purpose of streaming such content online
and the agreement of race tracks 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.com, 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.com 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.com 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.com 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.com 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.com under the License
Agreement, Youbet.com has agreed to pay to TVG fees based on the handle
generated by Youbet.com from wagering activity and to issue to TVG the warrants
to purchase Youbet.com common stock on the terms and conditions set forth in the
Warrant Issuance Agreement, as described below (see "Competition"). The TVG fees
are as follows:

     .    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 only. 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.com
          network.

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

                                        9

<PAGE>

     .    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.com will pay to TVG the
following fees:

     .    At such time as Youbet.com opens its own account wagering facility,
          with respect to wagers accepted or processed through an account
          wagering facility other than Magna, Youbet.com will charge customers a
          transaction fee of 25 cents per wager, with the first $3.00 of such
          fees per customer per month being retained by Youbet.com, 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.

     .    Commencing with the opening of Youbet.com's own account wagering
          facility, with respect to account wagers processed through Magna,
          Youbet.com 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.com 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.com is permitted to modify or waive transaction fees for
          certain customers, provided that it shares any such fees from such
          customers equally with TVG.

     .    Commencing with the first calendar quarter in which Youbet.com
          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.

     .    With respect to account wagers on races conducted at the TVG Exclusive
          Tracks from Youbet.com 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.

     .    With respect to account wagers on races conducted at the TVG Exclusive
          Tracks from Youbet.com customers in other states other, (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.

     .    With respect to account wagers on races conducted at non-TVG Exclusive
          Tracks from Youbet.com customers with an account address within a
          25-mile radius of any TVG Exclusive Track, Youbet.com 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.com's partner tracks located within the 25-mile radius.

                                       10

<PAGE>

     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.com 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 model, as a deferred asset
captioned "Licensing Rights" and is being amortized over three years, the
estimated life of the Company's technology. Accumulated amortization as of March
31, 2002 was $833,838.

     The Company issued to TVG the Additional TVG Warrant on September 20, 2001
(the time the Warrant Agreement was approved by the stockholders) entitling TVG
to purchase 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 Warrant Shares, is equal to
51% of the sum of (i) the total number of shares of Youbet.com 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 model, as a
deferred asset captioned "Licensing Rights" and is being amortized over three
years, the estimated life of the Company's technology. Accumulated amortization
as of March 31, 2002 was $1,396,152. 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.com 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.

     Estimated aggregate amortization expense relating to Licensing Rights for
the next three years is as follows:

     2002           $3,615,408
     2003            3,615,408
     2004              503,551

Note 5-Notes payable

     The Company entered into a Securities Purchase Agreement on March 21, 2002,
whereby the Company issued a series of 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 Chief Executive Officer and seven other investors. Both principal
and all interest accrued on these Notes will be payable at the earlier of a)
one-year from the date of issuance, or b) upon the Company's completion of
funding in an amount greater than two

                                       11

<PAGE>

million dollars ($2,000,000), excluding the Notes, in any ninety-day period
prior to the maturity of the Note. 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 Company recorded the
fair value of the warrants issued of $437,137, using the Black-Scholes model, as
a note discount and is being amortized over one year as interest expense.

Note 6-Stockholders' Equity

Issuance of Stock Options

     During the three months ended March 31, 2002, the Company granted various
stock options, as follows:

     (1)  Stock options were granted to employees to purchase 900 shares of
          common stock at exercise prices ranging from $0.50 to $0.82, the fair
          market value at the date of grant. These options vest over four years,
          and are exercisable for a period of five years.

     (2)  Stock options were granted to an executive officer to purchase 400,000
          shares of common stock at an exercise price of $0.50, below the market
          value at the date of grant, which was $0.60. These options vest as
          follows; 100,000 vest in ninety days, and 300,000 vest over three
          years. These options are exercisable for a period of ten years.

     (3)  Stock options were granted to a director to purchase 40,000 shares of
          common stock at an exercise price of $0.80, the fair market value at
          the date of grant. These options vest monthly over one year and are
          exercisable for a period of ten years.

     (4)  Stock options were granted to consultants to purchase 3,751 shares of
          common stock at exercise prices ranging from $0.56 to $0.65, the fair
          market value at the date of grant. The fair value of these options is
          being expensed, with a credit to additional paid-in-capital. These
          options vest as follows; 1,251 upon grant, and 2,500 vest in six
          months. These options are exercisable for a period of five years.

Issuance of warrants

     During the three months ended March 31, 2002, in connection with the Notes
Payable financing, the Company issued warrants to the lenders to purchase up to
750,000 of common stock. See Note-5 to the accompanying notes to the unaudited
consolidated financial statements.

Note 7-Legal Proceedings

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

                                       12

<PAGE>

for alleged breach of contract in the amount of $8.7 million. The Company has
answered the complaint and intends to defend itself vigorously in the action. On
August 19, 1999, Mr. Von Opel moved for summary judgment on the issue of
liability, which on June 2, 2000, the court denied. The Company is proceeding
with discovery and has noticed the deposition of Mr. Von Opel. As the litigation
is at an initial stage, an outcome cannot be predicted at this time.

     The Company received correspondence from the Business Software Alliance
("BSA") alleging the Company had used or installed unauthorized copies of
software products on its computers. In their correspondence, BSA proposed to
settle their claims against the Company for a settlement amount of $824,000,
based on twice the alleged value of the unauthorized software installed.
Management believes that the BSA claims are substantially overstated. Management
cannot predict the outcome of this claim.

     The Company was served with a lawsuit from a vendor claiming nonpayment of
services in the amount of approximately $300,000. The Company filed a counter
claim against the vendor. During April 2002, the Company settled all of the
vendor's claims for $160,000.

     The Company is also a party to certain other claims, actions, and
proceedings incidental to its business, none of which is expected to have a
material adverse effect on the business, financial position or results of
operations of the Company.

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. The Company has accrued a total of $150,000
($75,000 to each of Messrs. Marshall and Fine) for the quarter ended March 31,
2002.

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

Forward Looking Statements

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

                                       13

<PAGE>

Going Concern

     The accompanying unaudited consolidated financial statements have been
prepared assuming that the Company will continue as a going concern, which
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. The Company's certified public accountants have
included an explanatory paragraph in their report for the year ended December
31, 2001, which indicates there is substantial doubt about the Company's ability
to continue as a going concern (see Note 1 to the unaudited consolidated
financial statements for additional information). The Company has suffered
significant recurring operating losses and needs to raise additional funds to
accomplish its objectives. The Company believes that its previous efforts to
reduce costs and operate more efficiently, combined with the opening of the
Oregon wagering hub in September 2001, and the Company receipt of licensing from
California in February 2002, will improve cash flows. However, the Company will
require additional capital to fund operations and pay down its liabilities, as
well as to fund its expansion plans consistent with Youbet.com's anticipated
changes in operations and infrastructure. During March 2002, the Company
successfully raised $750,000 in debt financing. The Company is exploring various
alternatives to raise this additional capital, but there can be no assurances
that the Company will be successful in this regard. To the extent that the
Company is unable to secure the capital necessary to fund its future cash
requirements on a timely basis and/or under acceptable terms and conditions, the
Company may not have sufficient cash resources to maintain operations. In such
event, the Company may be required to consider a formal or informal
restructuring or reorganization. No adjustments have been made to the
consolidated financial statements that might result from the outcome of this
uncertainty.

Overview

     Youbet.com established itself as one of the leading global brand names for
online live event sports entertainment wagering and other forms of online
gaming. The Company has initially focused its efforts primarily on the United
States horse racing industry. Youbet.com believes that online communication is
an ideal medium for live event wagering. First, online communication allows
bettors instant access to vast amounts of historical performance data used in
assessing potential wagers. Second, online communication offers the ability to
sort and analyze such data in ways and at speeds that are unachievable manually.
Third, online communication technology allows wagers to be placed from virtually
any location within a jurisdiction where wagering is legal, thus freeing bettors
from traditional site-specific wagering locations. In addition, the speed of
electronic communication allows wagers to be placed and acknowledged in seconds.

     Youbet.com's initial product, the You Bet Network, is a PC-based system,
which utilizes the infrastructure of the Internet and a virtual private network
with Internet access to provide up-to-the minute detailed information on races
taking place at horse tracks nationwide. The Company also delivers a live
simulcast of most of these races directly to the customer's computer. In
addition, customers can use the You Bet Network to process wagers, using the
system's icon-driven menus to fill out an electronic betting ticket with a brief
series of mouse-clicks. The wager

                                       14

<PAGE>

is then transmitted electronically to a licensed account wagering entity. The
customer's account is debited, the wager is placed at the host horse track and
an electronic confirmation is sent to the customer through the You Bet Network.
This entire process usually takes less than three seconds. The subsequent
adjustment to the customer's account for winnings also usually takes less than
three seconds after official winnings are posted at the racetrack. To enhance
and improve the You Bet Network, the Company has developed a web-based
application "Youbet Express" which was launched in March 2001, and a state of
the art phone wagering system which was launched in September 2001.
Additionally, the Company is looking into improving its web content management
and exploring other revenue streams.

     Youbet.com derives revenue from the You Bet Network in three ways. First,
it receives commissions derived from wagers placed by Youbet.com customers.
Second, it charged a monthly subscription fee of $5.95 per month until September
1, 2001 when the Company eliminated its $5.95 subscription fee and instead
started charging a transaction fee of $0.25 per bet placed. Beginning November
2001, the transaction fee was waived. Third, it receives revenue from the sale
of handicapping information.

Consolidated Results of Operations-Three Months Ended March 31, 2002 Compared To
Three Months Ended March 31, 2001

Revenues

     Revenues for the three months ended March 31, 2002, were $2,617,000, an
increase of $969,000 from $1,648,000 for the three months ended March 31, 2002.
The Company receives commission revenues through its subsidiary Youbet Oregon,
Inc. The Company records gross commission proceeds as revenues and records the
related costs as Sales and Marketing expenses. In addition, the Company
recognizes net commissions earned on wagers as revenue as wagers are placed at
third party wagering facilities ("Magna"). The increase in revenues was mainly
due to an increase in the amount of wagers placed by Youbet.com customers at the
Oregon wagering hub which was opened during September 2001. This increase was
partially offset by a decrease in the amount of wagers placed by Youbet.com
customers at the Magna wagering hub.

Operating Expenses

     NETWORK OPERATIONS-Network operations costs consist primarily of salaries,
data center management and telecommunications costs. For the three months ended
March 31, 2002, network operations costs decreased by $222,000 or 31% to
$492,000 in 2002 from $714,000 in 2001. The decrease was mainly due to decreases
in telecommunication costs, salaries, and in moving related costs.

     RESEARCH AND DEVELOPMENT-Research and development costs consist primarily
of salaries. For the three months ended March 31, 2002, research and development
costs decreased by $224,000 or 31% to $489,000 in 2002 from $713,000 in 2001.
This decrease resulted primarily from decreases in consulting expenses and
salaries. The Company will continue to invest in the development of the You Bet
Network and other projects, which management believes are of value and critical
to achieving its strategic objectives.

                                       15

<PAGE>

     SALES AND MARKETING-Sales and marketing expenses consist primarily of
marketing program expense, commissions and salaries. For the three months ended
March 31, 2002, sales and marketing expenses increased by $595,000 or 56% to
$1,659,000 in 2002 from $1,064,000 in 2001 mainly due to costs associated with
the Oregon hub, track related commissions, and commissions paid to TVG. This
increase was partially offset by a reduction in expenditures on marketing
programs, and to decreases in salaries and non-cash compensation.

     GENERAL AND ADMINISTRATIVE-General and administrative expenses consist
principally of salaries, facilities expenses, legal, accounting, and investor
relations. For the three months ended March 31, 2002, general and administrative
expenses increased by $298,000 or 25% to $1,484,000 in 2002 from $1,186,000 in
2001. The increase resulted primarily from increases in salaries, bonuses and
professional fees.

     DEPRECIATION AND AMORTIZATION-For the three months ended March 31, 2002,
depreciation and amortization increased by $906,000 or 184% to $1,399,000 in
2002 from $493,000 in 2001. The increase was due to the amortization of
licensing rights.

Other Income (Expense)

     INTEREST INCOME-For the three months ended March 31, 2002, interest income
decreased by $160,000 or 91% to $16,000 in 2002 from $176,000 in 2001. The
decrease is mainly due to lower cash balances being utilized for the period in
2002 as compared to 2001.

     INTEREST EXPENSE-For the three months ended March 31, 2002, interest
expense was $5,000 as compared to $4,000 in 2001.

Liquidity and Capital Resources

     The Company has financed its operations primarily through the sale of its
securities and convertible debt as Youbet.com has incurred only negative cash
flow from operations since inception. At March 31, 2002, Youbet.com had
$3,038,000 in cash and cash equivalents. Youbet.com's principal commitments
consist of obligations under operating leases.

     At March 31, 2002, the Company had negative net working capital of $760,000
compared to net working capital of $806,000 at December 31, 2001. The Company
incurred net losses from operations for the years ended December 31, 2001, 2000
and 1999, and needs to raise additional funds to accomplish its objectives. The
Company's independent certified public accountants have included an explanatory
paragraph in their report for the year ended December 31, 2001, which indicates
there is substantial doubt about the Company's ability to continue as a going
concern. (See Note 1 to the unaudited consolidated financial statements for
additional information). The Company is attempting to raise additional capital
to meet future working capital requirements, but may not be able to do so.
Should the Company not be able to raise additional capital, it may have to
severely curtail operations.

     The Company entered into a Securities Purchase Agreement on March 21, 2002,
whereby the Company issued a series of 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

                                       16

<PAGE>

Executive Officer and seven other investors. Both principal and all interest
accrued on these Notes will be payable at the earlier of a) one-year from the
date of issuance, or b) upon the Company's completion of funding in an amount
greater than two million dollars ($2,000,000), excluding the Notes, in any
ninety-day period prior to the maturity of the Note. 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.

     Net cash used in operating activities was $1,238,000 and $1,935,000 for the
three months ended March 31, 2002 and 2001, respectively. The decrease in 2002
from 2001 in cash used in operating activities of $697,000 was mainly due to 1)
an increase in depreciation and amortization of $905,000, 2) an increase in
accounts payable of $810,000, 3) an increase in customer deposits of $169,000,
4) an increase in non-cash compensation of $141,000, and 5) an increase in other
accrued expenses (including accrued compensation) of $249,000. These changes
were partially offset by 1) an increase in deposits of $541,000, 2) an increase
in prepaids, receivables, and other current assets totaling $492,000, and 3) an
increase in the loss of $542,000.

     Net cash used in investing activities was $35,000 and $351,000 for the
three months ended March 31, 2002 and 2001, respectively. The decrease in 2002
from 2001 in cash used in investing activities of $316,000 was mainly due to 1)
the Company's purchase of $35,000 in property and equipment in 2002, a decrease
of $424,000 from 2001, which was partially offset by the release of restricted
cash in 2001 of $108,000.

     Net cash provided by financing activities was $750,000 for the three months
ended March 31, 2002 as compared to net cash used in financing activities of
$9,000 for the same period in the prior year. The increase of $741,000 from 2001
in cash provided (used) in financing activities was due to the $750,000
generated in 2002 from the proceeds of notes payable, which is fully described
in Note-5 to the accompanying unaudited consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     The majority of the Company's cash equivalents are bank accounts and money
markets, and the Company does not believe it has significant market risk
exposure with regard to its financial instruments. The Company has notes payable
which carry a fixed interest rate at 12%.

Part II. Other Information

     During February 2002, Youbet.com received notification from The Nasdaq
Stock Market that it is not in compliance with the National Market's listing
maintenance standard regarding minimum bid prices. This standard requires that
the Company's common stock maintain a minimum bid price of at least $1.00 per
share. In order to comply with this standard, the Company's common stock must
have a minimum bid price of at least $1.00 for 10 consecutive trading days prior
to May 15, 2002. If the Company is unable to demonstrate compliance with this
standard on or before May 15, 2002 the Nasdaq Stock Market will seek to delist
the company's common stock from the Nasdaq National Market. At that time the
company may appeal the delisting to the Listing Qualifications Panel of The
Nasdaq Stock Market.

                                       17

<PAGE>

     If the Company is not in compliance by May 15, 2002, the Company may apply
to transfer its securities to the Nasdaq SmallCap Market. If the transfer
application is approved, the Company will have until August 13, 2002, to comply
with the minimum bid requirement. In addition, the Company may be eligible to
transfer back to the Nasdaq National Market, if it achieves compliance with the
minimum bid price and other continued listing requirements of the Nasdaq
National Market. There can be no assurance that the Company will be able to
maintain its listing on the Nasdaq National Market or on the Nasdaq SmallCap
Market.

Item 1. Legal Proceedings

     On June 4, 1999, a complaint was filed against the Company in the Court of
Chancery of the State of Delaware in and for New Castle County entitled George
Von Opel v. Youbet.com Inc. (C.A. No. 17200 NC). In the complaint Mr. Von Opel
alleges that the Company breached its contractual obligation pursuant to a
Private Placement Memorandum by failing to register the shares of common stock
underlying 400,000 warrants issued by the Company to an affiliate of Mr. Von
Opel. The complaint seeks specific performance of the alleged obligation to
register such shares and damages for alleged breach of contract in the amount of
$8.7 million. The Company has answered the complaint and intends to defend
itself vigorously in the action. On August 19, 1999, Mr. Von Opel moved for
summary judgment on the issue of liability, which on June 2, 2000, the court
denied. The Company is proceeding with discovery and has noticed the deposition
of Mr. Von Opel. As the litigation is at an initial stage, an outcome cannot be
predicted at this time.

     The Company received correspondence from the Business Software Alliance
("BSA") alleging the Company had used or installed unauthorized copies of
software products on its computers. In their correspondence, BSA proposed to
settle their claims against the Company for a settlement amount of $824,000,
based on twice the alleged value of the unauthorized software installed.
Management believes that the BSA claims are substantially overstated. Management
cannot predict the outcome of this claim.

     The Company was served with a lawsuit from a vendor claiming nonpayment of
services in the amount of approximately $300,000. The Company filed a counter
claim against the vendor. During April 2002, the Company settled all of the
vendor's claims for $160,000.

     The Company is also a party to certain other claims, actions, and
proceedings incidental to its business, none of which is expected to have a
material adverse effect on the business, financial position or results of
operations of the Company.

Item 2. Changes in Securities

Issuance of Stock Options

     During the three months ended March 31, 2002, the Company granted various
stock options, as follows:

     (1)  Stock options were granted to employees to purchase 900 shares of
          common stock at exercise prices ranging from $0.50 to $0.82,

                                       18

<PAGE>

          the fair market value at the date of grant. These options vest over
          four years, and are exercisable for a period of five years.

     (2)  Stock options were granted to an executive officer to purchase 400,000
          shares of common stock at an exercise price of $0.50, below the market
          value at the date of grant, which was $0.60. These options vest as
          follows; 100,000 vest in ninety days, and 300,000 vest over three
          years. These options are exercisable for a period of ten years.

     (3)  Stock options were granted to a director to purchase 40,000 shares of
          common stock at an exercise price of $0.80, the fair market value at
          the date of grant. These options vest monthly over one year and are
          exercisable for a period of ten years.

     (4)  Stock options were granted to consultants to purchase 3,751 shares of
          common stock at exercise prices ranging from $0.56 to $0.65, the fair
          market value at the date of grant. The fair value of these options is
          being expensed, with a credit to additional paid-in-capital. These
          options vest as follows; 1,251 upon grant, and 2,500 vest in six
          months. These options are exercisable for a period of five years.

Issuance of warrants

     See Note-5 to the accompanying notes to the unaudited consolidated
financial statements.

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
first quarter of the fiscal year ended December 31, 2002.

Item 5. Other Information

Item 6. Exhibits and Reports On Form 8-K

     (A)  Exhibits

          The following exhibits are submitted herewith:

          None

     (B)  Reports On Form 8-K

          There were no reports filed on form 8-K for the quarter ended March
          31, 2002.

                                       19

<PAGE>

                                   Signatures

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


                                     YOUBET.COM, INC.


Date: 5/15/2002                      By: /s/ David M. Marshall
      ---------                      ---------------------

                                     David M. Marshall
                                     Director and Chief Executive Officer

Date: 5/15/2002                      By: /s/ Charles F. Champion
      ---------                          -----------------------

                                     Charles F. Champion
                                     Director, President and Chief Operating
                                     Officer


Date: 5/15/2002                      By: /s/ Phillip C. Hermann
      ---------                         ----------------------

                                     Phillip C. Hermann
                                     Chief Financial Officer

                                       20