<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 SEPTEMBER 30, 2003


                         COMMISSION FILE NUMBER: 0-26015

                                   -----------

                                YOUBET.COM, INC.


        DELAWARE                                          95-4627253
(State of Incorporation)                      (IRS Employer Identification No.)

              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

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 28,374,911 as of October 24, 2003.

Transitional Small Business Disclosure Format (check one): Yes____   No __X__
                                                                          -


<PAGE>



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

<TABLE>
<CAPTION>


                                                                                                                           PAGE

<S>      <C>                                                                                                                <C>
PART I.             FINANCIAL INFORMATION

    Item 1.         Financial Statements
                         Condensed Consolidated Balance Sheet as of September 30, 2003 (unaudited)
                                   and December 31, 2002                                                                     3
                         Condensed Consolidated Statements of Operations for the three months ended
                                   September 30, 2003 and September 30, 2002
                         (unaudited) 4 Condensed Consolidated Statements of
                         Operations for the nine months ended
                                   September 30, 2003 and September 30, 2002
                         (unaudited) 5 Condensed Consolidated Statements of Cash
                         Flows for the nine months ended
                                   September 30, 2003 and September 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                   20

    Item 3.         Controls and Procedures                                                                                 26


PART II.            OTHER INFORMATION

    Item 1.         Legal Proceedings                                                                                       27

    Item 2.         Changes in Securities                                                                                   28

    Item 3.         Defaults Upon Senior Securities                                                                         28

    Item 4.         Submission of Matters to a Vote of Security Holders                                                     28

    Item 5.         Other Information                                                                                       28

    Item 6.         Exhibits and Reports on Form 8-K                                                                        28

    Signatures                                                                                                              30

    Exhibit 3.1:    Certificate of Incorporation of Youbet.com, as amended through November 12, 2001

    Exhibit 3.2:    Bylaws of Youbet.com, as amended through January 19, 1999

    Exhibit 4.1:    Form of Additional TVG Warrant (incorporated by reference to
                    Exhibit 7(c) to the Schedule 13D (SEC File No. 005-78294) filed by
                    Gemstar-TV Guide International, Inc. on June 3, 2002)

    Exhibit 10.1:   Separation Agreement, dated as of May 3, 2000, by and between Youbet.com and
                    Russell Fine.


    Exhibit 10.2:   Release Agreement, dated as of April 22, 2003, by and among Youbet.com, Inc.,
                    Russell Fine and Fineline Services, LLC

    Exhibit 10.3:   Consulting Agreement, dated as of March 3, 2003, by and between Youbet.com, Inc.
                    and J. Scott Schmidt

    Exhibit 10.4:   Consulting Agreement, dated as of June 19,2002, by and between Youbet.com and
                    James R. Edgar

    Exhibit 10.5:   Form of Supplement to Employment Agreement

    Exhibit 31.1:   Certification Pursuant to Rule 13a-14 of the Securities
                    Exchange Act of 1934

    Exhibit 31.2:   Certification Pursuant to Rule 13a-14 of the Securities
                    Exchange Act of 1934

    Exhibit 32:     Certifications Pursuant to Section 906 of the
                    Sarbanes-Oxley Act of 2002


</TABLE>




                                       2
<PAGE>



PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

                                YOUBET.COM, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                            SEPTEMBER 30,     DECEMBER 31,
                                                                                 2003              2002
                                                                            -------------     -------------
                                                                              (UNAUDITED)       (AUDITED)
<S>                                                                         <C>               <C>
ASSETS:
      Current Assets:
           Cash and Cash Equivalents                                        $   8,811,804     $   4,559,897
           Restricted Cash, current (Note 2)                                    3,731,919         2,351,421
           Receivables (Note 3)                                                   894,605           790,686
           Prepaid Expenses                                                     1,087,131           436,119
           Interest and Other Receivables                                          20,879            23,682
                                                                            -------------     -------------
      Total Current Assets                                                  $  14,546,338     $   8,161,805
      Property and Equipment, net                                               2,981,481         3,953,912
      Licensing Rights, net  (Note 4)                                           2,311,293         5,022,830
      Deferred Lease Costs                                                         30,378            33,521
      Long-Term Prepaids                                                           22,315                 -
      Deposits (Note 6)                                                           595,715         1,300,785
                                                                            -------------     -------------
           TOTAL ASSETS                                                     $  20,487,520     $  18,472,853
                                                                            =============     =============

LIABILITIES AND STOCKHOLDER'S EQUITY
      Current Liabilities:
           Fees Payable to Related Party  (Note 4)                          $   3,531,817     $   2,113,540
           Accounts Payable - Track Related  (Note 5)                           2,132,765         4,293,289
           Customer Deposits                                                    2,404,411         1,477,255
           Accrued Expenses                                                     1,037,373           729,735
           Accounts Payable - Trade                                               495,884           604,417
           Accrued Compensation and Related Items  (Note 8)                       345,719           532,796
           Deferred Revenues                                                       61,343            26,577
           Commitments and Contingencies (Note 10)
           Notes Payable, face $750,000, net of unamortized
                 discount of  $97,807 at December 31, 2002                              -           652,193
                                                                            -------------     -------------
      Total Current Liabilities                                             $  10,009,312     $  10,429,802

           Notes Payable, face $2,000,000, net of unamortized
                 discount of $355,006  (Note 7)                                 1,644,994                 -
                                                                            -------------     -------------
           TOTAL LIABILITIES                                                $  11,654,306     $  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
                 28,374,911 and 23,422,600 shares outstanding as of
                 September 30, 2003 and December 31, 2002, respectively     $      28,375     $      23,422
           Treasury Stock                                                      (1,828,709)                -
           Additional Paid In Capital                                         101,325,657        95,863,660
           Accumulated Deficit                                                (90,692,109)      (87,844,031)
                                                                            -------------     -------------
           TOTAL STOCKHOLDERS' EQUITY                                       $   8,833,214     $   8,043,051
                                                                            -------------     -------------
           TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                       $  20,487,520     $  18,472,853
                                                                            =============     =============
</TABLE>

      See Accompanying Notes to Condensed Consolidated Financial Statements



                                       3
<PAGE>



                                YOUBET.COM, INC.
                 CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED SEPTEMBER 30,
                                                          ------------------------------
                                                              2003             2002
                                                          ------------     ------------
<S>                                                       <C>              <C>
REVENUES  (NOTES 4 AND 5)
     Commissions                                          $ 14,043,202     $  8,072,884
     Subscription Fees                                         178,129              111
     Race Information                                           83,589           54,769
                                                          ------------     ------------
TOTAL REVENUES                                            $ 14,304,920     $  8,127,764
OPERATING EXPENSES:
     Track Fees                                              6,037,400        3,646,380
     Licensing Fees - Related Party  (Note 4)                3,462,710        1,899,010
     Network Operations                                        551,815          472,445
     Research and Development                                  475,960          443,357
     Sales and Marketing                                       471,272          408,695
     General and Administrative                              2,602,281        1,991,142
     Depreciation and Amortization                           1,212,958        1,396,568
                                                          ------------     ------------
TOTAL OPERATING EXPENSES                                  $ 14,814,396     $ 10,257,597
                                                          ------------     ------------
LOSS FROM OPERATIONS                                      $   (509,476)    $ (2,129,833)
                                                          ============     ============
OTHER INCOME (EXPENSE):
     Interest Income                                            10,285            9,218
     Interest Expense                                         (121,364)        (139,230)
     Other Income                                                2,702          127,008
                                                          ------------     ------------
TOTAL OTHER INCOME (EXPENSE)                              $   (108,377)    $     (3,004)
                                                          ------------     ------------
NET LOSS                                                  $   (617,853)    $ (2,132,837)
                                                          ============     ============

BASIC AND DILUTED LOSS PER SHARE:
     Net Loss per Common Share                            $      (0.02)    $      (0.11)
                                                          ------------     ------------
     Weighted Average No. of Common Shares Outstanding      27,431,953       20,047,412
                                                          ============     ============

</TABLE>


      See Accompanying Notes to Condensed Consolidated Financial Statements



                                       4
<PAGE>



                                YOUBET.COM, INC.
                 CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                         NINE MONTHS ENDED SEPTEMBER 30,
                                                          -----------------------------
                                                              2003             2002
                                                          ------------     ------------
<S>                                                       <C>              <C>
REVENUES  (NOTES 4 AND 5)
     Commissions                                          $ 38,429,172     $ 16,605,424
     Subscription Fees                                         420,788              556
     Race Information                                          243,043          149,884
                                                          ------------     ------------
TOTAL REVENUES                                            $ 39,093,003     $ 16,755,864
OPERATING EXPENSES:
     Track Fees                                             18,116,710        6,535,488
     Licensing Fees - Related Party  (Note 4)                7,650,562        3,630,419
     Network Operations                                      1,497,825        1,467,881
     Research and Development                                1,542,117        1,479,806
     Sales and Marketing                                     1,341,091        1,593,912
     General and Administrative                              7,169,705        5,327,039
     Depreciation and Amortization                           4,096,600        4,195,472
                                                          ------------     ------------
TOTAL OPERATING EXPENSES                                  $ 41,414,610     $ 24,230,017
                                                          ------------     ------------
LOSS FROM OPERATIONS                                      $ (2,321,607)    $ (7,474,153)
                                                          ============     ============
OTHER INCOME (EXPENSE):
     Interest Income                                            30,790           32,233
     Interest Expense                                         (637,082)        (289,469)
     Other Income                                               79,821          126,991
                                                          ------------     ------------
                                                          ------------     ------------
TOTAL OTHER INCOME (EXPENSE)                              $   (526,471)    $   (130,245)
                                                          ------------     ------------
NET LOSS                                                  $ (2,848,078)    $ (7,604,398)
                                                          ============     ============

BASIC AND DILUTED LOSS PER SHARE:
     Net Loss per Common Share                            $      (0.11)    $      (0.38)
                                                          ------------     ------------
     Weighted Average No. of Common Shares Outstanding      25,553,337       19,879,458
                                                          ============     ============
</TABLE>

      See Accompanying Notes to Condensed Consolidated Financial Statements



                                       5
<PAGE>



                                YOUBET.COM, INC.
                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                   NINE MONTHS ENDED SEPTEMBER 30,
                                                                    ---------------------------
                                                                        2003            2002
                                                                    -----------     -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
      CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                 <C>            <C>
            Net Loss                                                $(2,848,078)   $(7,604,398)
      ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH PROVIDED BY


      OPERATING ACTIVITIES:

            Depreciation and Amortization                             4,096,601       4,195,472
            Non-Cash Interest Expense                                   488,194         230,046
            Stock-Based Compensation                                    303,410         257,686
      CHANGE IN OPERATING ASSETS AND LIABILITIES:
            Restricted Cash                                          (1,017,543)              -
            Receivables                                                (103,919)       (489,892)
             repaid Expenses
            P                                                          (651,012)        (11,079)
            Interest and Other Receivables                                2,803          33,522
            Long-Term Prepaids                                          (22,315)              -
            Deposits                                                    708,213        (755,289)
            Accounts Payable - Trade                                   (108,533)        (14,809)
            Fees Payable to Related Party                             1,418,277       1,733,610
            Accounts Payable - Track Related                         (2,160,524)      3,689,634
            Accrued Expenses                                            307,638        (345,018)
            Customer Deposits                                           927,156         945,858
            Accrued Compensation and Related Items                     (187,077)         43,264
            Deferred Revenues                                            34,766            (440)
                                                                    -----------     -----------
                  NET CASH PROVIDED BY OPERATING ACTIVITIES         $ 1,188,057     $ 1,908,167
                                                                    -----------     -----------
      CASH FLOWS FROM INVESTING ACTIVITIES:
            Restricted Cash                                            (362,955)       (572,974)
            Purchases of Property and Equipment                        (412,633)        (31,857)
                                                                    -----------     -----------
                  NET CASH USED IN INVESTING ACTIVITIES             $  (775,588)    $  (604,831)
                                                                    -----------     -----------
      CASH FLOWS FROM FINANCING ACTIVITIES:
            Proceeds from Exercise of Stock Options and Warrants      2,589,438           3,884
            Proceeds from Notes Payable                               2,000,000         750,000
            Payments of Notes Payable                                  (750,000)              -
                                                                    -----------     -----------
                  NET CASH PROVIDED BY FINANCING ACTIVITIES         $ 3,839,438     $   753,884
                                                                    -----------     -----------
      NET INCREASE IN CASH AND CASH EQUIVALENTS                     $ 4,251,907     $ 2,057,220
      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            $ 8,811,804     $ 5,617,960
                                                                    ===========     ===========

      SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
            Cash Paid for Interest                                  $   172,727     $    12,247
                                                                    ===========     ===========

      NON-CASH INVESTING AND FINANCING ACTIVITIES:
            Issuance of Warrants with Notes Payable                 $   518,223     $         -
            Issuance of Warrants for Licensing Rights                         -         437,137
            Reclassification of Restricted Cash to Deposits                   -         920,805
                                                                    ===========     ===========


</TABLE>


      See Accompanying Notes to Condensed Consolidated Financial Statements



                                       6
<PAGE>




YOUBET.COM, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 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 in select
               international markets. The Company currently provides its
               customers with the ability to receive interactive, real-time
               audio/video broadcasts directly on their computers, access a
               comprehensive database of handicapping information and, in most
               states, wager on a wide selection of U.S., 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,
               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 consolidated financial statements for the three and
               nine months ended September 30, 2003 and 2002 include all
               adjustments (consisting of normal recurring accruals) which
               management considers necessary to present fairly the consolidated
               financial position of the Company as of September 30, 2003, the
               consolidated results of its operations for the three and nine
               months ended September 30, 2003 and 2002, and its consolidated
               cash flows for the nine months ended September 30, 2003 and 2002
               in conformity with accounting principles generally accepted in
               the United States. These condensed consolidated 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 nine months ended
               September 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


                                       7
<PAGE>


               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.

               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 September 30,
               2003, total warrants outstanding were 17,861,874 with exercise
               prices between $0.50 to $19.50 and total stock options
               outstanding were 5,252,230 with exercise prices between $0.26 and
               $5.31.

        TECHNOLOGY AND CONTENT CONCENTRATION

               Youbet currently utilizes a patented wagering technology and
               track content from a shareholder under a license agreement. The
               patented technology and track content are significant to the
               Company's operations. Any disruption of the Company's ability to
               use the patented technology or track content could result in an
               adverse effect on operations. The shareholder could be impacted,
               as well, because management believes that the Company is a
               material source of revenue to the shareholder. (See Note 4)

        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 September 30, 2003 and December 31, 2002, the
               Company had uninsured cash and cash equivalents and restricted
               cash of $11,793,870 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" (SFAS 150).
               This statement affects the classification, measurement and


                                       8
<PAGE>


               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 include 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, SFAS
               150 is effective for all financial instruments entered into or
               modified after May 31, 2003, and otherwise was effective at the
               beginning of the first interim period beginning after June 15,
               2003. The adoption of SFAS 150 did not have an impact on the
               Company's consolidated financial position or disclosures.

NOTE 2:      RESTRICTED CASH, CURRENT

        PLAYERS TRUSTSM

               As of September 30, 2003, the balance of customer accounts
               maintained in Players TrustSM was $2,582,347 all of which is
               recorded as restricted cash, current. This amount was $249,305 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 September 30, 2003 and December 31, 2002, these
               reserves amounted to $175,450 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 September 30, 2003 and
               December 31, 2002, the letter of credit supported by a cash
               deposit is recorded as restricted cash, current.

NOTE 3:        RECEIVABLES

               As of September 30, 2003, receivables of $894,605 primarily
               consisted of (1) $384,988 due from Magna Entertainment
               Corporation for fees earned on handle generated through
               Magna's Call-A-Bet system and (2) $152,063 due from various
               tracks for settlement of wagers processed through the
               Company's Oregon hub.

               As of December 31, 2002, receivables of $790,686 primarily
               consisted 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.



                                       9
<PAGE>




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

                  |X|      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.

                  |X|      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.

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



                                       10
<PAGE>


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

                  |X|      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 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.

                  |X|      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.

                  |X|      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.

                  |X|      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.

                  |X|      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.

                  |X|      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 date 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


                                       11
<PAGE>


               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
               amortizing the fair value over three years, the estimated life of
               the licensed technology. Accumulated amortization as of September
               30, 2003 was $2,288,902. 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 to TVG.

               The Company issued to TVG an additional warrant (the "Additional
               TVG Warrant"), on September 20, 2001 (the date the Warrant
               Agreement was approved by Youbet's stockholders) 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," and is amortizing the fair value over three years.
               Accumulated amortization as of September 30, 2003 was $5,364,162.

               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             $          903,846
                            2004                      1,407,447
                                            --------------------------
                            Total            $       2,311,293
                                            ==========================

               We periodically review the recoverability of 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 carrying value.



                                       12
<PAGE>




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.

        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 September 30, 2003 and 2002, $53,202 and
        $409,552, respectively, of the Company's revenues were generated through
        the Magna simulcast agreement. Similar revenues for the nine months
        ended September 30, 2003 and 2002, were $410,017 and $1,987,449,
        respectively.

NOTE 6:  DEPOSITS

        As of September 30, 2003 and December 31, 2002, deposits primarily
        include (1) $500,000 deposit for licensing with the California Horse
        Racing Board, (2) $60,078 security deposit for the Company's Woodland
        Hills facility, (3) $10,000 for the Global Cash reserve deposit, (4)
        $15,835 contract deposit for Stargate Pennsylvania facility, (5) $8,252
        for corporate housing deposit, (6) $1,350 deposit for UPS, and (7) $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
        Charles Champion, the Company's 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


                                       13
<PAGE>


        Black-Scholes model, the Company recorded the fair value of the warrants
        issued ($437,137) as a note discount and amortized this value 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 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 ($227,000) was recorded as an expense in the
        first quarter of the current year. The relative fair value of the
        1,334,000 assigned warrants ($518,223) was recorded as a discount to the
        face value of the Second Notes that is being amortized as interest
        expense over the two-year life of the Second Notes. Accumulated
        amortization of discount on the Second Notes was $163,217 as of
        September 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 corporation) 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. These
        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 was being
        accrued until the Company achieved and sustained positive cash low for
        at least two consecutive fiscal quarters. As a result of positive cash
        flow for the first and second quarters of 2003, the compensation payable
        to Mr. Champion was paid in the third quarter.

        On August 27, 2003, the Compensation Committee approved a retention
        and/or severance package for all employees of the Company in the event
        of a change of control. A change of control is defined as any individual
        or entity acquiring beneficial ownership of more than 30% of the total
        outstanding common stock of the Company, a sale of all or substantially
        all of the Company's assets or a merger in which the Company is not the
        surviving entity or which otherwise triggers a change of control under
        this definition. The plan provides for severance payments in the event
        of a change of control encompassing: (i) a multiple of annual salary if


                                       14
<PAGE>


        an employee is terminated within two years of the change of control;
        (ii) payment of COBRA benefits for one year; and (iii) all unvested
        options vest immediately and may be exercised within 90 days of
        termination. The plan also provides for retention payments in the event
        of a change of control, which includes payments over a designated number
        of quarters equal to a certain percentage of their salary. Both the
        severance and retention plans provide for a guarantee of bonus payments
        in the event the employee bonus plans are changed within two years of a
        change of control.

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 (APB25) 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 nine months ended September 30, 2003, in connection
               with the Second Notes, the Company assigned warrants to the
               Investors to purchase up to 1,334,000 shares of common stock at
               an exercise price of $0.8075 per share (See Note 7).

               Information with respect to common stock purchase warrants issued
               is summarized as follows:

<TABLE>
<CAPTION>
                                                                       WARRANTS               WEIGHTED AVERAGE 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                                      (3,341,480)                   0.87
                                                                -----------------------     ----------------------------------
               WARRANTS EXERCISABLE AT SEPTEMBER 30, 2003                   17,861,874                 $  2.54
                                                                =======================
</TABLE>

               Included in the 17,861,874 balance at September 30, 2003 are
               16,432,969 shares attributable to the Additional TVG Warrant. 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). As a
               result of warrant issuances and stock option exercises, the TVG
               exercise price could range from approximately $36,000,000 to
               approximately $40,000,000 for a range of shares from
               approximately 21,605,213 shares to 16,432,969 shares,
               respectively, depending on the outcome of the pending arbitration
               (See Note 10).



                                       15
<PAGE>




               Additional information about outstanding warrants to purchase the
               Company's common stock at September 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
                                                         -------------------   --------------------   ---------------
<S>                       <C>                                       <C>               <C>                 <C>
                     RANGE OF EXERCISE PRICES:
                          $0.50                                     225,000           3.47                $ 0.50
                          $0.8075                                   872,299           1.37                  0.81
                          $1.66 - 2.50                           16,517,575           0.63                  2.50
                          $3.125 - 5.25                              22,000     Not determinable            3.84
                          $7.93 - 19.50                             225,000           0.64                 14.33
                                                         -------------------                          ---------------
                               TOTAL                             17,861,874                               $ 2.54
                                                         ===================                          ===============
</TABLE>

        STOCK OPTION ARRANGEMENTS

               As of September 30, 2003, under the Company's 1998 Stock Option
               Plan, there were 6,546,223 stock options granted and outstanding
               out of a total approved pool of 8,500,000 common stock options.

        ISSUANCE OF STOCK OPTIONS

               During the nine months ended September 30, 2003, the Company
               granted various stock options, as follows:

                  |X|      Stock options were granted to employees to purchase
                           240,000 shares of common stock at an exercise prices
                           ranging from $0.77 to $3.51 per share, the fair
                           market value at the date of grant. These options vest
                           ratably over four years and are exercisable for a
                           period of five years.

                  |X|      Stock options were granted to employees to purchase
                           200,000 shares of common stock at exercise price of
                           $3.04 per share, the fair market value on the date of
                           the grant. These options vest ratably over two years,
                           and are exercisable for a period of five years.

                  |X|      Stock options were granted to a non-employee Director
                           to purchase 40,000 shares of common stock at an
                           exercise price of $0.74 per share, 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.

                  |X|      Stock options were granted to an ex-director to
                           purchase 13,334 shares of common stock at an exercise
                           price of $0.68 per share, below the $1.50 per share
                           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.



                                       16
<PAGE>




               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                                     493,334         2.26
     Options Exercised                                (1,610,831)        0.93
     Options Cancelled                                  (123,965)        1.71
     Options Forfeited                                  (104,383)        4.37
                                                      -----------    ----------
BALANCE, SEPTEMBER 30, 2003                            5,252,230         0.88
                                                      ===========    ==========
OPTIONS EXERCISABLE (VESTED) AT SEPTEMBER 30, 2003     3,802,459     $   0.76
                                                      ===========    ==========
</TABLE>

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

<TABLE>
<CAPTION>
                                             OPTIONS OUTSTANDING                           OPTIONS EXERCISABLE
                                 ----------------------------------------------  ---------------------------------------
                                                   WEIGHTED
                                                    AVERAGE        WEIGHTED
                                                   REMAINING        AVERAGE
     RANGE OF EXERCISE           NUMBER OF         CONTRACTUAL     EXERCISE           NUMBER OF        WEIGHTED AVERAGE
       PRICES                      SHARES        LIFE (IN YEARS)    PRICE              SHARES          EXERCISE PRICE
 ------------------------------------------------------------------------------------------------------------------------
<S>      <C>                       <C>                <C>          <C>                 <C>                  <C>
 $0.26 - $0.99                     4,424,694          7.11         $ 0.65              3,425,735            $ 0.64
 $1.00 - 2.15                        417,863          3.27           1.21                240,151              1.01
 $2.50                                74,000          2.15           2.50                 74,000              2.50
 $2.70 - 3.88                        305,673          4.58           3.03                 32,573              3.07
 $5.31                                30,000          5.76           5.31                 30,000              5.31
                                 -----------                                       -------------
              TOTAL                5,252,230          6.58         $ 0.88              3,802,459            $ 0.76
                                 ===========                                       =============
</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 grant
               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 nine months ended
               September 30, 2003, the Company recognized non-cash compensation
               expense of $49,048 as required by the variable accounting
               provisions of APB25 and Interpretation No. 44: Accounting for
               Certain Transactions Involving Stock Compensation (an
               Interpretation of APB Opinion No. 25) (FIN44) for the options
               subject to the repricing plan.

               As of September 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


                                       17
<PAGE>


               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 SFAS 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 SFAS
               No. 123, the net loss and basic loss per share would have been as
               shown below. The fair value of stock options granted under the
               Company's plan was estimated on the date of grant using the
               Black-Scholes option-pricing model using the following weighted
               average assumptions:

<TABLE>
<CAPTION>
                                                         NINE MOS.
                                                       ENDED 9/30/03          2002           2001
                                                    --------------------    ----------    ---------
<S>                                                         <C>                <C>            <C>
                    Expected Life in Years                  5.0                8.6            6.3
                    Risk Free Interest Rate                4.0%               5.2%           5.2%
                    Dividend Yield                          0%                 0%             0%
                    Expected Volatility                    75.2%             109.5%         135.8%
</TABLE>


               The weighted average fair value at the date of grant for stock
               options and warrants granted during the nine months ended
               September 30, 2003 was $1.49 per option and $0.75 per warrant.
               The pro forma results of operations as if the Company had adopted
               the fair value method for options granted to employees is as
               follows:
<TABLE>
<CAPTION>

                                                                        NINE MONTHS ENDED  NINE MONTHS ENDED
                                                                       SEPTEMBER 30, 2003  SEPTEMBER 30, 2002
                                                                         ---------------   ----------------
<S>                                                                      <C>               <C>
                      AS REPORTED NET LOSS                               $   (2,848,078)   $     (7,604,398)
                            Add:  Stock-based employee
                            compensation expense included in                    114,124             113,014
                            reported loss, net of related tax effects
                            Less:  Total stock based employee
                            compensation expense determined
                            under fair value based methods for all
                            awards, net of related tax effects               (1,285,460)         (2,079,764)
                                                                         --------------     ----------------
                      PRO FORMA NET LOSS                                 $   (4,019,414)    $    (9,571,148)
                                                                         ==============     ================

                      NET LOSS PER SHARE:
                            As Reported                                  $        (0.11)    $         (0.38)
                            Pro Forma                                    $        (0.14)    $         (0.48)

</TABLE>

               The Company recorded $1,828,709 for the fair value of 623,683
               shares of Treasury Stock received in exchange for the exercise of
               1,865,200 common stock options and warrants during the current
               year.



                                       18
<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 consolidated results of
        operations, cash flows, or financial condition.

        On September 5, 2003, TVG filed an action in the Court of Chancery of
        the State of Delaware (Civil Action No. 50529) to enjoin the Company
        from proceeding with its annual meeting of stockholders on September 26,
        2003. TVG objected to two proposals involving changes to the Company's
        certificate of incorporation and bylaws allowing for a staggered board
        and a supermajority vote of stockholders for future certificate of
        incorporation and bylaw changes. TVG alleged that the Company failed to
        provide sufficient information in its proxy material about the effects
        of the proposed amendments on TVG's interests in the Company. On
        September 25, 2003, the Court of Chancery enjoined the Company from
        proceeding with the two proposals to amend the Company's certificate of
        incorporation and bylaws. As a result, the Company delayed its annual
        meeting. The Company intends to reschedule its annual meeting and revise
        the proxy materials to comply with the Court's order.

        On September 8, 2003, TVG filed a Demand for Arbitration with the
        American Arbitration Association against Youbet to be heard in
        Wilmington, Delaware. In this proceeding, the two principle issues are:
        (1) an assertion that the Company has breached the Warrant Issuance
        Agreement and the Additional TVG Warrant, requesting an injunction
        barring the Company, its officers, agents, employees, representatives
        and all other persons acting in concert or participation with them from
        taking any action to implement or adopt the classified board proposal or
        the supermajority voting proposal; and (2) TVG's request for an order
        directing the Company to reduce the exercise price of the Additional TVG
        Warrant in accordance with the terms of the Warrant Issuance Agreement
        and the Additional TVG Warrant and to comply with the provisions of the
        Additional TVG Warrant. The License Agreement between TVG and the
        Company also contains a so-called "Cross-Default Provision", which
        states that Youbet's failure to provide TVG with the Additional TVG
        Warrant in accordance with the Warrant Issuance Agreement or make
        certain specified payments to TVG shall be deemed a material breach of
        the License Agreement. The Company does not believe that the proposed
        amendments to its certificate of incorporation are inconsistent or
        conflict with the Additional Warrant and is contesting TVG's assertion
        vigorously. In addition, if TVG were to successfully invoke the
        Cross-Default Provision and terminate the License Agreement, such action
        could have a material adverse effect on Youbet.

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


                                       19
<PAGE>


        serving in such capacity. The term of the indemnification period is for
        the 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 September 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 September
        30, 2003.


ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

        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
report contains certain forward-looking statements. Statements containing
expressions such "may," "will," "project," "might," "expect," "believe,"
"anticipate," "intend," "could," "would," "estimate," potential," "continue" or
"pursue," or the negative or other variations thereof or comparable terminology
used in Youbet's press releases and in its reports filed with the Securities and
Exchange Commission are intended to identify forward-looking statements. These
forward-looking statements, which are included in accordance with the Safe
Harbor provisions of the Private Securities Litigation Reform Act of 1995, may
involve known and unknown risks, uncertainties and other factors that may cause
Youbet's actual results and performance in future periods to be materially
different from any future results or performance suggested by the
forward-looking statements in this report. Although Youbet believes the
expectations reflected in such forward-looking statements are based upon
reasonable assumptions, it can give no assurance that actual results will not
differ materially from these expectations. From time to time, these risks,
uncertainties and other factors are discussed in the Company's filings with the
Securities and Exchange Commission. Such factors include, without limitation,
the following: the outcome of our ongoing arbitration and related discussions
with TVG; the timely development and market acceptance of new products and
technologies; our ability to secure additional sources of financing; our ability
to control operating expenses; increased competition in the advance deposit
wagering business; a decline in the public acceptance of wagering; wagering
ceasing to be approved in jurisdictions where Youbet currently operates; the
limitation, conditioning or suspension of any of Youbet's licenses; increases in
or new taxes imposed on wagering revenues; loss or retirement of key executives;
and a decline in the general economy. Readers are cautioned not to place undue
reliance on forward-looking statements, which speak only as of the date of this
report. Youbet does not undertake, and specifically disclaims any obligation, to
publicly release the result of any revisions that may be made to any
forward-looking statements to reflect the occurrence of anticipated or
unanticipated events or circumstances after the date of such statements.




                                       20
<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 in
         select international markets. The Company currently provides its
         customers with the ability to receive interactive, real-time
         audio/video broadcasts directly on their computers, access a
         comprehensive database of handicapping information and, in most states,
         wager on a wide selection of U.S. 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, 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 a license 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.



                                       21
<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 SEPTEMBER 30, 2003 COMPARED TO
THE THREE MONTHS ENDED SEPTEMBER 30, 2002

        Revenues increased 76% to $14,304,920 for the third quarter ended
        September 30, 2003 as compared to $8,127,764 in the third quarter of
        2002. The Company experienced a growth of 14% in its customer base and a
        39% increase in the dollar amount wagered per customer as compared to
        three months ended September 30, 2002. Gross handle grew substantially
        from $46,340,751 for the third quarter 2002, to $72,532,744 for the most
        recent quarter. 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.

        OPERATING EXPENSES

               TRACK FEES: Track Fees increased to $6,037,400 in 2003, as
               compared to $3,646,380 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 licensing
               agreement with TVG (See Note 4 to the consolidated financial
               statements). For the three months ended September 30, 2003,
               Licensing Fees - Related Party increased to $3,462,710 as


                                       22
<PAGE>


               compared to $1,899,010 in 2002 primarily due to increased
               wagering on TVG tracks.

               NETWORK OPERATIONS: Network Operations expenses increased 17% to
               $551,815 in 2003, as compared to $472,445 in 2002. The increase
               was primarily due to higher salaries and additional repair and
               maintenance costs offset, in part, by lower communication costs.
               Network Operations consist of costs for salaries, data center
               management, and telecommunications.

               RESEARCH AND DEVELOPMENT: Research and Development expenses
               increased 7.4% to $475,960 in 2003, as compared to $443,357 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 expenses increased 15%
               to $471,272 in 2003, as compared to $408,695 in 2002. The
               increase was primarily due to increased expenses associated with
               marketing programs and salaries.

               GENERAL AND ADMINISTRATIVE: General and Administrative expenses
               increased 31% to $2,602,281 in 2003 as compared to $1,991,142 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
               decreased 13% to $1,212,958 in 2003 as compared to $1,396,568 in
               2002. Depreciation and Amortization primarily consists of
               amortization of licensing rights related to the TVG license
               agreement (See Note 4 to the consolidated financial statements).

        OTHER INCOME (EXPENSE)

               INTEREST INCOME:  Interest Income increased 12% to $10,285 in
               2003 as compared to $9,218 in 2002.  The increase was primarily
               due to higher balances of cash and cash equivalents.

               INTEREST EXPENSE: Interest Expense decreased to $121,364 in 2003
               as compared to $139,230 in 2002. The decrease was primarily due
               to a lower effective interest rate on the newly issued unsecured
               note as compared to the rate on the notes outstanding during 2002
               (See Note 7 to the consolidated financial statements).

               OTHER INCOME:  Other Income decreased significantly in 2003
               representing a recovery in 2002 on a legal matter.

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 COMPARED TO
THE NINE MONTHS ENDED SEPTEMBER 30, 2002

        Revenues increased 133% to $39,093,003 for the nine months ended
        September 30, 2003 as compared to $16,755,864 in 2002. The Company
        experienced a growth of 16% in its customer base and a 64% increase in
        the dollar amount wagered per customer as compared to the nine months
        ended September 30, 2002. Gross handle grew substantially from
        $112,970,346 for the first nine months in 2002, to $206,837,561 for the
        current year. These results were primarily due to (1) an increase in


                                       23
<PAGE>


        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.

        OPERATING EXPENSES

               TRACK FEES: Track Fees increased to $18,116,710 in 2003, as
               compared to $6,535,488 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 nine months ended September 30, 2003, Licensing Fees -
               Related Party increased to $7,650,562 as compared to $3,630,419
               in 2002 primarily due to increased wagering on TVG tracks.

               NETWORK OPERATIONS: Network Operations expenses increased 2% to
               $1,497,825 in 2003, as compared to $1,467,881 in 2002. The
               increase was primarily due to higher service and network expenses
               offset, in part, by lower content production center expenses.
               Network Operations consist of costs for salaries, data center
               management, and telecommunications.

               RESEARCH AND DEVELOPMENT: Research and Development expenses
               increased 4% to $1,542,117 in 2003, as compared to $1,479,806 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 expenses decreased 16%
               to $1,341,091 in 2003, as compared to $1,593,912 in 2002. The
               decrease was primarily due to reduced expenses associated with
               marketing programs and salaries.

               GENERAL AND ADMINISTRATIVE: General and Administrative expenses
               increased 35% to $7,169,705 in 2003 as compared to $5,327,039 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
               decreased 2% to $4,096,600 in 2003 as compared to $4,195,472 in
               2002. Depreciation and Amortization primarily consists of
               amortization of licensing rights related to the TVG license
               agreement (See Note 4).



                                       24
<PAGE>





        OTHER INCOME (EXPENSE)

               INTEREST INCOME:  Interest Income decreased 4% to $30,790 in
               2003 as compared to $32,233 in 2002.  The decrease was primarily
               due to lower interest rates in 2003 as compared to 2002.

               INTEREST EXPENSE: Interest Expense increased to $637,082 in 2003
               as compared to $289,469 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 a write-off in 2003
               related to the settlement of a disputed invoice with a vendor
               and a recovery on a legal matter in 2002.

LIQUIDITY AND CAPITAL RESOURCES

        The Company had working capital of $4,537,026 at September 30, 2003
        compared with a net working capital deficit of $2,267,997 at December
        31, 2002. Cash and cash equivalents at September 30, 2003 were
        $8,811,804, an increase of $4,251,907 over the $4,559,897 reported at
        December 31, 2002. Working capital increased in the nine months ended
        September 30, 2003 primarily as a result of an increase in cash and cash
        equivalents and restricted cash and a reduction in accounts payable
        trade, track payables and accrued compensation, offset in part by an
        increase in customer deposits and fees payable to related party. Cash
        and cash equivalents balances increased in the nine months ended
        September 30, 2003 primarily as a result of cash provided by operating
        activities and the cash received from the issuance of notes payable and
        exercises of stock option and warrants. 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 a license from California in February 2002, have 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.



                                       25
<PAGE>


        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 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
        $163,217 as of September 30, 2003.

        Net cash provided by operating activities was $1,188,057 for the nine
        months ended September 30, 2003 compared to $1,908,167 for the nine
        months ended September 30, 2002. The decrease in cash provided by
        operating activities results primarily from increased working capital
        needs due to the reduction in accounts payable - trade, track payables
        and accrued compensation and increase in operations related restricted
        cash, receivables and prepaid expenses. These uses of operating cash
        were partially offset by reduced net loss, increase in fees payable to
        related party, and increased customer deposits.

        Net cash used in investing activities was $775,588 for the nine months
        ended September 30, 2003 compared to $604,831 used in investing
        activities for the nine months ended September 30, 2002. The increase in
        net cash used in investing activities primarily results from increased
        purchases of property and equipment offset by a reduction in investing
        related restricted cash.

        Net cash provided by financing activities was $3,839,438 for the nine
        months ended September 30, 2003 and $753,884 for the nine months ended
        September 30, 2002. During the nine-month period ended September 30,
        2003, the Company received $2,589,438 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 nine-month period ended September 30, 2002, the
        Company received $750,000 proceeds from issuance of notes payable.

ITEM 3.   CONTROLS AND PROCEDURES

  As of September 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


                                       26
<PAGE>


Executive Officer and our Chief Financial Officer, concluded that our disclosure
controls and procedures were effective in timely alerting management, including
our Chief Executive Officer and our Chief Financial Officer, of material
information that we are required to include in periodic Securities and Exchange
Commission filings.

There have been no changes in our internal control over financial reporting that
occurred during the quarter ended September 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 September 5, 2003, TVG, a subsidiary of Gemstar-TV Guide
        International and a shareholder of the Company, filed an action in the
        Court of Chancery of the State of Delaware (Civil Action No. 50529) to
        enjoin the Company from proceeding with its annual meeting of
        stockholders on September 26, 2003. TVG objected to two proposals
        involving changes to the Company's certificate of incorporation and
        bylaws allowing for a staggered board and a supermajority vote of
        stockholders for future certificate of incorporation and bylaw changes.
        TVG alleged that the Company failed to provide sufficient information in
        its proxy material about the effects of the proposed amendments on
        TVG's interests in the Company. On September 25, 2003, the Court of
        Chancery enjoined the Company from proceeding with the two proposals to
        amend the Company's certificate of incorporation and bylaws. As a
        result, the Company delayed its annual meeting. The Company intends to
        reschedule its annual meeting and revise the proxy materials to comply
        with the Court's order.

        On September 8, 2003, TVG filed a Demand for Arbitration with the
        American Arbitration Association against Youbet to be heard in
        Wilmington, Delaware. In this proceeding, the two principle issues are:
        (1) an assertion that the Company has breached the Warrant Issuance
        Agreement and the Additional TVG Warrant, requesting an injunction
        barring the Company, its officers, agents, employees, representatives
        and all other persons acting in concert or participation with them from
        taking any action to implement or adopt the classified board proposal or
        the supermajority voting proposal; and (2) TVG's request for an order
        directing the Company to reduce the exercise price of the Additional TVG
        Warrant in accordance with the terms of the Warrant Issuance Agreement
        and the Additional TVG Warrant and to comply with the provisions of the
        Additional TVG Warrant. The License Agreement between TVG and the
        Company also contains a so-called "Cross-Default Provision", which
        states that Youbet's failure to provide TVG with the Additional TVG
        Warrant in accordance with the Warrant Issuance Agreement or make
        certain specified payments to TVG shall be deemed a material breach of
        the License Agreement. The Company does not believe that the proposed
        amendments to its certificate of incorporation are inconsistent or
        conflict with the Additional Warrant and is contesting TVG's assertion
        vigorously. In addition, if TVG were to successfully invoke the
        Cross-Default Provision and terminate the License Agreement, such action
        could have a material adverse effect on Youbet.


                                       27
<PAGE>


  ITEM 2.    CHANGES IN SECURITIES

        ISSUANCE OF WARRANTS

               During the nine months ended September 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). The issuance of these warrants was deemed
               to be exempt from registration under the Securities Act of 1933,
               as amended, in reliance on Section 4(2) of the Securities Act or
               Regulation D of the Securities Act as transactions by an issuer
               not involving a public offering. Appropriate legends were affixed
               to the instruments representing such warrants issued in such
               transactions and all recipients had adequate access to
               information about Youbet.com. The shares of common stock
               underlying these warrants were subsequently registered for resale
               under a Prospectus Supplement, dated April 24, 2003, which
               supplemented a Prospectus dated August 11, 2000.

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 September 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's letter of resignation did not indicate any disagreement with
        management, and he will continue to serve as an advisor to the Company.

ITEM 6.      EXHIBITS AND REPORTS ON FORM 8-K

        (a)    Exhibits

                  Exhibit 3.1 Certificate of Incorporation of Youbet.com, as
                  amended through November 12, 2001 Exhibit 3.2 Bylaws of
                  Youbet.com, as amended through January 19, 1999

                  Exhibit 4.1: Form of Additional TVG Warrant (incorporated by
                  reference to Exhibit 7(c) to the Schedule 13D (SEC File No.
                  005-78294) filed by Gemstar-TV Guide International, Inc. on
                  June 3, 2002)



                                       28
<PAGE>


                  Exhibit 10.1: Separation Agreement, dated as of May 3, 2000,
                  by and between Youbet.com and Russell Fine

                  Exhibit 10.2: Release Agreement, dated as of April 22, 2003,
                  by and among Youbet.com, Inc., Russell Fine and Fineline
                  Services, LLC

                  Exhibit 10.3: Consulting Agreement, dated as of March 3, 2003,
                  by and between Youbet.com, Inc. and J. Scott Schmidt

                  Exhibit 10.4: Consulting Agreement, dated as of June 19, 2002,
                  by and between Youbet.com and James R. Edgar

                  Exhibit 10.5: Form of Supplement to Employment Agreement

                  Exhibit 31.1: Certification Pursuant to Rule 13a-14 of the
                  Securities Exchange Act of 1934

                  Exhibit 31.2: Certification Pursuant to Rule 13a-14 of the
                  Securities Exchange Act of 1934

                  Exhibit 32: Certifications Pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002


        (b)    Reports on Form 8-K

                  Form 8-K, dated August 6, 2003 and filed August 8, 2003,
                  reporting under Item 5 the release by the Oregon Racing
                  Commission report of its on quarterly hub handles.

                  Form 8-K, dated August 7, 2003 and filed August 8, 2003,
                  reporting under Item 5 the appointment of Charles Champion as
                  Chairman of the Board and Lawrence Lucas resignation as
                  Chairman of the Board.

                  Form 8-K, dated August 11, 2003 and furnished August 13, 2003,
                  reporting under Item 5 the second quarter 2003 earnings of
                  Youbet.com.

                  Form 8-K, dated August 12, 2003 and furnished August 18, 2003,
                  providing under Items 7 and 9 the quarterly earnings call
                  transcript.

                  Form 8-K, dated September 8, 2003 and filed September 9, 2003,
                  reporting under Items 5 and 7 a Demand for Arbitration filed
                  against the Company by TVG.

                  Form 8-K, dated and filed September 9, 2003 reporting under
                  Items 5 and 7 a press release and documents associated with a
                  legal action filed against the Company in the Court of
                  Chancery of the State of Delaware.

                  Form 8-K, dated September 25, 2003 and filed September 26,
                  2003, reporting under Items 5 and 7 a press release and the
                  Memorandum Order issued by the Court of Chancery of the State
                  of Delaware enjoining the Youbet's annual meeting.



                                       29
<PAGE>





                                   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.

   October 31, 2003          By:  /s/   Charles F. Champion
                                        --------------------------------------
                                        Charles F. Champion
                                        President and Chief Executive Officer

   October 31, 2003          By:  /s/   Gary W. Sproule
                                        --------------------------------------
                                        Gary W. Sproule
                                        Chief Financial Officer