<PAGE>

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

                                   FORM 10-QSB

  [X]  Quarterly Report under Section 13 or 15(d) of the Securities Exchange
       Act of 1934

       For the quarterly period ended September 30, 1999

  [ ]  Transition Report under Section 13 or 15(d) of the Securities Exchange
       Act of 1934

       For the transition period from                to
                                      --------------    -------------

                       Commission file number: 33-13789LA

                                YOUBET.COM, INC.
   ---------------------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)


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


        1950 Sawtelle Boulevard, Suite 180, Los Angeles, California 90025
  ---------------------------------------------------------------------------
         (Address of principal executive offices)               (Zip Code)

                                 (310) 444-3300
   ---------------------------------------------------------------------------
                (Issuer's telephone number, including area code)



  ---------------------------------------------------------------------------
            (Former name, former address and former fiscal year,
                       if changed since last report.)

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

  As of October 31, 1999, the issuer had 19,321,645 shares of common stock
  issued and outstanding.

  Transitional Small Business Disclosure Format:  Yes [ ]  No [X]

                                       1

<PAGE>

                                YOUBET.COM, INC.

                                     INDEX

PART I.   FINANCIAL INFORMATION                                             Page

   Item 1.  Financial Statements

     Balance Sheets -- December 31, 1998 and September 30, 1999             3-4

     Statements of Operations -- Three months ended September 30, 1998
      and 1999 and nine months ended September 30, 1998 and 1999            5-6

     Statements of Cash Flows -- Nine months ended September 30,
      1998 and 1999                                                         7-8

     Notes to Financial Statements -- Nine months ended                    9-14
         September 30, 1998 and 1999.


   Item 2.  Management's Discussion and Analysis of
              Financial Condition and Results of Operations               15-22


PART II.  OTHER INFORMATION

   Item 1.  Legal Proceedings                                                23

   Item 2.  Changes in Securities                                            24

   Item 4.  Submission of Matters to a Vote of Security Holders              25

   Item 6.  Exhibits and Reports on Form 8-K                                 26

   Signatures                                                                27

                                       2

<PAGE>


                                 YOUBET.COM, INC.
                                  BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                               December 31,            September 30,
                                                                                   1998                    1999
                                                                            -------------------   -----------------------
                                                                                                        (Unaudited)
<S>                                                                         <C>                   <C>
ASSETS

Current assets:
    Cash and cash equivalents                                                    $1,540,616               $67,583,126
    Stock subscriptions receivable                                                2,100,000                         -
    Receivables                                                                      50,364                   340,646
    Prepaid expenses                                                                 22,344                 2,476,115
    Other current assets                                                             11,317                    11,751
                                                                                 ----------               -----------

Total current assets                                                              3,724,641                70,411,638
                                                                                 ----------               -----------

Property and equipment                                                            1,700,211                 2,998,261
Less:  Accumulated depreciation and amortization                                   (820,535)               (1,134,073)
                                                                                 ----------               -----------

Property and equipment, net                                                         879,676                 1,864,188
                                                                                 ----------               -----------

Other assets:
    Deferred financing costs, net of amortization                                    31,395                 1,523,640
    Deposits and other                                                               17,537                    20,063
    Deferred project costs                                                                -                    94,388
                                                                                 ----------               -----------

Total other assets                                                                   48,932                 1,638,091
                                                                                 ----------               -----------

Total assets                                                                     $4,653,249               $73,913,917
                                                                                 ----------               -----------
                                                                                 ----------               -----------
</TABLE>

                                       3

<PAGE>

                                 YOUBET.COM, INC.
                                  BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                    December 31,        September 30,
                                                                                       1998                  1999
                                                                                 ------------------   -------------------
                                                                                                         (Unaudited)
<S>                                                                              <C>                  <C>
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable                                                                   $    984,258           $  1,173,409
   Accrued compensation and related items                                                  144,252                191,258
   Other accrued expenses                                                                  451,127              2,250,570
   Deferred revenues                                                                             -                528,690
   Current portion of capitalized lease obligations                                        220,317                 87,968
                                                                                      ------------           ------------

Total current liabilities                                                                1,799,954              4,231,895

Notes payable                                                                                    -             38,748,578
Capitalized lease obligations, less current portion                                         60,134                 29,838
                                                                                      ------------           ------------

Total liabilities                                                                        1,860,088             43,010,311
                                                                                      ------------           ------------

Stockholders' equity (Note 2):
  Convertible preferred stock, $.001 par value
    (aggregate liquidation preference of $2,677,750 and $0 at December 31, 1998
    and September 30, 1999, respectively); authorized - 1,000,000 shares; issued
    and outstanding-107,110 shares and no shares at December 31, 1998 and
    September 30, 1999, respectively                                                           107                      -
  Common stock, $.001 par value; authorized -
    50,000,000 shares; issued and outstanding and issuable - 13,970,268 shares
    at December 31, 1998 and 19,121,288 shares at September 30,1999,
    respectively                                                                            13,970                 19,121
  Additional paid-in capital                                                            42,326,397             84,034,540
  Accumulated deficit                                                                  (37,825,941)           (51,537,523)
  Deferred compensation                                                                 (1,161,372)            (1,472,532)
  Stock note receivable                                                                   (560,000)              (140,000)
                                                                                      ------------           ------------

Total stockholders' equity                                                               2,793,161             30,903,606
                                                                                      ------------           ------------

Total liabilities and stockholders' equity                                            $  4,653,249           $ 73,913,917
                                                                                      ------------           ------------
                                                                                      ------------           ------------
</TABLE>

                                       4

<PAGE>

                                 YOUBET.COM, INC.
                              STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                           Three Months Ended
                                                                                              September 30,
                                                                                ------------------------------------------
                                                                                       1998                    1999
                                                                                -------------------      -----------------
                                                                                               (Unaudited)
<S>                                                                             <C>                      <C>
Revenues                                                                           $    76,382              $ 1,132,054

Operating expenses:
   Network operations                                                                  404,798                  492,083
   Research and development                                                            348,667                  533,321
   Sales and marketing                                                                 499,587                5,429,485
   General and administrative                                                          818,612                1,204,577
   Depreciation and amortization                                                        86,192                  114,240
   Non-cash compensation                                                               707,283                  457,895
                                                                                   -----------              -----------

   Total operating expenses                                                          2,865,139                8,231,601
                                                                                   -----------              -----------

Loss from operations                                                                (2,788,757)              (7,099,547)

Other income (expense):
   Interest expense                                                                    (79,116)              (1,014,213)
   Amortization of deferred financing costs                                            (64,242)                 (95,008)
   Fair value of warrants issued for financing costs                                  (161,962)                 (12,570)
   Interest income                                                                      48,608                  969,095
   Other                                                                                (9,557)                   8,197
                                                                                   -----------              -----------

   Total other income (expense)                                                       (266,269)                (144,499)
                                                                                   -----------              -----------

Net loss                                                                           $(3,055,026)             $(7,244,046)
                                                                                   -----------              -----------
                                                                                   -----------              -----------

Net loss per share - basic and diluted                                             $     (0.28)             $     (0.38)
                                                                                   -----------              -----------
                                                                                   -----------              -----------

Weighted average number of shares                                                   11,104,273               19,121,288
                                                                                   -----------              -----------
                                                                                   -----------              -----------
</TABLE>

                                       5

<PAGE>

                                 YOUBET.COM, INC.
                             STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                            Nine Months Ended
                                                                                              September 30,
                                                                                 -----------------------------------------
                                                                                       1998                    1999
                                                                                 ------------------     -------------------
                                                                                                (Unaudited)
<S>                                                                              <C>                    <C>
Revenues                                                                            $     98,407            $  2,325,922

Operating expenses:
   Network operations                                                                    736,401               1,390,700
   Research and development                                                              927,202               1,492,397
   Sales and marketing                                                                 1,190,751               6,896,485
   General and administrative                                                          2,044,488               2,778,872
   Depreciation and amortization                                                         244,325                 315,273
   Non-cash compensation                                                               3,452,572               1,951,286
                                                                                    ------------            ------------

   Total operating expenses                                                            8,595,739              14,825,013
                                                                                    ------------            ------------

Loss from operations                                                                  (8,497,332)            (12,499,091)

Other income (expense):
   Interest expense                                                                     (322,717)             (2,038,201)
   Amortization of deferred financing costs                                             (111,698)               (191,965)
   Discount on conversion of bridge loans,
     A/P, and deferred salaries into
     common stock                                                                       (841,713)                      -
   Fair value of warrants issued for financing costs                                  (1,405,684)               (478,221)
   Interest income                                                                        49,380               1,488,699
   Other                                                                                (120,219)                  7,197
                                                                                    ------------            ------------

   Total other income (expense)                                                       (2,752,651)             (1,212,491)
                                                                                    ------------            ------------

Net loss                                                                            $(11,249,983)           $(13,711,582)
                                                                                    ------------            ------------
                                                                                    ------------            ------------

Net loss per share - basic and diluted                                              $      (1.10)           $      (0.85)
                                                                                    ------------            ------------
                                                                                    ------------            ------------

Weighted average number of shares                                                     10,196,812              16,151,722
                                                                                    ------------            ------------
                                                                                    ------------            ------------
</TABLE>

                                       6

<PAGE>

                                 YOUBET.COM, INC.
                             STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                             Nine Months Ended
                                                                                               September 30,
                                                                                 ------------------------------------------
                                                                                       1998                    1999
                                                                                 ------------------      ------------------
                                                                                                (Unaudited)
<S>                                                                              <C>                     <C>
Increase (Decrease) in Cash and Cash Equivalents

Cash flows from operating activities:

   Net loss                                                                        $(11,249,983)           $(13,711,582)
   Adjustments to reconcile net loss to net cash
       provided by operating activities:
     Depreciation and amortization                                                      244,325                 315,273
     Amortization of deferred financing costs                                           111,698                 191,966
     Lease restructuring and other costs                                                 70,645                   1,237
     Interest accreted on notes payable                                                       -               2,020,068
     Non-cash compensation                                                            4,866,969               2,429,507
     Accounts payable and accrued liabilities
       settled through the issuance of common
       stock and warrants                                                               556,079                       -
     Discount on conversion of bridge
       loans, accounts payable and employee
       deferred salaries into common stock
       and warrants                                                                     841,713                       -
     Changes in operating assets and liabilities:
     (Increase) decrease in:
       Receivables                                                                       (7,992)                (69,498)
       Prepaid expenses                                                                (137,213)             (2,453,771)
       Other current assets                                                             (12,487)               (221,216)
       Deposits and other                                                               (19,032)                (96,914)
     Increase (decrease) in:
       Accounts payable                                                                (146,077)                189,152
       Accrued compensation and related items                                          (402,322)                143,008
       Other accrued interest payable                                                   (94,663)                      -
       Other accrued expenses                                                            17,439               1,737,205
       Deferred revenues                                                                      -                 528,690
       State income taxes payable                                                        (6,400)                      -
                                                                                   ------------            ------------

Net cash used in operating activities                                                (5,367,301)             (8,996,875)
                                                                                   ------------            ------------

Cash flows from investing activities:
   Purchases of property and equipment                                                 (188,462)             (1,301,025)
                                                                                   ------------            ------------

Net cash used in investing activities                                                  (188,462)             (1,301,025)
                                                                                   ------------            ------------
</TABLE>

                                       7

<PAGE>

                                 YOUBET.COM, INC.
                             STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                            Nine Months Ended
                                                                                              September 30,
                                                                                 ----------------------------------------
                                                                                      1998                   1999
                                                                                 ----------------      ------------------
                                                                                               (Unaudited)
<S>                                                                              <C>                   <C>
Increase (Decrease) in Cash and Cash Equivalents

   Proceeds from convertible note                                                              -              36,728,510
   Proceeds from warrant purchase                                                              -                   2,438
   Proceeds from exercise of stock options
     and warrants                                                                      1,030,000               3,151,319
   Increase in deferred financing costs                                                  (96,000)             (1,684,214)
   Net proceeds from sale of securities                                                5,143,954              38,305,002
   Proceeds from advances and bridge loans:
     Related parties                                                                     888,875                       -
     Unrelated parties                                                                 1,190,000                       -
   Repayments of advances:
     Related parties                                                                     (23,875)                     -
     Unrelated parties                                                                   (30,000)                     -
   Payments on capitalized lease obligations                                             (54,533)               (162,645)
                                                                                      ----------             -----------

Net cash provided by financing activities                                              8,048,421              76,340,410
                                                                                      ----------             -----------

Cash and cash equivalents:
   Net increase                                                                        2,492,658              66,042,510
   Cash at beginning of period                                                            52,895               1,540,616
                                                                                      ----------             -----------

   Cash at end of period                                                              $2,545,553             $67,583,126
                                                                                      ----------             -----------
                                                                                      ----------             -----------


Supplemental disclosure of cash flow information

   (a) Cash paid for:
          Interest paid                                                               $   23,465             $    18,035
                                                                                      ----------             -----------
                                                                                      ----------             -----------
   (b) Non-cash transactions:
          During the nine months ended September 30, 1999, certain employees
               exercised 74,833 stock options in exchange for 74,833 common
               stock shares in a cashless exercise. To effect this cashless
               exercise, 37,417 stock options were forfeited.
          During the nine months ended September 30, 1999, the Company issued
               13,505 common stock shares in conjunction with the conversion of
               vendor debt of $33,763.
          During the nine months ended September 30, 1999, the Company issued
               1,071,100 common stock shares from the conversion of 107,110
               preferred stock shares.
          During the nine months ended September 30, 1998 and 1999, the Company
               incurred and deferred $3,953,879 and $1,567,167 of non-cash
               compensation, respectively.
          During the nine months ended September 30, 1999, the Company issued
               50,000 warrants at a total fair value of $453,500 as closing
               costs of the public offering.
          During the nine months ended September 30, 1999, the Company offset
               milestone bonuses against $420,000 in stock notes receivable.
</TABLE>

                                       8

<PAGE>

                                YOUBET.COM, INC.
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
                  NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999

NOTE 1--ORGANIZATION AND BASIS OF PRESENTATION

BUSINESS

     Youbet.com, Inc. (the "Company") is a Delaware corporation. Since
mid-1995, the Company has been engaged in developing PC-based proprietary
communications software technology to be utilized by consumers for online
entertainment purposes. The Company's first service being offered to
subscribers is the You Bet Network, an interactive online horseracing network
that is broadcast over the Company's virtual private network.

     During the quarter ended June 30, 1999, the Company determined it had
successfully completed the development stage by incurring revenues of over
$1,000,000 since the beginning of the year. Accordingly, the Company is no
longer in the development stage and is now in the operating stage.

BASIS OF PRESENTATION

     The accompanying financial statements are unaudited, but in the opinion
of management of the Company, contain all adjustments necessary to present
fairly the financial position at September 30, 1999, the results of
operations for the nine months and three months ended September 30, 1998 and
1999, and the cash flows for the nine months ended September 30, 1998 and
1999. These adjustments are of a normal recurring nature. The results of
operations for the nine months and three months ended September 30, 1999 are
not necessarily indicative of the results of operations to be expected for
the full fiscal year ending December 31, 1999.

     Certain information and footnote disclosures normally included in
financial statements that have been prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to the
rules and regulations of the Securities and Exchange Commission, although
management of the Company believes that the disclosures contained in these
financial statements are adequate to make the information presented therein
not misleading. For further information, refer to the consolidated financial
statements and notes thereto included in the Company's Annual Report on Form
10-KSB for the year ended December 31, 1998, as filed with the Securities and
Exchange Commission.

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

LOSS PER SHARE

     Basic earnings per share are calculated by dividing net loss by the
weighted average number of common shares outstanding during the period.
Diluted earnings per share are calculated by dividing net loss by the basic
shares outstanding and all dilutive securities, including stock options,
warrants, convertible notes and preferred stock, but does not include the
impact of potential common shares which would be antidilutive.

                                       9

<PAGE>

                                YOUBET.COM, INC.
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
                  NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999

NOTE 1--ORGANIZATION AND BASIS OF PRESENTATION (Continued)

     For all periods presented, potential dilutive securities were not
included in the earnings per share calculation since their effect would be
anti-dilutive. Basic and diluted earnings per share are the same for all
periods presented.

NOTE 2--NOTES PAYABLE

     On April 5, 1999, the Company issued $45,500,000 principal amount of 11%
Senior Convertible Discount Notes for cash proceeds of $36,728,510, which
represents a discount of 11% per year, compounded semi-annually, to April 5,
2001. The Company incurred approximately $1,625,000 of costs related to this
offering and issued 50,000 warrants exercisable at $10.00 per share as a
finder's fee. These warrants had an aggregate fair value of $352,000. The
notes begin accruing interest on April 5, 2001 at 11% per year, payable
semi-annually. Principal and unpaid interest are due and payable on April 5,
2004. The Notes plus accrued, unpaid interest are convertible at any time at
the rate of $10 per common share. Based on a valuation report prepared by an
investment and merchant banking firm dated April 28, 1999, the Company has
determined that the Notes conversion price at $10.00 per share was at fair
market value. Accordingly, the Company will recognize a charge to operations
of $352,000 over the five year maturity period, with a corresponding credit
to paid-in capital. The notes also contain covenants and restrictions
limiting the ability of the Company to engage in certain financings, other
transactions and dividend distributions.

NOTE 3--STOCKHOLDERS' EQUITY

a.   Issuance of Common Stock and Warrants

     During the three months ended March 31, 1999, the Company issued 74,833
shares of common stock in conjunction with the exercise of stock options by
certain employees. In order to effect a cashless transaction, an additional
37,417 stock options were forfeited. This cashless exercise resulted in a
charge to non cash compensation of $300,000.

     During the three months ended March 31, 1999, the Company issued 100,000
shares of common stock at a price of $2.50 per share, generating gross
proceeds to the Company of $250,000.

     During the three months ended March 31, 1999, the Company issued 13,505
shares of common stock in conjunction with the conversion of vendor debt of
$33,763.

     During the six months ended June 30, 1999, the Company issued 1,028,000
shares of common stock, in conjunction with the exercise of warrants and
stock options with exercise prices ranging from $2.50 to $5.25 per share,
generating gross proceeds to the Company of $3,151,318.

     During the six months ended June 30, 1999, 107,110 shares of convertible
preferred stock were converted into 1,071,100 shares of common stock.

                                      10

<PAGE>

                                YOUBET.COM, INC.
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
                  NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999

NOTE 3--STOCKHOLDERS' EQUITY (Continued)

     As final settlement for the finder's fee related to the preferred stock
financing in June 1998, additional fees of $122,500 were paid to the finder.
The fees are charged to additional paid-in capital at June 30, 1999. In
addition, 13,000 warrants with an exercise price of $.01 and 26,000 warrants
with an exercise price of $2.50 were issued to the finder. These warrants are
exercisable through March 2004.

     In June 1999, the Company completed its public offering and issued
2,863,582 common stock shares at a price of $14.00 per share, generating
gross proceeds of $37,283,838. The Company also issued 654,275 shares of
common stock, in conjunction with the exercise of warrants, generating net
proceeds to the Company of $2,153,553. The Company incurred $1,660,142 of
closing fees in conjunction with the above transactions.

     During the six months ended June 30, 1999, the Company issued 100,000
warrants to its joint venture partner which concurrently agreed to purchase
142,857 shares at an aggregate cost of $2,000,000 of the Company's common
stock in the secondary public offering and agreed to contribute funds to
their joint venture project. The total fair value of these warrants was
$907,000 of which 50% was charged as financing costs and the remaining 50%
was charged against paid-in capital. The warrants have an exercise price of
$19.50 and a term of five years.

     During the six months ended June 30, 1999, the Company issued 50,000
warrants in exchange for services. The fair value of these warrants of
$405,000 is being charged to operations over the vesting period. The warrants
have an exercise price of $11.50 and a term of five years. The warrants vest
over three years.

     During the three months ended September 30, 1999, the Company issued
25,000 warrants in exchange for services. The fair value of the warrants of
$142,000 is being charged to operations over the vesting period. The warrants
have an exercise price of $7.93 and a term of five years. The warrants vest
over three years.

b.   Stock Options

     During the nine months ended September 30, 1999, deferred compensation
of $1,567,167 was recorded as a result of the issuance of stock options being
granted in exchange for future services. Deferred compensation charged to
operations for the nine months ended September 30, 1999 was $1,256,008.

     During the nine months ended September 30, 1999, the Company granted
various stock options, as follows:

     (1) The Company issued stock options to four executives under the 1998
         Stock Option Plan to purchase a total of 350,000 shares of common stock
         at an exercise price of $10.50 per share, the fair market price at the
         date of grant. The stock options vest at specified dates during a
         period of four years and are exercisable for a period of ten years.

                                      11

<PAGE>

                                YOUBET.COM, INC.
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
                  NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999

NOTE 3--STOCKHOLDERS' EQUITY (Continued)

     (2) Stock options were granted to employees to purchase 325,450 shares of
         common stock at exercise prices ranging from $6.81 to $12.59 per share.
         Of these stock options 36,150 shares of common stock were issued below
         the fair market value on the date of grant. The aggregate difference
         between the exercise price and the fair market value at the date of
         grant was $171,629, which is being charged to operations over the
         option's vesting period. These options vest over four years and are
         exercisable for a period of five years.

     (3) Stock options were granted to a consultant to purchase 25,000 shares of
         common stock at the fair market value on the date of grant. The fair
         value of these options were $257,750, which was charged to deferred
         compensation and are being amortized over the vesting period. These
         options vest ratably over two years commencing on the grant date. These
         options are exercisable for a period of ten years.

     (4) Stock options were granted to a consultant to purchase 30,000 shares of
         common stock at the fair market value on the date of grant. The fair
         value of these options were $238,927, which was charged to deferred
         compensation and are being amortized over the vesting period. These
         options vest ratably over six months commencing on the grant date.
         These options are exercisable for a period of five years.

     (5) Stock options were granted to a Director to purchase 40,000 shares of
         common stock at the fair market value on the date of grant. These
         options vest ratably over a 12 month period and are exercisable for a
         period of ten years.

NOTE 4--JOINT VENTURE AGREEMENT

     On June 9, 1999, the Company announced that it had entered into a letter of
intent with Station Casinos, Inc., to create a joint venture which will offer
in-home interactive and sports wagering to Nevada residents. The joint venture
will be owned on a 50/50 basis by the Company and Station Casinos. The Company
will adapt its proprietary software and technology and license it on a
non-exclusive basis to the joint venture. Station Casinos will fund a portion of
the Company's software development cost and contribute to funding the joint
venture's advertising and other costs. The Company agreed to spend $1,600,000 to
develop software to be used by the joint venture. The joint venture is subject
to execution of definitive agreements, and its service will be offered only
after obtaining all required regulatory approvals, including the approval of the
Nevada gaming authorities.

     The Company also agreed to grant Station Casinos a 5-year warrant to
purchase 100,000 shares of the Company's common stock (See Note 3a). Project
costs of $94,388 have been capitalized as a result of this agreement.

                                      12

<PAGE>

                                YOUBET.COM, INC.
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
                  NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999

NOTE 5--SIGNIFICANT AGREEMENTS

     During the three months ended June 30, 1999 the Company amended its
service agreements with Robert M. Fell, David M. Marshall, and Russell M.
Fine. The amendment included a bonus award for the three officers when
specified milestones are met. At June 30, 1999, two of the four milestones
were met by the Company through the placement of the convertible note and the
June public offering. As such, Robert M. Fell had earned bonuses totaling
$420,000 which was applied against a note receivable due from the Robert M.
Fell Living Trust. David M. Marshall and Russell M. Fine had earned bonuses
totaling $150,000 each, which were accrued at June 30, 1999. These bonuses
have been charged to operations. If the remaining milestones are achieved the
Company would grant Robert M. Fell additional bonuses of $140,000 and David
M. Marshall and Russell M. Fine would receive additional bonuses of $150,000
each.

NOTE 6--LEGAL PROCEEDINGS

     On June 4, 1999, a complaint was filed against Youbet.com in the Court
of Chancery of the State of Delaware in and for New Castle County entitled
Georg von Opel v. Youbet.com, Inc. (C.A. No. 17200 NC). In the complaint Mr.
von Opel alleges that Youbet.com breached its obligation to register the
shares of common stock underlying 400,000 warrants issued by Youbet.com to an
affiliate of Mr. von Opel. The complaint seeks specific performance of the
alleged obligation to register such shares and damages for alleged breach of
contract in the amount of $8.7 million. Youbet.com filed its answer to the
complaint on July 15, 1999. Youbet.com intends to defend itself vigorously in
the action. Among other things, Mr. von Opel executed a letter on February
24, 1998 which Youbet.com contends effected a waiver of such registration
rights.

     On August 19, 1999, Mr. von Opel filed a motion for summary judgment on
the issue of liability. Youbet.com believes that it will be able to establish
its defense, through written and deposition discovery, and has filed an
affidavit seeking the Court's permission to take such discovery before
opposing Mr. von Opel's motion. Mr. von Opel has served reply papers dated
October 28, 1999, in which he contests the sufficiency of Youbet.com's
affidavit. Youbet.com believes that Mr. von Opel's reply papers are
procedurally improper, and will try to reach an agreement with Mr. von Opel
regarding the discovery which Youbet.com seeks, before responding to Mr. von
Opel's motion. No hearing has been scheduled to date on either Youbet.com's
affidavit or Mr. von Opel's motion.

       As the litigation is in an initial stage, Youbet.com cannot predict
its outcome, although if the claim is determined adversely to Youbet.com, it
could have a material adverse effect on Youbet.com.

       On October 13, 1999, a search warrant was served on Youbet.com by the
Los Angeles Police Department in connection with an investigation by the Los
Angeles Police Department and the Los Angeles District Attorney's Office.
Youbet.com understands the investigation to encompass the legality of online
and telephone wagering within California. In cooperation with the
investigation, effective November 10, 1999, Youbet.com has voluntarily
suspended reception and transmission of wagering information from California

                                      13

<PAGE>

                                YOUBET.COM, INC.
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
                  NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999

NOTE 6--LEGAL PROCEEDINGS (Continued)

residents and is accelerating its implementation of a new data center outside
the state of California. Youbet.com is continuing to cooperate with the
investigation. As the investigation is in an initial stage, Youbet.com cannot
predict its outcome, although if a charge is filed by the Los Angeles
District Attorney and such claim is determined adversely to Youbet.com, it
may have a material adverse effect on Youbet.com.

                                      14

<PAGE>

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

THE FOLLOWING DISCUSSION OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OF YOUBET.COM,INC. SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL
STATEMENTS AND THE RELATED NOTES INCLUDED ELSEWHERE IN THIS 10-QSB. THIS
DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. YOUBET.COM'S ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE
ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS.

OVERVIEW

        Youbet.com intends to establish itself as the leading global brand
name for online live event wagering. Youbet.com has initially focused its
efforts primarily on the United States horse track racing industry and
believes that its principal product, the You Bet Network, is currently the
only legal system available for online wagering in the United States.
Youbet.com believes that online communication is an ideal medium for live
event wagering. First, online communication allows bettors instant access to
vast amounts of historical performance data used in assessing potential
wagers. Second, online communication offers the ability to sort and analyze
such data in ways and at speeds that are unachievable manually. Third, online
communication technology allows wagers to be placed from virtually any
location within a jurisdiction where wagering is legal, thus freeing bettors
from traditional site-specific wagering locations. In addition, the speed of
electronic communication allows wagers to be placed and acknowledged in
seconds.

       Youbet.com's initial product, the You Bet Network, is a PC-based
system which utilizes the infrastructure of the Internet and a closed-loop
private network with Internet access to provide up-to-the minute detailed
information on races taking place at horse tracks nationwide. Youbet.com also
delivers a live simulcast of most of these races directly to the subscriber's
computer. In addition, subscribers can use the You Bet Network to transmit
information and thereby facilitate wagers, using the system's icon-driven
menus to fill out an electronic betting ticket with a brief series of
mouse-clicks. The information is then transmitted electronically to a
licensed account wagering entity, currently Mountain Laurel Racing, Inc., and
Washington Trotting Association, Inc., both of which are subsidiaries of
Ladbroke USA (collectively "Ladbroke"). Ladbroke accepts and processes the
wager from its hub in Pennsylvania. After processing the wager, Ladbroke
sends an electronic confirmation to the bettor through the You Bet Network.
The round-trip time from information submission to acknowledgment is usually
less than three seconds.

       Youbet.com currently derives revenue from the You Bet Network in three
ways. First, it charges a monthly subscription fee, currently $5.95 per
month. Second, it receives a fee from Ladbroke equal to fifty percent (50%)
of the net commissions to Ladbroke derived from wagers placed by Youbet.com
subscribers. Third, it receives revenue from the sale of handicapping
information.

       Since mid-1995, Youbet.com has been engaged in developing the You Bet
Network, its first service being offered to subscribers. Youbet.com has
incurred substantial software development costs since inception, which have
been charged to operations as research and development costs. Management

                                      15

<PAGE>

believes that the technological feasibility of Youbet.com's proprietary
software technology has been established.

       During the quarter ended June 30, 1999, Youbet.com determined it had
successfully completed the development stage by incurring revenues of over
$1,000,000 since the beginning of the year. Accordingly, Youbet.com is no
longer in the development stage and is now in the operating stage.

       Youbet.com has expanded its operations in recent years and has grown
to 87 employees at September 30, 1999. Youbet.com expects to add additional
personnel in the United States and plans to commence operations
internationally and add personnel as operations expand. Youbet.com currently
expects to significantly increase its operating expenses in order to grow its
sales and marketing operations, expand in international markets and upgrade
and enhance its service and technologies.

RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1998

       REVENUES

       Revenues for the three months ended September 30, 1999 were
$1,132,000, of which $972,000 represented Youbet.com's commission on the
gross amount of each wager placed by its subscribers. The remaining revenue
included $121,000 from subscription fee revenue as Youbet.com commenced
charging a monthly subscription fee to its subscribers in February 1999, and
$39,000 from information revenue as Youbet.com began charging subscribers for
handicapping information in April 1999.

       OPERATING EXPENSES

       NETWORK OPERATIONS.  Network operations costs consist primarily of
salaries and costs to support the private network. Network operations costs
increased by $87,000 or 21.6% to $492,000 for the three months ended
September 30, 1999 from $405,000 for the three months ended September 30,
1998 reflecting the continued development and expansion of the You Bet
Network. Youbet.com expects network operations costs to increase
significantly as the You Bet Network expands to support the growth in
subscribers.

       RESEARCH AND DEVELOPMENT. Research and development costs consist
primarily of salaries. Research and development costs increased by $185,000
or 53% to $533,000 for the three months ended September 30, 1999 from
$349,000 for the three months ended September 30, 1998. This increase
resulted from the hiring of developers and continued development of the You
Bet Network. Youbet.com will continue to invest in the development of the You
Bet Network, which Youbet.com believes is critical to achieving its strategic
objectives and, as a result, expects research and development costs to
increase significantly in future periods.

       SALES AND MARKETING. Sales and marketing expenses consist primarily of
marketing program expense and salaries. Sales and marketing expenses
increased by $4,930,000 or 986.8% to $5,429,000 for the three months ended
September 30,

                                      16

<PAGE>

1999 from $500,000 for the three months ended September 30, 1998. The
increase in sales and marketing reflects the continued expansion of
Youbet.com's marketing activities. Marketing activities during the current
quarter were concentrated on the rollout of direct mailing campaigns,
including the mailing of CD's to potential subscribers, in addition to
placement of radio advertising in twelve major markets throughout the U.S.
Youbet.com expects sales and marketing expenses to continue increasing to
brand the You Bet Network, grow its subscriber base, hire additional sales
and marketing personnel and expand internationally.

       GENERAL AND ADMINISTRATIVE. General and administrative expenses
consist principally of salaries, facilities expenses, legal and accounting
and investor relations. General and administrative expenses increased by
$386,000 or 47.1% to $1,205,000 for the three months ended September 30, 1999
from $819,000 for the three months ended September 30, 1998. The increase
resulted primarily from an increase in personnel related costs, legal and
accounting fees, and general operating activity. Youbet.com expects that
general and administrative expenses will increase in future periods as it
hires additional personnel to provide for the growth of the business.

       NON-CASH COMPENSATION. Non-cash compensation relates to the recording
of the fair value of warrants and stock options charged to the period of
benefit. Non-cash compensation decreased $249,000 or 35.3% to $458,000 for
the three months ended September 30, 1999 from $707,000 for the three months
ended September 30, 1998. The decrease resulted from fewer warrants and
options being issued during the current fiscal year. Youbet.com expects that
these non-cash compensation costs will continue as it issues additional
warrants and stock options and amortizes the deferred costs associated with
these transactions.

       OTHER INCOME (EXPENSE)

       NET INTEREST EXPENSE. Net interest expense increased by $15,000 or
47.9% to $45,000 for the three months ended September 30, 1999 compared to
$30,000 for the three months ended September 30, 1998. The increase in net
interest expense is due to the issuance in April 1999 of $45.5 million of 11%
Senior Convertible Discount Notes. However, Youbet.com will not pay cash
interest thereon until October 2001. Interest expense was offset by interest
income from investment of the net proceeds obtained in the April 1999
convertible debt issuance ($36.7 million) and the June 1999 secondary public
offering ($36.1 million). Youbet.com expects net interest expense to increase
in future periods as cash resources are invested in the expansion of the
Company's operations.

       FAIR VALUE OF WARRANTS ISSUED FOR FINANCING COSTS. Fair value of
warrants issued for financing costs decreased by $149,000 or 92.2% to $13,000
for the three months ended September 30, 1999 compared to $162,000 for the
three months ended September 30, 1998. The 1998 expense resulted from
warrants issued during 1997, with the related expense amortized during 1997
and 1998. The 1999 expense resulted from warrants issued as a finder's fee to
certain holders of the 11% Senior Convertible Discount Notes.

                                      17

<PAGE>

NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1998

       REVENUES

       Revenues for the nine months ended September 30, 1999 were $2,326,000,
of which $2,049,000 represented Youbet.com's commission on the gross amount
of each wager placed by its subscribers. The remaining revenue included
$213,000 from subscription fee revenue as Youbet.com commenced charging a
monthly subscription fee to its subscribers in February 1999, and $64,000
from information revenue as Youbet.com began charging subscribers for
handicapping information in April 1999.

       OPERATING EXPENSES

       NETWORK OPERATIONS.  Network operations costs consist primarily of
salaries and costs to support the private network. Network operations costs
increased by $654,000 or 88.8% to $1,391,000 for the nine months ended
September 30, 1999 from $736,000 for the nine months ended September 30, 1998
reflecting the continued development and expansion of the You Bet Network.
Youbet.com expects network operations costs to increase significantly as the
You Bet Network expands to support the growth in subscribers.

       RESEARCH AND DEVELOPMENT. Research and development costs consist
primarily of salaries. Research and development costs increased by $565,000
or 61% to $1,492,000 for the nine months ended September 30, 1999 from
$927,000 for the nine months ended September 30, 1998. This increase resulted
from payment of $150,000 in performance bonuses and the hiring of developers
and continued development of the You Bet Network. Youbet.com will continue to
invest in the development of the You Bet Network, which Youbet.com believes
is critical to achieving its strategic objectives and, as a result, expects
research and development costs to increase significantly in future periods.

       SALES AND MARKETING. Sales and marketing expenses consist primarily of
marketing program expense and salaries. Sales and marketing expenses
increased by $5.7 million or 479.2% to $6,896,000 for the nine months ended
September 30, 1999 from $1,191,000 for the nine months ended September 30,
1998. The increase in sales and marketing reflects the expansion of
Youbet.com's marketing activities as the Youbet Network did not launch until
the third quarter of 1998. Marketing activities during 1999 have focused on
the rollout of direct mailing campaigns, including the mailing of CD's to
potential subscribers. Youbet.com also began a radio advertising campaign in
twelve major markets throughout the U.S. Youbet.com expects sales and
marketing expenses to continue increasing significantly to brand the You Bet
Network, grow its subscriber base, hire additional sales and marketing
personnel and expand internationally.

       GENERAL AND ADMINISTRATIVE. General and administrative expenses
consist principally of salaries, facilities expenses, legal and accounting
and investor relations. General and administrative expenses increased by
$734,000 or 35.9% to $2,779,000 for the nine months ended September 30, 1999
from $2,044,000 for the nine months ended September 30, 1998. The increase
resulted from payment of $150,000 in performance bonuses and an increase in
personnel related costs, legal and accounting fees, and general operating
activity.

                                      18

<PAGE>

Youbet.com expects that general and administrative expenses will increase in
future periods as it hires additional personnel to provide for the growth of
the business.

       NON-CASH COMPENSATION. Non-cash compensation relates to the recording
of the fair value of warrants and stock options charged to the period of
benefit. Non-cash compensation decreased $1,501,000 or 43.5% to $1,951,000
for the nine months ended June 30, 1999 from $3,453,000 for the nine months
ended September 30, 1998. The decrease resulted from fewer warrants and
options being issued during the current fiscal year, offset by recognition of
$420,000 in performance bonuses. In lieu of payment, the bonuses were applied
against a $560,000 note receivable. Youbet.com expects that these non-cash
compensation costs will continue as it issues additional warrants and stock
options and amortizes the deferred costs associated with these transactions.

       OTHER INCOME (EXPENSE)

       NET INTEREST EXPENSE. Net interest expense increased by $276,000 or
101% to $549,000 for the nine months ended September 30, 1999 compared to
$273,000 for the nine months ended September 30, 1998. The increase in net
interest expense is due to the issuance in April 1999 of $45.5 million of 11%
Senior Convertible Discount Notes. However, Youbet.com will not pay cash
interest thereon until October 2001. Youbet.com expects interest expense to
increase significantly in 1999 as a result of the issuance of the 11% Senior
Convertible Discount Notes.

       FAIR VALUE OF WARRANTS ISSUED FOR FINANCING COSTS. Fair value of
warrants issued for financing costs decreased by $927,000 or 66% to $478,000
for the nine months ended September 30, 1999 compared to $1,406,000 for the
nine months ended September 30, 1998. The 1998 expense resulted from warrants
issued during 1997, with the related expense amortized during 1997 and 1998.
The 1999 expense resulted primarily from issuance of warrants to Station
Casinos, Inc.

LIQUIDITY AND CAPITAL RESOURCES

       Youbet.com has financed its operations primarily through the sale of
its securities and issuance of debt. Youbet.com finalized two significant
transactions during the nine months ending September 30, 1999, as follows:

       In April 1999, Youbet.com issued $45,500,000 principal amount of 11%
Senior Convertible Discount Notes for cash proceeds of $36,728,510
(generating net proceeds of approximately $35,103,000), which represents a
discount of 11% per year, compounded semi-annually to April 2001. The notes
begin accruing interest in April 2001 at 11% per year, payable semi-annually.
Principal and unpaid interest are due and payable on April 5, 2004.

       In June, 1999, Youbet.com sold 2,863,582 shares of common stock in a
secondary public offering at an offering price of $14 per share, for cash
proceeds of $37,283,838 (generating net proceeds of approximately
$36,087,000). In addition, warrant holders sold an additional 654,275 shares
upon the exercise of warrants, generating additional net proceeds to the
Company of $2,153,553.

                                      19

<PAGE>

       During January and February 1999, Youbet.com received $2,100,000 from
stock subscription receivables, resulting from the sale of common stock and
Series A Convertible Preferred Stock during December, 1998. During January
1999, Youbet.com sold 100,000 shares of common stock to a private investor
for a cash purchase price of $2.50 per share, resulting in proceeds to
Youbet.com of $250,000. During the six months ended June 30, 1999, Youbet.com
issued 373,725 shares of common stock in conjunction with the exercise of
warrants and stock options with exercise prices ranging from $2.50 to $5.25,
generating net proceeds to Youbet.com of $988,000.

       At September 30, 1999 Youbet.com had $67,583,126 in cash. Youbet.com's
principal commitments consist of the aforementioned Senior Convertible
Discount Notes.

       Net cash used in operating activities was $8,997,000 and $5,367,000
for the nine months ended September 30, 1999 and 1998, respectively. The
principal use of cash was to fund losses from operations. The increase in the
net cash used in operating activities was the result of the increased
operating loss and an increase in prepaid expenses associated with the
marketing campaigns.

       Net cash used in investing activities was $1,301,000 and $188,000 for
the nine months ended September 30, 1999 and 1998, respectively, for
purchases of property and equipment. The increase was primarily the result of
purchases of computer equipment to support the growth of the company.

       Net cash provided by financing activities was $76,340,000 and
$8,048,000 for the nine months ended September 30, 1999 and 1998,
respectively. The increase was primarily the result of the aforementioned
debt and equity transactions.

       Youbet.com does not currently have any material commitments for
capital expenditures. However, Youbet.com anticipates that it will experience
a substantial increase in capital expenditures and lease commitments
consistent with Youbet.com's anticipated growth in operations and
infrastructure, including various capital expenditures associated with the
expansion of operations into foreign markets. Youbet.com anticipates that it
will continue to experience significant growth in its operating expenses for
the foreseeable future and that these expenses will be a material use of cash
resources. Youbet.com believes that its existing cash will be sufficient to
meet its anticipated cash needs for working capital and capital expenditures
at least for the next twelve months.

RECENT EVENT

       On October 13, 1999, a search warrant was served on Youbet.com by the
Los Angeles Police Department in connection with an investigation by the Los
Angeles Police Department and the Los Angeles District Attorney's Office.
Youbet.com understands the investigation to encompass the legality of online
and telephone wagering within California. In cooperation with the
investigation, effective November 10, 1999, Youbet.com has voluntarily
suspended reception and transmission of wagering information from California
residents and is accelerating its implementation of a new data center outside
the state of California. At November 10, 1999, approximately 17% of the
Company's subscribers were from California. For the quarter ended September
30, 1999, the Company had 11,452 subscribers, an increase of 5,724 or
approximately 100% for the quarter. Youbet.com is continuing to cooperate
with the investigation. As the investigation is in an initial stage,
Youbet.com cannot

                                      20

<PAGE>

predict its outcome, although if a charge is filed by the Los Angeles
District Attorney and such claim is determined adversely to Youbet.com, it
may have a material adverse effect on Youbet.com.

IMPACT OF THE YEAR 2000

       The year 2000 risk is the result of computer programs being written
using two digits rather than four digits to define the applicable year.
Computer programs that have sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. As a result, computer
systems and/or software used by many companies and governmental agencies may
need to be upgraded to comply with year 2000 requirements or risk system
failure or miscalculations causing disruptions of normal business activities.

       STATE OF READINESS

       Based on an internal assessment, Youbet.com believes that its software
programs, both those developed internally and purchased from material outside
vendors, are year 2000 compliant or will be by December 31, 1999. Youbet.com
began assessing its state of year 2000 readiness during October 1998. This
included reviewing the year 2000 compliance of the following:

     --        Youbet.com's internally developed proprietary software
               incorporated in the You Bet Network
     --        Ladbroke's pool wagering and other software
     --        Third party handicapping information suppliers
     --        Third-party software vendors

    Youbet.com will continue to require its vendors of material hardware and
software to provide assurances of their year 2000 compliance.

       COSTS

       To date, Youbet.com has incurred approximately $50,000 of costs in
identifying and evaluating year 2000 compliance issues. Most of Youbet.com's
expenses have related to, and are expected to continue to relate to, the
operating costs associated with time spent by employees in the evaluation
year 2000 compliance matters. At this time, Youbet.com does not possess the
information necessary to estimate the potential costs of future revisions to
software relating to the You Bet Network should revisions be required or the
replacement of third-party software, hardware or services, if any, that are
determined to not be year 2000 compliant. Although Youbet.com believes that
its software programs, both developed internally and purchased from outside
vendors are either already year 2000 compliant or will be by December 31,
1999, failure to identify non year 2000 compliant software could have a
material and adverse effect on Youbet.com's business, results of operations
and financial condition.

                                      21

<PAGE>

       RISKS

       Youbet.com is not currently aware of any significant year 2000
compliance problems relating to the You Bet Network or other software systems
that would have a material and adverse effect on business, results of
operations and financial condition. However, there can be no assurance that
Youbet.com will not discover year 2000 compliance problems in its proprietary
software or other third party software that will require a substantial
investment to correct. Youbet.com's inability to fix such hardware or
software on a timely basis could result in lost revenues, increased operating
costs and other business interruptions, any of which could have a material
and adverse effect on Youbet.com's business, results of operations and
financial condition.

       Failure to adequately address year 2000 compliance issues in
Youbet.com's proprietary software or third party software could result in
claims of mismanagement, misrepresentation or breach of contract and related
litigation, which could be costly and time-consuming to defend. In addition,
there can be no assurance that utility companies, Internet network companies,
Internet access companies, third-party service providers and others outside
Youbet.com's control will be year 2000 compliant. The failure by these
entities to be year 2000 compliant could result in a systemic failure beyond
Youbet.com's control, including, for example, a prolonged Internet,
telecommunications or electrical failure, which could also prevent Youbet.com
from providing subscribers access to the You Bet Network or other value added
handicapping services any of which would have a material and adverse effect
on Youbet.com's business, results of operations and financial condition.

       CONTINGENCY PLAN

       Although Youbet.com continues to evaluate its software for possible
year 2000 compliance issues, Youbet.com believes that its software programs,
both those developed internally and purchased from material outside vendors,
are already year 2000 compliant or will be by December 31, 1999. Therefore,
Youbet.com does not have a formal contingency plan for a major year 2000
problem. Youbet.com's inability to locate or correct a significant year 2000
problem, if one exists, could result in an interruption in, or a failure of,
certain normal business activities or operations. In addition, year 2000
problems may affect sub-systems of the You Bet Network, such as the ability
to provide value added handicapping information. Any such failure could cause
Youbet.com's subscribers to seek alternate providers for online wagering.
This could require Youbet.com to incur significant unanticipated expenses to
remedy and could divert Youbet.com's management's time and attention, either
of which could have a material and adverse effect on business, results of
operation and financial condition.

                                      22

<PAGE>

                           PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

     On June 4, 1999, a complaint was filed against Youbet.com in the Court
of Chancery of the State of Delaware in and for New Castle County entitled
Georg von Opel v. Youbet.com, Inc. (C.A. No. 17200 NC). In the complaint Mr.
von Opel alleges that Youbet.com breached its obligation to register the
shares of common stock underlying 400,000 warrants issued by Youbet.com to an
affiliate of Mr. von Opel. The complaint seeks specific performance of the
alleged obligation to register such shares and damages for alleged breach of
contract in the amount of $8.7 million. Youbet.com filed its answer to the
complaint on July 15, 1999. Youbet.com intends to defend itself vigorously in
the action. Among other things, Mr. von Opel executed a letter on February
24, 1998 which Youbet.com contends effected a waiver of such registration
rights.

     On August 19, 1999, Mr. von Opel filed a motion for summary judgment on
the issue of liability. Youbet.com believes that it will be able to establish
its defense, through written and deposition discovery, and has filed an
affidavit seeking the Court's permission to take such discovery before
opposing Mr. von Opel's motion. Mr. von Opel has served reply papers dated
October 28, 1999, in which he contests the sufficiency of Youbet.com's
affidavit. Youbet.com believes that Mr. von Opel's reply papers are
procedurally improper, and will try to reach an agreement with Mr. von Opel
regarding the discovery which Youbet.com seeks, before responding to Mr. von
Opel's motion. No hearing has been scheduled to date on either Youbet.com's
affidavit or Mr. von Opel's motion.

       As the litigation is in an initial stage, Youbet.com cannot predict
its outcome, although if the claim is determined adversely to Youbet.com, it
could have a material adverse effect on Youbet.com.

       On October 13, 1999, a search warrant was served on Youbet.com by the
Los Angeles Police Department in connection with an investigation by the Los
Angeles Police Department and the Los Angeles District Attorney's Office.
Youbet.com understands the investigation to encompass the legality of online
and telephone wagering within California. In cooperation with the
investigation, effective November 10, 1999, Youbet.com has voluntarily
suspended reception and transmission of wagering information from California
residents and is accelerating its implementation of a new data center outside
the state of California. Youbet.com is continuing to cooperate with the
investigation. As the investigation is in an initial stage, Youbet.com cannot
predict its outcome, although if a charge is filed by the Los Angeles
District Attorney and such claim is determined adversely to Youbet.com, it
may have a material adverse effect on Youbet.com.

                                      23

<PAGE>

ITEM 2.  CHANGES IN SECURITIES

       In July 1999, Youbet.com issued 30,000 options to an outside
consultant for services rendered. The options are exercisable at $11.13 per
share and expire in July, 2004. The fair value of the options is $238,927.

       In August 1999, Youbet.com issued 25,000 warrants to a horse racing
track for services rendered. The warrants are exercisable at $7.93 per share
and expire on August 3, 2002. The fair value of the warrants is $141,861.

       In September 1999, Youbet.com issued 40,000 options to a director. The
options are exercisable at $7.00 per share and expire in September, 2009. The
exercise price is equal to the fair market value of the stock on the date of
grant.

       During the quarter ended September 30, 1999, Youbet.com issued 78,050
options to employees at exercise prices ranging from $6.81 to $12.50. The
options vest over a four year period.

                                      24

<PAGE>

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

     Youbet.com, Inc. held its Annual Meeting of Shareholders (the "Meeting")
on September 23, 1999, at which the Company's stockholders: (1) elected the
nominated slate of seven directors, each to serve until the next meeting and
until his or her successor has been duly elected and qualified: Robert M.
Fell, Russell M. Fine, Caesar P. Kimmel, Alan W. Landsburg, David M.
Marshall, Charles D. Peebler Jr. and William H. Roedy, (2) elected the
amendment to the 1998 Stock Option Plan to reserve an additional 1,500,000
shares of Youbet.com common stock for options in addition to the 1,000,000
shares previously reserved for a total of 2,500,000 shares of common stock
and (3) elected BDO Seidman, LLP as the Company's independent public
accountants and auditors for the fiscal year ended December 31, 1999.

     Holders of record of the Company's common stock as of August 12, 1999
were entitled to vote at the Meeting. On August 12, 1999, there were
19,121,288 shares of common stock outstanding and entitled to vote and
14,210,494 of such shares were represented at the Meeting. Of the shares
cast, each of the directors received at least 99.9% in favor of his election.
The shares cast for each director were as follows: Robert M. Fell: 14,196,672
for and 13,822 withheld; Russell M. Fine: 14,196,316 for and 14,178 withheld;
Caesar P. Kimmel: 14,196,672 for and 13,822 withheld; Alan W. Landsburg:
14,196,672 for and 13,822 withheld; David M. Marshall: 14,196,316 for and
14,178 withheld; Charles D. Peebler Jr.: 14,196,672 for and 13,822 withheld;
and William H. Roedy: 14,196,672 for and 13,822 withheld. With respect to the
election of the amendment to the 1998 Stock Option Plan and the election of
BDO Seidman, LLP, the shares cast were 8,092,353 for, 779,553 against and
153,289 shares in abstention and 14,030,369 for, 135,277 against and 44,848
shares in abstention, respectively.

                                      25

<PAGE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits:

27 Financial Data Schedule (electronic filing only)

(b) Reports on Form 8-K - Three Months Ended September 30, 1999:

     Youbet.com filed a Form 8-K dated October 12, 1999 subsequent to the
quarter ended September 30, 1999 to report subscriber counts as of September
30, 1999, to announce the appointment of Charles Peebler as a new board
member replacing Jess Rifkind and to announce co-founder David Marshall's
resignation as an officer and director effective December 31, 1999. Form
8-K's were filed on October 20, 1999 and on November 12, 1999 with respect to
the local investigation of legality of online and telephone parimutuel
wagering in California. Additionally, Youbet.com filed a Form 8-K dated
November 3, 1999 to report earnings for the three months and nine months
ended September 30, 1998 and 1999.

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<PAGE>


                                   SIGNATURES

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


                                       YOUBET.COM, INC.
                                       --------------------------------
                                          (Registrant)


Date:  November 15, 1999                By: /s/ ROBERT M. FELL
                                       --------------------------------
                                       Robert M. Fell
                                       President and Chief Executive
                                         Officer


Date:  November 15, 1999                By: /s/ PHILLIP C. HERMANN
                                       --------------------------------
                                       Phillip C. Hermann
                                       Executive Vice President
                                         and Chief Financial Officer


                                      27