Youbet.com Reports Loss for Q1

14 May 2002

Youbet.com, Inc.

Revenue for the first quarter of 2002 increased 59% to $2.6 million, compared to revenue of $1.6 million for the first quarter of 2001. The increase in quarterly revenue was primarily due to the impact of Youbet.com TotalAccess(TM) (Oregon wagering hub) operations which commenced in September 2001. Sequentially, the Company reported a revenue increase of 43% over revenue of $1.8 million for the fourth quarter ended December 31, 2001 resulting from a higher level of wagering activity through the Youbet Network. Youbet.com reported handle derived from wagering activity of $27.1 million for the first quarter of 2002, a decrease of 2% compared to handle of $27.5 million during the same quarter last year.

Total operating expenses increased 32% over the first quarter of last year largely due to increased sales and marketing expenses associated with Oregon hub related costs, track related commissions and commissions paid to TVG. Depreciation and amortization expenses increased significantly due to the amortization of licensing rights. On a sequential comparison, total operating expenses decreased 25% from the fourth quarter of 2001 due to a substantial reduction in general and administrative expense. Fourth quarter 2001 general and administrative expense included a $2.5 million write-off of capitalized software related to Youbet.com's online sports wagering platform.

EBITDA (earnings before interest, taxes, depreciation and amortization) was $(1.5) million for the first quarter of 2002, a 26% improvement over EBITDA of $(2.0) million for the first quarter of 2001.

First quarter 2002 net loss was $(2.9) million, or $(0.15) per common share, compared to a net loss of $(2.4) million, or $(0.12) per common share, for the same period in 2001. Sequentially, the Company narrowed its net loss 47% from a net loss of $(5.5) million, or $(0.28) per common share, for the fourth quarter of 2001.

At March 31, 2002, Youbet.com had total assets of $18.6 million including cash and cash equivalents of $3.0 million. Stockholders' equity in Youbet.com totaled $13.9 million.

"The end of the first quarter marked the beginning of solid momentum in terms of wagering activity through the Youbet Network," said Chief Executive Officer David Marshall. "Our acceptance of wagering by California residents began during February bringing significant new customer activity for the quarter. Last month, we introduced content for the first time from premier racetracks including Churchill Downs, Hollywood Park, Saratoga, Del Mar, and Arlington, among others. We are also off to a great start regarding Triple Crown action, with record-setting handle and new account sign-ups surrounding the Kentucky Derby. With these developments, we are making important progress on our enhanced marketing initiatives and strategies for broad Youbet.com Network utilization and exposure."

Operational Highlights and Recent Developments

On February 21, 2002, Youbet.com received a license from the California Horse Racing Board authorizing the Company's acceptance of online and telephone horse racing pari-mutuel wagering from California residents.

In March 2002, the Company received a capital infusion of $750,000 concurrent with original co-founder David Marshall's return to executive management for Youbet.com. Since then the Company has proceeded with additional executive management transitions, including the appointment of Charles F. Champion as President and Chief Operating Officer, and the Board appointments of Gary Adelson, Guy Chipparoni and Brad Rosenberg.

Under Marshall's direction, Youbet.com has also announced the engagement of SBI E2-Capital (USA) Ltd, SOFTBANK Investment Corp Japan's new U.S. investment banking arm, and vFinance Investments, Inc. to assist in the execution of its corporate finance strategy.

Commenting on recent Company developments during April and May 2002, David Marshall stated, "We have made a number of announcements during the past several weeks that demonstrate clear and powerful progress towards capital, management and marketing. We've improved our financial performance, welcomed a new President, and secured a new board of directors. I would like to thank Larry Lucas for stepping up to Chairman. He has proven time and again to be an invaluable contributor to the success of Youbet.com.

"We also announced two co-marketing agreements with major names in the horse racing industry. Through our relationship with Churchill Downs Incorporated (Nasdaq:CHDN - News), Youbet.com is designated as an official online wagering platform of Churchill Downs and the Kentucky Derby, among other key promotional benefits. This arrangement contributed to a record-breaking week for April 28 - May 4. Single day handle on the day of the Kentucky Derby was in excess of $1 million, and we facilitated over 2,000 new customer sign-ups in the 48 hours preceding the race.

"We have also established a two-year co-marketing and content agreement with the Maryland Jockey Club, bringing Laurel Park and Pimlico into our track which completes our Network representation of each of the Triple Crown racing venues. Additionally, our Network is now open to top thoroughbred track Hollywood Park as of the track's season debut on April 24," Marshall concluded.