Investor Presentation

1
Investor Presentation
September 2006
2
Safe Harbor Language

• This presentation contains certain
  forward-looking statements. Statements containing
  expressions such as "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
  presentation 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 presentation.
  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 timely development and market
  acceptance of new products and technologies our
  ability to secure financing on terms acceptable
  to us 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. Viewers are
  cautioned not to place undue reliance on
  forward-looking statements, which speak only as
  of the date of this presentation. 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.

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Youbets Profile

• Youbet.com offers players the ability to wager on
  worldwide pari-mutuel horse racing content
  through internet and telephone ADW (Advanced
  Deposit Wagering) platforms
• International Racing Group subsidiary offers
  high end players the ability to wager on
  pari-mutuel horse racing content through live
  operators with rebate incentives
• United Tote subsidiary is a leading supplier of
  innovative totalizator systems, terminals and
  other pari-mutuel wagering services, systems and
  content
• Pari-mutuel fantasy games will leverage our
  customer data base and core competencies and
  generate higher margins

4
Domestic ADW Market Share Potential
Industry Handle growth driven solely by ADW
Channel CAGR 17
Projected CAGR, 05-08
Above data is based on a study conducted by the
Monitor Group
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Domestic ADW Market Share Potential
ADW Handle Reported by the Oregon Hub(1)
2005 U.S. Thoroughbred Handle
( in billions)
( in millions)
1,165
95 CAGR
884
830
424
80
(1) ORC Hub began reporting Xpressbet data in Q3
2005
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Youbet.com - Advanced Deposit Wagering
Sign Up
1.
2.
3.
Over 1,500,000,000 Wagered Safely Securely
7
Youbets Business Model Key Drivers
Key Drivers - Handle
Key Initiatives
Youbets Business Model
Player Agents Youbet Advantage
Customer Acquisition, Retention Evolution
Handle 100
Strategic Marketing Youbet.net
- Track Pools 80
Spokesmen Endorsements Handicap Contests
Gross Revenue 20
- Track Fees - Licensing Fees -
Processing Fees - Total Fees 14

Players Trust
Product Offerings Differentiation
Game Content Wager Pad Pro
Youbet Mobile

• Net Revenue (Yield) 6
• Other Revenue 1
• Total Net Revenue 7

Content
Complete track portfolio Contract renewal
International expansion
- Operating Expense 5
Digital Rights Management High Quality AV
N -Tier System
Technology
EBITDA 2
8
Leading ADW Offerings Integral to Success
Aug 2004
Sept 2004
Youbet Mobile - automated interactive voice
recognition system
Apr 2005
Cancel Wager - ability to cancel a wager made
prior to post
Dec 2005
Youbet Mobile wireless website
Youbet.net - Learn to Play website
Youbet Advantage
- Player Rewards Program
Apr 2006
July 2006
Wager Pad Pro - High performance wager processing
Higher quality streaming video product Fantasy
Game Deployment
Late 2006
2007
Integrated Solution
9
New Strategic Marketing Initiatives
Customer Count (in thousands)

• Youbet.net
• Non-wagering educational site with full features
  of Youbet.com
• National advertising campaign on ESPN
• Entertains and educates novice handicappers while
  familiarizing them with Youbets interface with
  goal of migration to pay-for-play

Over 24,000 sign ups since the launch in April
Approximately 15 conversion rate from
Youbet.net to Youbet.com
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New Strategic Marketing Initiatives

• Youbet Advantage - Player Rewards Program

• Targets
• New customer acquisition
• Wallet share
• Player evolution
• Higher yields and player retention

• Enables co-promotional programs with track
  partners
• Offers transparent rewards
• Differentiates Youbets products services

11
Focused Marketing to Attract New Customers
Target Audience
Marketing Mix
April 2002

• Horseracing Fans

Novice Player to Professional Handicappers
Jan 2004
Players at OTBs, On-Track, Online
Targeted Audience Shift
12
New Strategic Marketing Initiatives

• Harrahs Louisiana Downs

• Official account wagering provider for Louisana
  Downs
• Promotion of Louisiana Downs content to Youbets
  customers through attractive player rewards
  offerings and targeted marketing

• Handle performance exceeding industry growth rate
  of approximately 17

Louisiana Downs Meet Results (YOY Handle in
thousands) For the first 63 days 50 YOY
increase in average daily handle 59 YOY
increase in handle per race card Youbet
Advantage Benefit 62 YOY increase on double
points day 25 YOY increase on non-double days
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Handle Performance Customer Deposits
Handle Performance (M) Year-over-Year handle
increase of 74 (YTD 05-06) 155M YOY handle
increase (YTD 05-06)
Revenue Performance
Year-over-Year revenue increase of 60 (YTD
05-06) 25M YOY revenue increase (YTD 05-06)
Total Customer Deposits 13 Increase in Total
Customer Deposits Year-over-Year (YTD 05-06) 78
of Total Deposits are returned to the horse
racing industry All deposits held in Youbets
Players Trust
SM
Handle information excluding United Tote
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Grow ADW Business

• Youbet Total Customer Count (thousands)

Customer Count
Over 180,000 Youbet.com active/inactive users
24,000 Youbet.net active users 25 Increase in
total customer count YTD (YTD 05-06) 28
Increase in total customers under 50 (YTD
05-06) 63 of total customers are under 50 61
CAGR for total customers under 50 (98-05)
58 CAGR (1998 2005) Total Customer Count
Handle
53 of total handle comes from customers Under 50
(2006 YTD)
Customer count includes both active inactive
users
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Recent Acquisitions

• International Racing Group (IRG) June 2005

Handle Performance following Acquisition

• Rebate provider licensed by Oregon Racing
  Commission
• Live operator / call center environment
• High end customer list
• Strategic integration - technology tote
  operations
• Computer Robotic Wagering Program Operating under
  the supervision and review of Oregon Racing
  Commission

NA
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IRG Business Model Key Drivers
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Recent Acquisitions

• United Tote February 2006

• The most innovative and advanced totalisator
  system provider industry wide - offering secure,
  expandable and reliable products services
• Proprietary game development - fantasy sports
  lottery style pari-mutuel games
• Integrated Solution - strategic integration of
  Youbets ADW platform and United Totes tote
  services and on-track presence
• International Presence - Argentina, Canada,
  Ecuador, Korea, Jamaica, Mexico, Spain, and the
  Philippines

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United Tote Key Initiatives

• Grow Core Tote Business
• Spent last two years securing majority of current
  business partners on long-term agreements
• Transition from Commodity Based pricing to
  Value Added pricing
• Over next two years significant opportunity for
  new business - 8 to 12 billion in annual wagers
  processed
• New proposals to
• Churchill Downs
• NYC OTB
• Nevada
• California
• International

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United Tote Business Model Key Drivers
United Totes Economic Model
Key Drivers
Key Initiatives
Contract Revenue 90
New Business Development
Penn Gaming Harrahs Chester Tioga
Charleston International
Equipment Sales 10
Gross Revenue 100
Innovative Product Offerings
Game Content F4 Deployment Pocket PC Wireless
Data Center Management
Data Center Consolidation
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Game Innovations
Fanta-Bet players compete for daily and jackpot
prizes as they use Fantasy Dollars to make
wagers on live racing in head-to-head competition

• First phase deployment late 2006

Stampede Bet provides lottery-style jackpots by
combining random and player-selected picks on
multiple races at multiple venues
Pari-mutuel Sports Betting provides pari-mutuel
wagering on any sporting event

Pari-mutuel Fantasy Games fantasy-style skill
based contest on unlimited content
Our proprietary games complement traditional
games while offering higher yields.
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Youbet/United Tote Integration Initiatives

• Integrated Solution - Single Account Portability
• Strategic integration of Tote, FastBet Card, ADW
  platform and Youbet Advantage (Player Rewards
  programs)
• Increased customer tracking, acquisition and
  loyalty
• Strategic Relationships / Partnerships
• One-to-one marketing

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Second Quarter Performance
Year over Year Actual Performance
Quarter June 30th (in thousands, except earnings
per share and percentage figures)
3 Mo. Ended
3 Mo. Ended
Consolidated Statement of Operations
06/30/06
06/30/05
Variance
Handle
217,226


120,260


81

Revenue
39,590
23,482
69
Expenses (1)
35,742
21,995
63
Depreciation Amortization
1,730
318
444
Taxes Other Income (Net)
77
168
-54
Net income
2,195


1,337


64
Diluted Earnings per share
0.06


0.04


50

As of
As of

Consolidated Balance Sheet
06/30/06
12/31/05
Variance
Cash and cash equivalents
14,160
16,686
-15
Total Assets
94,536
40,829
132
Total Liabilities
57,660
17,944
221
Stockholders' Equity
36,876
22,885
61
(1) Expenses include Operating Costs, Contract
Cost Equipment Costs
23
Historical Financial Results
( in millions except per share data)
Gross Revenue
Handle
CAGR 94 (2001-2005)
CAGR 50 (2001-2005)
Income from Operations
Net Cash from Operating Activities
24
Investment Merits

• Record Q2 Revenue and Earnings Per Share
• 35 ADW market share
• Financial / Operating leverage
• Industry leading product offerings
• Poised to become only end-to-end provider in the
  industry from the integration of recent
  acquisitions
• Continue to diversify sources of revenue through
  accretive transactions