Summary of Significant Accounting Policies

Revenue recognition and Promotional allowances

Gaming revenue is the net difference between gaming wagers and payouts for prizes from VGMs, non-subsidized free play and accruals related to the anticipated payout of progressive jackpots. Progressive jackpots contain base jackpots that increase at a progressive rate based on the credits played and are charged to revenue as the amount of the jackpots increase. The Company recognizes gaming revenues before deductions of such related expenses as NYSGC share of VGM revenue and the MHHA and Agriculture and New York State Horse Breeding Development Fund’s (the "BDF") contractually required percentages. The MHHA Agreement expired on January 31, 2014 and since February 1, 2014, such deductions for MHHA and the BDF are the statutorily required percentages.

Food, beverage, racing and other revenue, includes food and beverage sales, racing revenue earned from pari-mutuel wagering on live harness racing and simulcast signals to and from other tracks and miscellaneous income. The Company recognizes racing revenues before deductions of such related expenses as purses, stakes and awards. The statutory elements of the racing revenues from Off-Track Betting Corporations are recognized as collected, due to uncertainty of receipt of and timing of payments.

Net revenues are recognized net of certain sales incentives in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Certification (“ASC”) 605-50, “Revenue Recognition—Customer Payments and Incentives”. The retail value of complimentary food, beverage and other items provided to the Company’s guests is included in gross revenues and then deducted as promotional allowances. The estimated cost of providing such food, beverage and other items as promotional allowances is included in food, beverage, racing and other expense. In addition, promotional allowances include non-subsidized free play offered to the Company’s guests based on their relative gaming worth and prizes included in certain promotional marketing programs.

The retail value amounts included in promotional allowances for the three months ended March 31, 2014 and 2013 are as follows:



	Three Months Ended March 31,
	2014		2013
	(in thousands)
Food and beverage	$	419	$	375
Non-subsidized free play	511		230
Players club awards	46		134
Total retail value of promotional allowances	$	976	$	739

The estimated cost of providing complimentary food, beverages and other items for the three months ended March 31, 2014 and 2013 are as follows:



	Three Months Ended March 31,
	2014		2013
	(in thousands)
Food and beverage	$	563	$	478
Non-subsidized free play	302		136
Players club awards	46		134
Total cost of promotional allowances	$	911	$	748

Accounts receivable

Accounts receivable, net of allowances, are stated as the amount the Company expects to collect. When required, an allowance for doubtful accounts is recorded based on information on the collectability of specific accounts. Accounts are considered past due or delinquent based on contractual terms, how recently payments have been received and the Company’s judgment of collectability. In the normal course of business, the Company settles wagers for other racetracks and is exposed to credit risk. These wagers are included in accounts receivable. Account balances are charged against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. As of March 31, 2014 and December 31, 2013, the Company recorded an allowance for doubtful accounts of approximately $166,000 and $166,000 respectively.

Earnings (loss) per common share

The Company computes basic earnings (loss) per share by dividing net income (loss) applicable to common shares by the weighted-average common shares outstanding for the period. Diluted earnings (loss) per share reflects the potential dilution of earnings that could occur if securities or contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings (loss) of the entity. Since the effect of common stock equivalents is anti-dilutive with respect to losses, these common stock equivalents have been excluded from the Company’s computation of loss per common share. Therefore, basic and diluted loss per common share for the three months ended March 31, 2014 and 2013 were the same.

The following table shows the approximate number of common stock equivalents outstanding at March 31, 2014 and 2013 that could potentially dilute basic earnings per share in the future.



	Outstanding as of March 31,
	2014	2013
Options	1,574,000	2,202,000
Warrants	1,083,000	1,083,000
Option matching rights	940,000	1,276,000
Restricted stock	111,000	50,000
Shares to be issued upon conversion of convertible debt	6,575,000	6,575,000
Total	10,283,000	11,186,000

Fair value

The Company follows the provisions of ASC 820, “Fair Value Measurement,” issued by the FASB for financial assets and liabilities. This standard defines fair value, provides guidance for measuring fair value, requires certain disclosures and discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow) and the cost approach (cost to replace the service capacity of an asset or replacement cost). The Company chose not to elect the fair value option as prescribed by FASB, for its financial assets and liabilities that had not been previously carried at fair value. The Company’s financial instruments are comprised of current assets, current liabilities and a short-term loan, related party. Current assets and current liabilities approximate fair value due to their short-term nature. As of March 31, 2014, the Company’s management was unable to reasonably estimate the fair value of the short-term loan, related party due to the inability to obtain quotes for similar credit facilities.

Estimates and assumptions

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from estimates.

Recent accounting pronouncements

The Company does not believe that any recently issued, but not effective, accounting standards, if currently adopted, will have a material effect on its consolidated financial position, results of operations, or cash flows.