Note B. 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.

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 from other tracks and miscellaneous income. The Company recognizes racing revenues before deductions of such related expenses as purses, stakes and awards. Some elements of the racing revenues from Off-Track Betting Corporations ("OTBs") are recognized as collected, due to uncertainty of payments 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, beverages 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 and six months ended June 30, 2011 and 2010 are as follows:


	Three months ended June 30,				Six months ended June 30,
	2011		2010		2011		2010
	(in thousands)
Food and beverage	$	160	$	369	$	462	$	879
Non-subsidized free play		198		79		104		161
Players club awards		99		293		173		439
Bus group sales incentives		0		8		1		12

Total retail value of promotional allowances	$	457	$	749	$	740	$	1,491

The estimated cost of providing complimentary food, beverages and other items for the three and six months ended June 30, 2011 and 2010 are as follows:


	Three months ended June 30,				Six months ended June 30,
	2011		2010		2011		2010
	(in thousands)
Food and beverage	$	146	$	275	$	501	$	728
Non-subsidized free play		116		45		61		93
Players club awards		99		293		173		439
Bus group sales incentives		0		4		1		6

Total cost of promotional allowances	$	361	$	617	$	736	$	1,266

Accounts receivable

Accounts receivable, net of allowances, are stated at 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 June 30, 2011 and December 31, 2010, the Company recorded an allowance for doubtful accounts of approximately $104,000 and $168,000, 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 loss of the entity. Since the effect of outstanding options, warrants and option matching rights is anti-dilutive with respect to losses, they have been excluded from the Company's computation of loss per common share. Therefore, basic and diluted losses per common share for the three months ended June 30, 2010 and six months ended June 30, 2011 and 2010 were the same.

The following table shows the approximate number of common stock equivalents outstanding at June 30, 2011 and 2010 that could potentially dilute basic income per share in the future, but were not included in the calculation of diluted loss per share because their inclusion would have been anti-dilutive.


	Outstanding at June 30,
	2011		2010
Options		7,658,000		6,084,000
Warrants		3,250,000		3,250,000
Option matching rights		5,386,000		6,076,000
Restricted stock		50,000		78,000
Shares to be issued upon conversion of convertible debt		19,726,000		5,175,000

Total		36,070,000		20,663,000

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 and requires certain disclosures. The Company's financial instruments are comprised of current assets, current liabilities and a long term loan. Current assets and current liabilities approximate fair value due to their short-term nature. As of June 30, 2011, the Company's management was unable to estimate reasonably the fair value of the long term loan 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.

Reclassifications

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

Recent accounting pronouncements

In May 2011, the FASB issued Accounting Standards Update No. 2011-04, "Fair Value Measurements (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs," ("ASU 2011-04"). ASU 2011-04 expands the disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. This new guidance is to be applied prospectively. This guidance will be effective for the Company beginning January 1, 2012. The Company anticipates that the adoption of this standard will not materially affect its consolidated financial statements.

In June 2011, the FASB issued Accounting Standards Update No. 2011-05, "Comprehensive Income (Topic 220): Presentation of Comprehensive Income," ("ASU 2011-05"). ASU 2011-05 eliminates the option to report other comprehensive income and its components in the statement of changes in equity. ASU 2011-05 requires that all non-owner changes in stockholders' equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. This new guidance is to be applied retrospectively. This guidance will be effective for the Company beginning January 1, 2012. The Company anticipates that the adoption of this standard will not change the presentation of its consolidated financial statements.