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TABLE OF CONTENTS
MTR GAMING GROUP, INC. CONTENTS

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 OF THE
SECURITIES ACT OF 1934

FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2001

COMMISSION FILE NO. 0-20508

MTR GAMING GROUP, INC.
(exact name of Company as specified in its charter)

STATE ROUTE 2, SOUTH, P.O. BOX 356, CHESTER, WEST VIRGINIA 26034
(Address of principal executive offices)

(304) 387-5712
(Company's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: NONE

Securities registered pursuant to Section 12(g) of the Act:

Title of each Class: COMMON STOCK $.00001 PAR VALUE

Name of each exchange on which registered: NASDAQ STOCK MARKET

        Indicate by check mark whether the Company (1) has filed reports required to be filed by Section 13 or 15(d) of the Securities Act of 1934 during the preceding 12 months (or for such shorter period that the Company was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K of Section 299.405 of this chapter) is not contained herein, and will not be contained, to the best of Company's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

        The aggregate market value of the Company's common stock held by non-affiliates (all persons other than executive officers or directors) of the Company on March26, 2002(based on the closing sale price per share on the NASDAQ Stock Market on that date) was $343,797,536.

        The Company's common stock outstanding at March 26, 2002 was 26,989,067 shares.

TABLE OF CONTENTS

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ITEM 1. BUSINESS

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION:

        This document includes "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact included in this document, including, without limitation, the statements under "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Liquidity and Sources of Capital" regarding the Company's strategies, plans, objectives, expectations, and future operating results are forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable at this time, it can give no assurance that such expectations will prove to have been correct. Such statements are subject to a number of risks and uncertainties that could cause the statements made to be incorrect and/or for actual results to differ materially. Those risks and uncertainties include but are not limited to weather conditions or road conditions limiting access to the Company's properties, adverse changes in West Virginia video lottery laws or the rates of taxation of video lottery operations, legalization of new forms of gaming in the Company's target markets, which would lead to increased competition, other competition, general economic conditions affecting the resort business, dependence upon key personnel, timely delivery and installation of slot machines, conversion of slot machines to higher bet limits, which is dependent upon vendors over whom the Company has no control, licensing and regulatory approval of the Company's planned Pennsylvania racetrack, changes in the number of diluted shares, leverage and debt service, expiration or non-renewal of gaming licenses, costs associated with maintenance and expansion of Mountaineer Park's infrastructure to meet the demands attending increased patronage, costs and risks attending construction, expansion of operations, market acceptance of the Company's Nevada properties and maintenance of "grandfathered" status of those properties, cyclical nature of business, limited public market and liquidity, shares eligible for future sale, impact of anti-takeover measures, and other risks detailed from time to time in the Company's Securities and Exchange Commission filings and press releases. The Company does not intend to update publicly any forward-looking statements, except as may be required by law.

COMPANY HISTORY

        The Company, through wholly owned subsidiaries, owns and operates the Mountaineer Racetrack & Gaming Resort in Chester, West Virginia, the Ramada Inn and Speedway Casino in North Las Vegas, Nevada, and the Ramada Inn in Reno, Nevada.

        The Company was incorporated in March 1988 in Delaware under the name "Secamur Corporation," a wholly owned subsidiary of Buffalo Equities, Inc. ("Buffalo"), and later "spun-off" through the sale of its stock to the stockholders of Buffalo in January 1989. In June 1989, the Company merged with Pacific International Industries, Inc., which had been engaged in the contract security guard services business in Southern California since its inception in February 1987. Upon completion of the merger, the Company was renamed Excalibur Security Services, Inc. to reflect its new line of business. After operating unprofitably, the Company filed a voluntary petition for reorganization with the U.S. Bankruptcy Court for the Central District of California in December 1990 and became a Chapter 11 debtor-in-possession. The Bankruptcy Court approved the Company's sale of its security guard services business in May 1991, and confirmed the Company's plan of reorganization in December 1991. The plan of reorganization authorized the Company to acquire, primarily, specified gaming and oil and gas businesses. Upon confirmation of the plan of reorganization, the Company changed its name to Excalibur Holding Corporation. In connection with management's decision to operate as a gaming company, the Company was renamed Winners Entertainment, Inc. in August 1993. At the annual meeting of stockholders on October 15, 1996, the stockholders of the Company approved a change of the Company's name from Winners Entertainment, Inc. to MTR Gaming Group, Inc. During 1998, the Company divested its oil and gas operations and since that time has operated only in the gaming and entertainment business.

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INTRODUCTION

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Acquisition and Development of Mountaineer Park

In December of 1992, the Company acquired all of the common stock of Mountaineer Park, Inc. ("Mountaineer Park"), a West Virginia corporation, in exchange for (i) assuming and paying off Mountaineer's mortgage debts of approximately $3.6 million; (ii) satisfying an additional $2.4 million of Mountaineer Park's debts through issuance of 446,496 shares of the Company's common stock; and (iii) 583,181 shares of common stock (together with certain price guarantees and registration rights) and $91,000 cash. At the time of the acquisition, Mountaineer Park was an obscure, low-stakes racetrack offering parimutuel wagering on live thoroughbred horse racing and simulcast horse and greyhound racing as well as a 101-room lodge and modest dining and lounge areas. Mountaineer also offered video lottery gaming with 165 terminals as a test program pursuant to a contract with the West Virginia State Lottery Commission.

Since acquiring Mountaineer Park in 1992, the Company's business has focused primarily on renovating and expanding Mountaineer Park's facilities and land holdings in order to maximize the benefits of the West Virginia Racetrack Video Lottery Act of 1994 (the "Lottery Act") and subsequent amendments that have permitted additional gaming machines and made their operation more profitable. Today, having spent more than $100 million on capital improvements and expansion projects, Mountaineer Park is growing into an entertainment complex and destination resort with hotel, fine dining and lounge facilities, an events center, health spa, full-service convention facilities and outdoor activities including golf, swimming and tennis—all anchored by a nationally respected live racing product (particularly in light of the August 2000 launch of Mountaineer Park's export simulcast business) and 2,500 slot machines.

Fiscal 2001 marked the Company's most ambitious growth phase, with approximately $54 million of new capital assets placed in service, exclusive of construction in progress. In August of 2001, Mountaineer Park opened its 52,750 square foot convention center, which can accommodate seated meals for parties of up to 1,870 guests, multiple smaller meetings simultaneously in up to 14 break out rooms, or concerts for up to 1,320 patrons; expanded its gaming space by 39,000 square feet; increased the gaming machine count to approximately 2,500; and on July 1, opened a Las Vegas-style "buffeteria" both to reduce waiting time for patrons in the Gatsby dining room and to provide more choices for dining patrons. Also in June of 2001, Mountaineer Park began construction of its new 260-room hotel, which is an integral part of the Company's expansion plans. See "Business Strategy" and "Management's Discussion and Analysis of Financial Condition and Results of Operations."

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Expansion into Nevada

In May of 1998, through its newly formed, wholly owned subsidiaries, Speakeasy Gaming of Las Vegas, Inc. and Speakeasy Gaming of Reno, Inc., the Company acquired two hotel/casino properties in Nevada. Speakeasy Gaming of Las Vegas, Inc. purchased, for approximately $5.6 million cash, a 131-room hotel and casino property (previously known as the Cheyenne Hotel & Casino) and an adjacent ¹/2-acre parcel to augment parking and renamed it the Ramada Inn and Speedway Casino (the "Speedway Property"). Since acquiring the Speedway Property, the Company has renovated 118 of the hotel rooms, refurbished the restaurant, and constructed a 15,600 square foot addition that houses the casino. Speakeasy Gaming of Reno, Inc. purchased for $8 million cash a 262-room hotel and casino (previously known as the Reno Ramada Plaza Hotel) and renamed it the Ramada Inn and Speakeasy Casino (the "Reno Property").

The Company's strategy was to diversify its gaming operations and leverage its expertise while limiting its capital investment by acquiring smaller gaming properties in traditional gaming markets. The Speedway Property and Reno Property were permitted by "grandfather" clauses to

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operate unrestricted gaming without having to comply with county ordinances that limited unrestricted gaming operations to larger facilities. The Company planned to acquire additional grandfathered properties, assemble a Nevada-based management team and corporate infrastructure, and then acquire a larger property or properties in Nevada. Due to poor financial performance of the Reno Property attributable primarily to newly enacted legislation in California which permitted new and unexpected competition from gaming facilities on Native American lands in Northern California, the Company closed the Speakeasy Casino at the Reno Property in July of 2001. Moreover, because of the superior opportunities for growth at Mountaineer Park, which became apparent after the amendment of West Virginia law to permit coin drop slot machines, the Company is now focusing its attention on the further development of Mountaineer Park and potential acquisitions of other racetracks in the Ohio Valley. See "Business Strategy."

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Planned Expansion into Pennsylvania

In June of 2001, through its newly formed, wholly owned subsidiary, Presque Isle Downs, Inc., the Company filed an application with the Pennsylvania State Horse Racing Commission for a license to conduct thoroughbred horse racing and parimutuel wagering in Erie, Pennsylvania. The Company's plans call for construction of a state-of-the-art horse racing facility featuring dirt and turf racing as well as concerts, nightly entertainment, and fine and casual dining. The new track, to be named Presque Isle Downs, would be built on land that the Company currently has under option. The Company selected Erie because it is already a resort and tourist destination, was previously the site of a licensed thoroughbred track, and presents opportunities for cross marketing with Mountaineer Park, which is approximately 150 miles from Erie. Construction of the new track is subject to a number of contingencies, including licensing, zoning, closing on the real property upon exercise of the various option contracts (including the ability of the sellers to convey clear title), feasibility studies, and other customary due diligence. Accordingly, there can be no assurance that the Company's plans to build the track in Erie will be executed. See "Business Strategy" and "Management's Discussion and Analysis of Financial Condition and Results of Operations—Capital Improvements."

MOUNTAINEER RACETRACK & GAMING RESORT—CHESTER, WEST VIRGINIA

        Mountaineer Park is situated on the Ohio River at the northern tip of West Virginia's northwestern panhandle in Hancock County, approximately 40 miles south of Youngstown, Ohio, 85 miles from Cleveland, Ohio, and 35 miles west of Pittsburgh, Pennsylvania. Mountaineer Park owns approximately 1,694 acres of real property in Hancock County, of which approximately 231 are west of State Route 2 and are the site of the racetrack, hotel, convention center, health club and events center; approximately 175 acres comprise Mountaineer's Woodview Golf Course located approximately seven miles south of the Mountaineer complex in the town of New Cumberland; and the remainder of the acreage is available for future development. Mountaineer Park acquired all but approximately 600 acres of its current holdings after the 1992 acquisition of Mountaineer Park in order to maximize the Company's flexibility for growth.

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Video Lottery Gaming Operations

Mountaineer Park's revenues and profits are driven primarily by its video lottery operations as well as parimutuel wagering, and to a lesser extent its lodging, food and beverage operations, ATM access fees, convention center, events center, and recreational facilities fees. Mountaineer Park currently operates approximately 2,500 gaming machines, of which 1,744 are coin drop machines. While Mountaineer Park's gaming machines are located in the racetrack buildings as well as in the hotel's Speakeasy Gaming Saloon, machines operating in the Speakeasy are far more profitable. Accordingly, 1,941 of Mountaineer Park's gaming machines are housed in the

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Speakeasy, and 559 in the racetrack buildings. Mountaineer Park has enjoyed strong growth in its slot business as a result of positive legislation (coin drop amendment in June of 1999; relief from limitation on ratio of machines in hotel versus racetrack buildings from 1:1 between 1994 and June of 1998 to 2:1 in June of 1998, and elimination of the ratio in 2000), increases in machine count (from 400 in 1994, to 800 in 1995, to 1,000 in 1997, to 1,200 in July of 1998, to 1,345 in 1999, to 1,905 in 2000, to 2,500 in September of 2001), progressive advertising and marketing, and increased patronage resulting from Mountaineer's development into a destination resort. Because of delays by third-party equipment suppliers, Mountaineer Park has not yet been able to take advantage of a further legislative change passed in 2001 permitting an increase in the maximum slot wager from $2 to $5.

Mountaineer Park derives revenue from the operation of gaming in the form of net win on the gross terminal income, or the total cash deposited into a machine less the value of credits cleared for winning redemption tickets, tokens or coins. Pursuant to the West Virginia Racetrack Video Lottery Act of 1994, as amended (the "Lottery Act"), the Company's commission is fixed at 47% of the net win after deducting an administration fee of 4% of gross terminal revenues first paid to the State of West Virginia. Additionally, with respect to net win in excess of Mountaineer Park's net win for the twelve months ending June 30, 2001, or "Excess Net Terminal Income" as it is referred to in a 2001 amendment of the Lottery Act, is subject to a 10% surcharge. However, the amendment created a capital reinvestment fund to which the State will contribute 42% of the surcharge. Generally, for each dollar a racetrack expends on capital improvements for the racetrack and adjacent property, the track will receive a dollar from the capital reinvestment fund. Further, after deducting the administrative fee and the surcharge from the Excess Net Terminal Income, the racetracks will receive 42% (as opposed to 47%) of the remaining net win. (See "Management's Discussion and Analysis of Financial Condition and Results of Operations").

The Company owns 2,040 machines and leases a total of 460 machines from various manufacturers. The leases covering the leased machines provide for a fixed monthly rental.

Although the Lottery Commission approved the linking of Video Slots in progressive jackpot networks in 1995, the technology for video lottery progressives has only recently become available. In January of 1999, Mountaineer Park introduced progressives on a test basis with respect to a total of 100 machines in several networks or "banks." In the fourth quarter of 2000, Mountaineer Park eliminated its progressive games because the available games proved unpopular. In February 2002 Mountaineer Park implemented progressive games once again after new games were approved for use in West Virginia.

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Racing and Parimutuel Wagering Operations

Mountaineer Park offers live thoroughbred horse racing on dirt and grass surfaces before expansive clubhouse and grandstand viewing areas with enclosed seating (770 seats and 2,850 seats respectively) for year-round racing. In August of 2000, Mountaineer Park also began exporting its signal to other outlets in the United States and the Caribbean. Those outlets (approximately 250 off-track wagering facilities thus far) simulcast Mountaineer Park's races and conduct parimutuel wagering. Mountaineer Park also conducts parimutuel wagering on horse and greyhound dog racing simulcast via closed circuit television from other prominent racetracks around the country. The stable area accommodates approximately 1,250 horses and is located adjacent to the main track. The racetrack parking lots have a combined capacity for over 2,900 vehicles.

The Company is subject to annual licensing requirements established by the West Virginia State Racing Commission (the "Racing Commission"). The Company's license was renewed in December 2001, and will remain effective through December 2002.

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The Company's revenue from racing operations is derived mainly from three sources: commissions earned on parimutuel wagering on live races held at Mountaineer Park; commissions earned on races conducted at other "host" racetracks and broadcast live (i.e., import simulcast) at Mountaineer Park; and, since August 11, 2000, fees paid to Mountaineer Park by other racetracks and off track wagering facilities that broadcast Mountaineer Park's races live (i.e., export simulcast). In parimutuel wagering, patrons bet against each other rather than against the operator of the facility or with pre-set odds. The dollars wagered form a pool of funds from which winnings are paid based on odds determined solely by the wagering activity. The racetrack acts as a stakeholder for the wagering patrons and deducts from the amounts wagered a "take-out" or gross commission, from which the racetrack pays state and county taxes and racing purses. The Company's parimutuel commission rates are fixed as a percentage of the total handle or amounts wagered. With respect to Mountaineer Park's live racing operations, such percentage is fixed by West Virginia law at three levels, 17.25%, 19% and 25%, depending on the complexity of the wager. The lower rate applies to wagering pools involving only win, place and show wagers while the higher rates apply to pools involving wagers on specified multiple events, such as trifecta, quinella and perfecta wagers. With respect to import simulcast racing operations, Mountaineer Park generally applies the commission rates imposed by the jurisdictions of the host racetracks, as mandated by the Racing Commission. Such rates vary with each jurisdiction and may be more or less favorable than the live racing commission rates. Out of its gross commissions, the Company is required to distribute fixed percentages to its fund for the payment of regular purses (the "regular purse fund"), the state of West Virginia and Hancock County and, with respect to commissions derived from simulcast operations, Mountaineer Park's employee pension plan. After deducting state and county taxes and, with respect to simulcast commission, simulcast fees and expenses and employee pension plan contributions, approximately one-half of the remainder of the commissions are payable to the regular purse fund. With respect to export simulcast racing operations, "guest" tracks and off track wagering outlets pay "host" fees to Mountaineer Park that average 3% of the handle wagered on Mountaineer Park's live races. Casinos and off track wagering facilities in Nevada currently receive Mountaineer Park's live race signal from a disseminator to whom Mountaineer Park pays a fee. The guest outlets previously paid a flat daily fee but as of January 1, 2002 pay a percentage of the handle to Mountaineer Park. Out of its gross host fees, Mountaineer Park distributes a fixed percentage to its fund for payment of regular purses and to Mountaineer Park's employee pension plan. After deducting the amount due from the Horsemen for capital improvements, approximately one-half of the remainder of the commissions is payable to the purse fund.

Mountaineer Park also receives the "breakage," which is the odd cents by which the amounts payable on each dollar wagered in a parimutuel pool exceeds a multiple of ten cents. Breakage from simulcast wagers is generally allocated proportionately between the host racetrack and Mountaineer Park on the basis of the amounts wagered at their respective facilities.

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Lodging, Food and Beverage Operations

Mountaineer Park's lodge currently has 101 hotel rooms and a dining room that seats 125 patrons for casual dining. The Speakeasy Gaming Saloon, which now encompasses approximately 130,000 square feet, the buffeteria, and the new convention center were annexed to the lodge. The Company expects its new 260-room hotel addition and retail plaza to open during the second quarter of 2002.

Mountaineer Park provides various dining options for patrons both at the racetrack and in the hotel and Speakeasy Gaming Saloon. The racetrack's Clubhouse Restaurant is open a minimum of 210 days annually on live race days and offers seating for 770 customers with full lunch and dinner menus and a private buffet. Clubhouse customers include racing fans, local residents and

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private social groups. Beverages and cocktails are also available in the grandstand building at the Hollywood Knights Saloon, which services gaming patrons as well as racing fans. A deli adjacent to the Hollywood Knights Saloon provides customers with a variety of sandwiches and pizza. Closed circuit television monitors displaying Mountaineer Park's live and simulcast races are provided at every table in both the Clubhouse and grandstand restaurant for the convenience of racing fans. The outdoor café, with seating for 140 people on the racetrack's apron, opens Kentucky Derby weekend through Labor Day. A small food court on the lower level of the grandstand serves a variety of fast food. The racetrack food and beverage facilities are intended to complement the entertainment experience for racing fans and gaming players and, therefore, are designed to offer familiar menus with moderate pricing in a comfortable atmosphere.

Currently, the hotel offers the Gatsby Restaurant, which overlooks the casino floor and seats 125 patrons for casual dining. In July 2001, Mountaineer Park opened a 160-seat Las Vegas style buffet that is accessible from the Speakeasy Gaming Saloon. Food and beverages are also available in the Speakeasy at two deli counters.

In August of 2001, Mountaineer Park opened its convention center. The Convention center is equipped and staffed to provide full service, including food and beverage, for groups ranging from ten to more than one thousand. The Company expects to build a convention and related food and beverage business in conjunction with the opening of the new hotel. See "Business Strategy" and "Management's Discussion and Analysis of Financial Condition and Results of Operations."

During the second quarter of 2002, Mountaineer Park is scheduled to open its new 260-room hotel and a retail plaza that will include a coffee and baked goods shop, a jewelry store, and a gourmet steakhouse for 60 guests. See "Business Strategy and "Management's Discussion and Analysis of Financial Condition and Results of Operations."

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Amenities and Recreational Activities

As part of its transformation into a destination resort, Mountaineer Park offers a number of amenities and recreational activities intended to enhance the entertainment experience of its slot and racing patrons.

In January of 1999, Mountaineer Park purchased the Woodview Golf Course, an eighteen-hole par 71 course measuring approximately 6,300 yards (subsequently expanded to 6,550 yards) on a 175-acre tract, which is located approximately seven miles from Mountaineer Park in New Cumberland, West Virginia. See "Business Strategy"; "Management's Discussion and Analysis of Financial Condition and Results of Operations."

In August of 2000, Mountaineer Park opened the Harvey E. Arneault Memorial Arena and Events Centre. Known as the "Harv," this 69,000 square foot facility is a tent-like fabric structure that seats approximately 5,000 patrons for concerts, boxing matches and other entertainment offerings. The Harv has a state-of-the-art stage, permanent bleachers and food and beverage concessions. See "Business Strategy"; "Management's Discussion and Analysis of Financial Condition and Results of Operations."

In February of 2001, Mountaineer Park opened its Spa and Fitness Centre. Also a fabric structure, this 12,000 square foot facility has a full complement of weight training and cardiovascular equipment as well as aerobics classes, a health bar, locker rooms with steam and sauna rooms, a hair and nail salon and treatment rooms for massage, facials and tanning. The spa offers both annual and day memberships. The Company plans to move the salon and treatment rooms into the new hotel. See "Business Strategy"; "Management's Discussion and Analysis of Financial Condition and Results of Operations—Capital Improvements."

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Mountaineer Park also offers tennis, outdoor swimming, and indoor swimming (upon opening of the new hotel).

RAMADA INN AND SPEEDWAY CASINO—NORTH LAS VEGAS, NEVADA

        In May of 1998, the Company, through its wholly owned subsidiary, Speakeasy Gaming of Las Vegas, Inc. ("Speakeasy Las Vegas"), purchased a 131-room hotel and casino property (previously known as the Cheyenne Hotel & Casino) and renamed it the Ramada Inn and Speedway Casino (together with an adjacent ¹/2 acre parcel purchased thereafter to augment parking, the "Speedway Property"). Since acquiring the Speedway Property, the Company has renovated 118 of the hotel rooms, refurbished the restaurant, and constructed a 15,600 square foot addition that houses the casino, and constructed a new swimming pool and parking lots that now accommodate 474 cars. The Speedway Property sits on approximately 6.1 acres and consists of one two-story building and one three-story building.

        The Speedway Property is located at 3227 Civic Center Drive in North Las Vegas at the intersection of Cheyenne Avenue and Interstate 15. I-15 is a major interstate freeway, which extends north into Utah and south past Downtown Las Vegas, the Las Vegas "strip" and into the Los Angeles Basin. The Speedway Property is approximately five miles from the Las Vegas Motor Speedway and three miles from Nellis Air Force Base.

        Currently, the Company operates approximately 400 slot machines, eight blackjack tables, a craps table and one roulette wheel at the Speedway Property. The Company has the necessary licenses to conduct non-restricted gaming at the Speedway Property until October of 2003, at which time the Company will have to seek renewal in order to continue to operate gaming.

RAMADA INN AND SPEAKEASY CASINO—RENO, NEVADA

        In May of 1998, the Company purchased a 262-room hotel and casino (previously known as the Reno Ramada Plaza Hotel) and has renamed it the Ramada Inn and Speakeasy Casino (the "Reno Property"). An eleven-story tower houses 236 of the Reno Property's hotel rooms. A separate three-story structure that contained 26 rooms was demolished during 2001 to create additional surface parking. The Reno Property is located at 6^th and Lake Streets in Reno and has parking for approximately 274 cars. The Reno Property has an 8,000 square foot area that was used for gaming. The Company operated the casino until July 2001, at which time casino operations ceased. The Company elected not to pursue renewal of its gaming license. The Company would be required to apply for such a gaming license in the event it considered reopening the casino. The Reno Property also has a 7,900 square foot convention facility housed in a separate building.

BUSINESS STRATEGY

        The Company's business strategy involves further developing and expanding its existing operations at Mountaineer Park as a destination resort, continuing growth of Mountaineer Park's export simulcast business, seeking to acquire other gaming and/or parimutuel businesses (with a particular emphasis on such opportunities in states bordering West Virginia) and improving profitability at the Speedway Property while minimizing the operating losses at the Reno Property.

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Further Develop, Expand And Market Mountaineer Park As A Destination Resort, Convention Center And Diversified Entertainment Facility.

Established in 1951 as a horse- racing venue, Mountaineer Park historically focused its operations on parimutuel wagering and related amenities. Following the appointment of Edson R. Arneault as Chairman and Chief Executive Officer in April 1995, the Company has sought to capitalize on the passage of the Lottery Act by repositioning the facility as a gaming destination

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resort and diversified entertainment facility. The Company has invested in excess of $100 million in expansion, renovation, and refurbishment of Mountaineer Park and has incrementally increased the number of gaming machines from 165 at the time of acquisition to approximately 2,500 in December of 2001 as legislative developments either permitted additional gaming machines or made their operation more profitable. The Company has also undertaken an aggressive marketing campaign involving print, radio and television advertisements, including 30-minute "infomercials" aired in Mountaineer Park's target markets, and direct mail. In August 2001 the Company launched an automated player tracking system, replacing a manual system. The system should generate valuable data concerning customer preferences as well as provide incentives for players to take advantage of all of the resort's amenities.

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Increase Capacity Through Expansion Of Facilities And Increasing Gaming Count.

Mountaineer Park's successful marketing, enhanced facilities and improved racing and gaming products have resulted in a paradigm shift: while weekends and summer months, respectively, continue to produce higher volumes of patrons and revenues than weekdays and winter months, respectively, commencing with the fourth quarter of 1999, weekday gaming revenues have regularly produced results previously seen only on weekends; and winter months are producing results previously seen only in summer months. Indeed, gaming revenue for the month of February 2002 was $16.7 million compared to $15.3 million in June of 2001. In order to capitalize on this momentum, in 2000 the Company began a four-phased expansion. Phase One of the expansion, which is complete, included:

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Construction of the 69,000 square foot theatre and events center for concerts, boxing, and other events (such as billiard tournaments, trade shows, car shows and charitable bingo) to drive gaming traffic (opened August of 2000).



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Expansion of the Speakeasy Gaming Saloon by approximately 32,000 square feet to house 550 additional slots (opened August of 2000).



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Commencement of export simulcasting after making necessary capital improvements, which created a new revenue source (opened August of 2000).



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Construction of 12,000 square foot full service spa and fitness center as an amenity for hotel guests as well as for the local community (opened February of 2001).

Phase Two of the expansion, which is currently underway, includes:

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Addition of approximately 260 hotel rooms, indoor swimming pools, upscale steakhouse and retail plaza to support convention center and peak visitor demand and to permit marketing as a destination resort (scheduled to open in second quarter of 2002).



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Further expansion of the Speakeasy Gaming Saloon by approximately 39,000 square feet to house approximately 595 additional slots, bringing machine count to approximately 2,500 (completed July 2001).



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Construct convention facilities (approximately 52,750 square feet) for trade and professional association events (opened in August 2001).



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Addition of a Las Vegas style buffet (opened in July 2001)



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Implementation of a state-of-the-art automated player tracking system to allow more efficient use of marketing and promotions dollars (implemented August 2001).



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Addition of 500 new slots in the second or third quarter of 2002, subject to regulatory approval.

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        Additional phases of the development, which the Company intends to undertake in 2002, are renovations to the original 101 hotel rooms, development of an RV park, and construction of a dock with 120 boat slips on riverfront property recently acquired just north of the Mountaineer complex. Other projects, which are not yet scheduled but remain contemplated as cash flow and available financing permit, include constructing (or having a third party construct and own) a new championship golf course and golf training facility on undeveloped acreage and developing housing, equestrian trails, and a river front shopping village.

        Management's strategy is to implement the expansion plans to create a destination resort that will both expand the Company's target market and further distinguish Mountaineer Park from competitors whose facilities may have some but not all of the entertainment venues available at Mountaineer Park. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Sources of Capital."

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Continue Growth Of Mountaineer Park's Export Simulcasting Business

The Company's strategy for further improving the financial results of its horse racing business is to: (i) continue to improve the quality of the live racing product by increasing average purses and sponsoring "stakes" races or "championship" races; (ii) emphasize marketing to sites already receiving the Mountaineer Park signal to ensure the Company is achieving full capacity for those markets; (iii) continue to develop and expand acceptance of Mountaineer Park's simulcast signal in the Canadian market and other new markets as they may open; and (iv) make its live racing product more attractive to wagerers by broadening the betting pool through the continued growth of Mountaineer Park's export simulcasting business.

Management believes that the enhanced quality of racehorses should continue to improve the Company's opportunities in export simulcasting. Accordingly, the Company will continue to evaluate its purse structures in order to enhance the quality of the racehorses running at Mountaineer Park. The commencement of export simulcasting activity in 2000 has not only created a new source of revenue but the related increase in gross dollars wagered on Mountaineer Park's live races has also improved the quality of racing as a wagering product, as a greater and more diverse wagering pool lessens the impact a particular wager will have on the pay-off odds. The Company will aggressively promote its simulcast signal in markets where the signal is already received to capture a greater share of the market. The Company has been successful in achieving initial acceptance of its simulcast signal in Canada and began 2002 by offering the signal one day a week. Management also continues to believe that the improvement of the racing product through increasing average daily purses (though not necessarily in the winter months) and sponsoring increased stakes races as part of the development of the export simulcast business, together with cross marketing of parimutuel wagering to slot patrons (including emphasis of benefits of the Players' Club System), will result in increased on-track handle as well. See "Operating Costs" and "Parimutuel Commission Operating Costs."

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Seek To Acquire Other Middle-Market Gaming And/Or Parimutuel Businesses In Bordering States

The Company continues to identify and evaluate opportunities involving other middle-market gaming and/or parimutuel businesses in states that border West Virginia. In this regard, in June of 2001 the Company filed an application to build a state-of-the-art thoroughbred racetrack in Erie, Pennsylvania. The Company selected Erie because it is already a resort and tourist destination, was previously the site of a licensed thoroughbred track, and presents opportunities for cross marketing with Mountaineer Park, approximately 150 miles from Erie. Because the project is subject to licensing and a number of other contingencies, there can be no assurance that the Company's plans to build the track in Erie will be executed.

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Improve Profitability At Las Vegas Property While Minimizing Losses At Reno Property

Management believes that the Speedway Property possesses unique characteristics vis-a-vis direct competitors. It is the closest full service hotel and casino to the Las Vegas Motor Speedway and the only motor racing themed casino in the United States. The property is further distinguished by its expansive interior and exterior murals that depict racing scenes and a distinct auto-themed dining area. With its renovated hotel and new casino and bandstand, the Speedway Property is well positioned to gain market share in the North Las Vegas market. The Company's strategy is to control costs, pursue targeted promotions and offer value oriented food, beverage and lodging.

Legislation passed in March of 2000 in California to permit Indian tribes to conduct casino gaming presented a threat to the tourist market in Reno. In July 2001 the Company closed the casino and one restaurant at the Reno Property in an effort to reduce operating losses. The Company has continued to operate the hotel and other food and beverage services. Management will continue marketing the property's 7,900 square foot convention facility to stimulate hotel and food and beverage operations. The Company will continue to explore all alternatives for reducing or eliminating operating losses at this property, including a sale.

COMPETITION

        The Company faces substantial competition in each of the markets in which its gaming facilities are located. Some of the competitors have significantly greater name recognition and financial and marketing resources than the Company. All of the Company's gaming operations primarily compete with other gaming operations in their geographic areas. New expansion and development activity is occurring in each of the relevant markets, which may be expected to intensify competitive pressures. All of the Company's gaming operations also compete to a lesser extent with operations in other locations, including Native American lands, riverboats and cruise ships, and with other forms of legalized gaming in the United States, including state-sponsored lotteries, on- and off- track wagering, high-stakes bingo, card parlors, and the emergence of Internet gaming. Several states have considered legalized casino gaming and others may in the future. Casinos in Canada have likewise recently begun advertising in Mountaineer Park's target markets. In a broader sense, the Company's operations face competition from all manner of leisure and entertainment activities, including shopping, high school and collegiate athletic events, television and movies, and travel.

        Specific competitive factors relating to the Company's primary gaming markets include the following:

        MOUNTAINEER PARK. In recent years, the number of gaming options available to consumers in the Company's West Virginia area market has increased considerably. Mountaineer Park's principal direct competitors are Wheeling Downs, which has announced expansion plans, located approximately 40 miles to the south in Wheeling, West Virginia, Thistledown and Northfield Park, located approximately 85 miles to the northwest in Cleveland, Ohio and The Meadows, located approximately 80 miles away from Mountaineer Park in Washington, Pennsylvania. In 2001, West Virginia enacted legislation permitting limited video lottery in bars and fraternal organizations. Mountaineer Park could face competition from this new form of legalized gaming. Wheeling Downs conducts parimutuel greyhound dog racing and video lottery gaming. Thistledown and Northfield conduct parimutuel thoroughbred horse racing but not video lottery gaming. The Meadows conducts live harness racing and provides import simulcasting, but does not have video lottery gaming. Since commencing export simulcasting, Mountaineer Park also competes with racetracks across the country to have its signal carried by off-track wagering parlors. In general, Mountaineer Park competes with other tracks for participation by quality racehorses. The Company also competes with statewide lotteries in West Virginia, Pennsylvania and Ohio, off-track and on-site wagering in Pennsylvania, and, to a lesser extent,

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destination gaming facilities in Las Vegas, Atlantic City, and Canada as well as other entertainment options available to consumers, including live and televised professional and collegiate major sports events. The Company will also compete with off-track wagering in Ohio. To the extent that Pennsylvania, Ohio or West Virginia legalizes any forms of casino gaming, slot machines or video lottery gaming, Mountaineer Park's gaming operations could compete with any such new gaming facilities located within driving distance of Mountaineer Park. If permitted under such new legislation, such facilities may offer more gaming machines than Mountaineer Park, as well as forms of gaming not available in West Virginia. Such competition could have a material adverse effect on the Company.

        THE SPEEDWAY PROPERTY. The Company does not intend for the Speedway Property to compete with the high-end luxury hotel/casinos along Las Vegas' famous Strip (along Las Vegas Boulevard between Sahara Avenue and Tropicana Avenue). Although the Strip is the main attraction for gaming patrons who travel to Las Vegas, the Company believes that North Las Vegas constitutes a distinct segment of the Las Vegas gaming market. Nevertheless, management recognizes that the Strip may limit customer traffic to the North Las Vegas area. Even within the North Las Vegas segment of the market, however, the Speedway Property faces substantial competition from other small casinos. New properties, or major additions, expansions or enhancements to competitors' existing properties could have a material adverse effect on the Company.

        THE RENO PROPERTY. The Reno Property competes with other properties in Reno, Nevada. In July 2001 the Company closed the casino and the restaurant at the Reno Property, but has continued to operate the hotel. The Reno Property's principal direct competitors are those hotels located in downtown Reno and other lodging facilities. The closing of the casino may make it more difficult for the Reno Property to compete with other hotels that offer gaming. There are currently nine facilities in downtown Reno that offer non-restricted gaming.

        In March of 2000, California voters passed a proposition to permit Indian tribes to conduct and operate slot machines, lottery games and banked and percentage card games on Indian lands. The Nevada properties, particularly the Reno Property, could be further adversely affected as a result of this increased competition.

EMPLOYEES

        As of December 31, 2001, the Company had approximately 1,687 employees (1,442 in connection with operations at Mountaineer Park and the remainder in Nevada) of whom approximately 65 were represented by a labor union under a collective bargaining agreement. The union representing mutuel clerks at the racetrack has been expanded in recent years to cover certain employees providing off-track betting services at the Speakeasy Gaming Saloon. The collective bargaining agreement was extended until November 30, 2002. The Company believes that its employee relations are good.

        The Company anticipates that the number of employees for operations at Mountaineer Park will increase materially in connection with the opening of the new hotel in 2002 and other planned expansion.

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REGULATION AND LICENSING

        GENERAL. All of the Company's gaming operations are subject to extensive regulations and could be subjected at any time to additional or more restrictive regulations. The Company is also subject to the provisions of West Virginia law that govern the conduct of thoroughbred horse racing in West Virginia (the "West Virginia Racing Act") and the operation of slots in West Virginia (the "Lottery Act"). The Company's live racing, pari-mutuel wagering and slot operations are contingent upon the continued governmental approval of such operations as forms of legalized gaming. The Company also may be materially adversely affected by legislation of additional forms of gaming activity, or expanded licensure, within or near the Company's present or future markets.

        The regulations and oversight applicable to the Company's operations are intended primarily to safeguard the legitimacy of gaming activity and its freedom from inappropriate or criminal influences. The Company's material licenses are subject to annual or other periodic renewal and governmental authorities may refuse to grant permission to continue to operate existing facilities. The failure to obtain or maintain in effect required regulatory approvals would have a material adverse effect upon the Company's business, financial condition and results of operations.

        WEST VIRGINIA RACING AND GAMING REGULATION. The powers and responsibilities of the Racing Commission include, among other things, (i) granting permission annually to maintain racing licenses and schedule race meets, (ii) approving simulcasting activities, (iii) licensing all officers, directors, racing officials and certain other employees of the Company and (iv) approving all contracts entered into by the Company affecting racing and parimutuel wagering operations. Such powers and responsibilities extend to the approval and/or oversight of all aspects of racing and parimutuel wagering operations. In order to conduct simulcast racing, Mountaineer Park is required under West Virginia law to hold a minimum of 210 live race days each year. West Virginia law requires that at least 80% of Mountaineer Park's employees must be citizens and residents of West Virginia and must have been such for at least one year. In addition, certain activities, such as simulcasting races, require the consent of the representatives of a majority of the horse owners and trainers at Mountaineer Park.

        The Company's export simulcast activities that occur outside of West Virginia are subject to regulation by other state racing commissions, as well as the provisions of the Federal Interstate Horse Racing Act of 1978, which prohibits Mountaineer Park from accepting off-track wagering on simulcast racing without the approval of the Racing Commission and, subject to certain exceptions, of any other currently operating track within 60 miles, or if none, of the closest track in any adjoining state. The Company has received all necessary approvals to conduct its current operations at Mountaineer Park; however, such approvals are subject to renewal and approval annually. The failure to receive or retain approvals or renewals of approvals, or a delay in receiving such approvals and renewals, could cause the reduction or suspension of racing and parimutuel wagering as well as of gaming operations at Mountaineer Park and have a material adverse effect upon the Company's business, financial condition and results of operations.

        Pursuant to the Lottery Act, each of the two West Virginia horse racetracks and two West Virginia dog racetracks licensed prior to January 1, 1994 and which conduct a minimum number of days of live racing, may apply for an annual license to operate gaming at its racetrack. The Lottery Act likewise requires that the operator of Mountaineer Park be subject to a written agreement with the horse owners, breeders and trainers who race horses at that facility (the "Mountaineer Park Horsemen") in order to conduct gaming operations. The Company is party to the requisite agreement with the Mountaineer Park Horsemen, which expires on January 1, 2004. The Lottery Act also requires that the operator of Mountaineer Park be subject to a written agreement with the parimutuel clerks in order to operate gaming. The Company is party to the requisite agreement with its pari-mutuel clerks, which expires on November 30, 2002. The absence of an agreement with the Mountaineer Park Horsemen or the parimutuel clerks at Mountaineer Park, or the termination or non-renewal of such agreement,

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would have a material adverse effect on the Company's business, financial condition and results of operations. The Lottery Commission has broad powers to approve and monitor all operations of the gaming machines, the specification of the machines and the interface between the terminals and the West Virginia Central Lottery System. The Lottery Commission also acts upon the Company's requests for increases in the number of gaming machines. The Lottery Commission's denial of a request to increase the number of machines at Mountaineer Park could limit the Company's growth and thus adversely affect the Company's business, financial condition and results of operations. In addition, the Lottery Commission licenses all persons who control the licensed entity or are key personnel of the gaming operation to ensure their integrity and absence of any criminal involvement.

        The conduct of gaming by a racing facility is subject to the approval of the voters of the county in which the facility is located. If such approval is obtained, the facilities may continue to conduct video lottery activities unless the matter is resubmitted to the voters pursuant to a petition signed by at least 5% of the registered voters, who must wait at least five years to bring such a petition. If approval is denied, another vote on the issue may not be held for a period of two years. Gaming was approved in Hancock County, the location of Mountaineer Park, on May 10, 1994. If such approval were ever revoked pursuant to the Lottery Act, it would have a material adverse effect on the Company.

        In order to qualify as a "video lottery game," as the term is defined under the Lottery Act, a game must, among other things, be a game of chance, which utilizes an interactive electronic terminal device allowing input by an individual player. Such a game may not be based on any of the following game themes: roulette, dice, or baccarat card games. Moreover, video lottery machines must meet strict hardware and software specifications, including minimum and maximum pay-out requirements, and must be connected to the Lottery Commission's central control computer by an on-line or dial-up communication system. Only machines registered with and approved by the Lottery Commission may offer video lottery games.

        Under the Lottery Act, racetracks that conduct gaming, as well as persons who service and repair gaming machines and validation managers (persons who perform video lottery ticket redemption services) are required to be licensed by the Lottery Commission. The licensing application procedures are extensive and include inquiries into, and an evaluation of, the character, background (including criminal record, reputation and associations), business ability and experience of an applicant and the adequacy and source of the applicant's financing arrangements. In addition, a racetrack applicant must hold a valid racing license, have an agreement regarding video lottery revenues with the representatives of a majority of the horsemen, the parimutuel clerks and the breeders for the racetrack and post a bond or irrevocable letter of credit in such amount as the Lottery Commission shall determine. Finally, no license will be granted until the Lottery Commission determines that each person who has "control" of an applicant meets all of the applicable licensing qualifications. Persons deemed to have control of a corporate applicant include: (i) any holding or parent company or subsidiary of the applicant who has the ability to elect a majority of the applicant's board of directors or to otherwise control the activities of the applicant; and (ii) key personnel of an applicant, including any executive officer, employee or agent, who has the power to exercise significant influence over decisions concerning any part of the applicant's business operations.

        Video Lottery machines may only be operated in the grandstand building of a racetrack where parimutuel wagering is permitted; provided, however, that if a racetrack was authorized by the Lottery Commission prior to November 1, 1993 to operate video lottery machines in another area of the racetrack's facilities, such racetrack may continue to do so. Accordingly, Mountaineer Park may operate video lottery machines at the Lodge as well as the racetrack.

        The Lottery Act imposes extensive operational controls relating to, among other matters, security and supervision, access to the machines, hours of operation, general liability insurance coverage and machine location. In addition, the Lottery Act prohibits the extension of credit for video lottery play

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and requires Lottery Commission approval before any video lottery advertising and promotional activities are conducted. The Lottery Act provides for criminal and civil liability in the event of specified violations.

        All revenues derived from the operation of video lottery games must be deposited with the Lottery Commission to be shared in accordance with the provisions of the Lottery Act. Under such provisions, each racetrack must electronically remit to the Lottery Commission its "gross terminal income" (total cash deposited into video lottery machines less the value of credits cleared for winning redemption tickets, tokens, or coins). To ensure the availability of such funds to the Lottery Commission, each racetrack must maintain in its account an amount equal to or greater than the gross terminal income to be remitted. If a racetrack fails to maintain this balance, the Lottery Commission may disable all of the racetrack's video lottery machines until full payment of all amounts due is made. From the gross terminal income remitted by a licensee, the Lottery Commission will deduct 4% to cover its costs of administering video lottery at the licensee's racetrack and divide the remaining amounts as follows: 47% is returned to the racetrack, 30% is paid to the State's general revenue fund, 15.5% is deposited in the racetrack's fund for the payment of purses, and the remaining 7.5% is divided among tourism promotion, Hancock County, the Racetrack Employees Pension Fund, and other programs. In April 2001, West Virginia amended the Lottery Act to establish among other things a new distribution scheme for the portion of each racetrack's net win in excess of that track's net win for the twelve months ending June 30, 2001 (referred to as the "Excess Net Terminal Income"). After deducting the administrative fee the Excess Net Terminal Income will be subject to a 10% surcharge. The remaining Excess Net Terminal Income after the surcharge (and the administrative fee) will be distributed as follows: 42% is returned to the racetrack, 41% is paid to the State's general revenue fund, 9.5% is deposited in the racetrack's fund for the payment of purses, and the remaining 7.5% is divided among tourism promotion, Hancock County, the Racetrack Employees Pension Fund, and other programs. The amendment also creates a capital reinvestment fund to which the State will contribute 42% of the surcharge attributable to each racetrack. Generally, for each dollar a racetrack expends on capital improvements for the racetrack and adjacent property, the racetrack will receive a dollar from the capital reinvestment fund.

        Pursuant to both the Racing Commission's and Lottery Commission's regulatory authority, the Company may be investigated by either body at virtually any time. Accordingly, the Company must comply with all gaming laws at all times. Should either body consider the Company to be in violation of any of the applicable laws or regulations, each has the plenary authority to suspend or rescind the Company's licenses. While the Company has no knowledge of any non-compliance, and believes that it is in full compliance with all relevant regulations, should the Company fail to comply with such regulations, its business would be materially adversely affected.

        NEVADA GAMING REGULATION. The laws, regulations, and supervisory procedures of the Nevada Gaming Authorities are based upon declarations of public policy which are concerned with, among other things: (i) the prevention of unsavory or unsuitable persons from having a direct or indirect involvement with gaming at any time or in any capacity; (ii) the establishment and maintenance of responsible accounting practices and procedures; (iii) the maintenance of effective controls over the financial practices of licensees, including the establishment of minimum procedures for internal fiscal affairs and the safeguarding of assets and revenues, providing reliable record keeping and requiring the filing of periodic reports with the Nevada Gaming Authorities; (iv) the prevention of cheating and fraudulent practices; and (v) the provision of a source of state and local revenues through taxation and licensing fees.

        In order to operate non-restricted gaming at the Nevada Properties, the Company, its Nevada subsidiaries and certain officers and directors are required to be licensed or found suitable as operators and owners of a casino by the Nevada Gaming Authorities. A gaming license requires the periodic payment of fees and taxes and is not transferable. The Company has also been registered by the

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Nevada Commission as a publicly traded corporation ("Registered Corporation") and as such, it will be required periodically to submit detailed financial and operating reports to the Nevada Commission and furnish any other information that the Nevada Commission may require. No person may become a stockholder of, or receive any percentage of profits from, the Company's Nevada subsidiaries without first obtaining licenses and approvals from the Nevada Gaming Authorities. In October 2001, the Company and all relevant affiliates obtained from the Nevada Gaming Authorities the necessary licenses or approvals to engage in gaming activities at the Las Vegas Property. The Company elected not to pursue renewal of the license to operate nonrestricted gaming at the Reno Property. With respect to the license of the Las Vegas Property, the Nevada Gaming Authorities issued a license for a term of two years, after which the Company will have to seek renewal in order to continue conducting gaming operations at this location.

        The Nevada Gaming Authorities may investigate any individual who has a material relationship to, or material involvement with, the Company or the Nevada Subsidiaries in order to determine whether such individual is suitable or should be licensed as a business associate of a gaming licensee. Officers, directors, and certain key employees of the Nevada subsidiaries must file applications with the Nevada Gaming Authorities and may be required to be licensed or found suitable by the Nevada Gaming Authorities. Officers, directors, and key employees of the Company who are actively and directly involved in gaming activities of the Nevada subsidiaries may be required to be licensed or found suitable by the Nevada Gaming Authorities. The Nevada Gaming Authorities may deny an application for licensing for any cause which they deem reasonable. A finding of suitability is comparable to licensing, and both require submission of detailed personal and financial information followed by a thorough investigation. The applicant for licensing or a finding of suitability must pay all the costs of the investigation. Changes in licensed positions must be reported to the Nevada Gaming Authorities and in addition to their authority to deny an application for a finding of suitability or licensing, the Nevada Gaming Authorities have jurisdiction to disapprove a change in a corporate position.

        If the Nevada Gaming Authorities were to find an officer, director, or key employee unsuitable for licensing or unsuitable to continue having a relationship with the Company or the Nevada subsidiaries, the companies involved would have to sever all relationships with such person. In addition, the Nevada Commission may require the Company or the Nevada subsidiaries to terminate the employment of any person who refuses to file appropriate applications. Determinations of suitability or of questions pertaining to licensing are not subject to judicial review in Nevada.

        The Company and the Nevada subsidiaries must submit detailed financial and operating reports to the Nevada Commission. Substantially all material loans, leases, sales of securities, and similar financial transactions by the Company and the Nevada subsidiaries will have to be reported to, or approved by, the Nevada Commission.

        If it were determined that the Company or its Nevada subsidiaries had violated the Nevada Gaming Control Act or the regulations promulgated thereunder (collectively, the "Nevada Act"), the gaming licenses could be limited, conditioned, suspended, or revoked, subject to compliance with certain statutory and regulatory procedures. In addition, the Nevada subsidiaries, the Company, and the persons involved could be subject to substantial fines for each separate violation of the Nevada Act at the discretion of the Nevada Commission.

        Any beneficial holder of the Company's voting securities, regardless of the number of shares owned, may be required to file an application, be investigated, and have his suitability as a beneficial holder of the Company's voting securities determined if the Nevada Commission has reason to believe that such ownership would otherwise be inconsistent with the declared policies of the State of Nevada. The applicant must pay all costs of investigation incurred by the Nevada Gaming Authorities in conducting any such investigation.

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        The Nevada Act requires any person who acquires more than five percent of the Company's voting securities to report the acquisition to the Nevada Commission. The Nevada Act requires that beneficial owners of more than 10 percent of the Company's voting securities apply to the Nevada Commission for a finding of suitability within 30 days after the Chairman of the Nevada Board mails the written notice requiring such filing. Under certain circumstances, an "institutional investor," as defined in the Nevada Act, which acquires more then 10 percent, but not more than 15 percent, of the Company's voting securities may apply to the Nevada Commission for a waiver of such finding of suitability if such institutional investor holds the voting securities for investment purposes only. An institutional investor shall not be deemed to hold voting securities for investment purposes unless the voting securities were acquired and are held in the ordinary course of business as an institutional investor and not for the purpose of causing, directly or indirectly, the election of a majority of the members of the board of directors of the Company, any change in the Company's corporate charter, bylaws, management, policies, or operations of the Company, or any of its gaming affiliates, or any other action which the Nevada Commission finds to be inconsistent with holding the Company's voting securities for investment purposes only. Activities which are not deemed to be inconsistent with holding voting securities for investment purposes only include: (i) voting on all matters voted on by stockholders; (ii) making financial and other inquiries of management of the type normally made by securities analysts for informational purposes and not to cause a change in its management, policies, or operations; and (iii) such other activities as the Nevada Commission may determine to be consistent with such investment intent. If the beneficial holder of voting securities who must be found suitable is a corporation, partnership, or trust, it must submit detailed business and financial information including a list of beneficial owners. The applicant is required to pay all costs of the investigation.

        Any person who fails or refuses to apply for a finding of suitability or a license within 30 days after being ordered to do so by the Nevada Commission or the Chairman of the Nevada Board, may be found unsuitable. The same restrictions apply to a record owner of securities if the record owner, after request, fails to identify the beneficial owner. Any stockholder found unsuitable and who holds, directly or indirectly, any beneficial ownership of the common stock of a Registered Corporation beyond such period of time as may be prescribed by the Nevada Commission may be guilty of a criminal offense. The Company is subject to disciplinary action if, after it receives notice that a person is unsuitable to be a stockholder or to have any other relationship with the Company or its Nevada subsidiaries, the Company (i) pays that person any dividend or interest upon voting securities of the Company, (ii) allows that person to exercise, directly or indirectly, any voting right conferred through securities held by that person, (iii) pays remuneration in any form to that person for services rendered or otherwise, or (iv) fails to pursue all lawful efforts to require such unsuitable person to relinquish his voting securities for cash at fair market value.

        The Nevada Commission may, in its discretion, require the holder of any debt security of a Registered Corporation to file applications, be investigated, and be found suitable to own the debt security of a Registered Corporation. If the Nevada Commission determines that a person is unsuitable to own such security, then pursuant to the Nevada Act, the Registered Corporation can be sanctioned, including the loss of its approvals, if without the prior approval of the Nevada Commission, it: (i) pays to the unsuitable person any dividend, interest, or any distribution whatsoever; (ii) recognizes any voting right by such unsuitable person in connection with such securities; (iii) pays the unsuitable person remuneration in any form; or (iv) makes any payment to the unsuitable person by way of principal, redemption, conversion, exchange, liquidation, or similar transaction.

        The Company must maintain a current stock ledger in Nevada, which may be examined by the Nevada Gaming Authorities at any time. If any securities are held in trust by an agent or by a nominee, the record holder may be required to disclose the identity of the beneficial owner to the Nevada Gaming Authorities. A failure to make such disclosure may be grounds for finding the record holder unsuitable. The Company will also be required to render maximum assistance in determining the

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identity of the beneficial owner. The Nevada Commission has the power to require the Company's stock certificates to bear a legend indicating that the securities are subject to the Nevada Act. Likewise, the Company may not make a public offering of its securities without the prior approval of the Nevada Commission if the securities or proceeds therefrom are intended to be used to construct, acquire, or finance gaming facilities in Nevada, or to retire or extend obligations incurred for such purposes.

        Changes in control of the Company through merger, consolidation, stock or asset acquisitions, management or consulting agreements, or any act or conduct by a person whereby he obtains control, may not occur without the prior approval of the Nevada Commission. Entities seeking to acquire control of a Registered Corporation must satisfy the Nevada Board and Nevada Commission in a variety of stringent standards prior to assuming control of such Registered Corporation. The Nevada Commission may also require controlling stockholders, officers, directors, and other persons having a material relationship or involvement with the entity proposing to acquire control, to be investigated and licensed as part of the approval process relating to the transaction.

        The Nevada legislature has declared that some corporate acquisitions opposed by management, repurchases of voting securities and corporate defense tactics affecting Nevada gaming licensees, and Registered Corporations that are affiliated with those operations, may be injurious to stable and productive corporate gaming. The Nevada Commission has established a regulatory scheme to ameliorate the potentially adverse effects of these business practices upon Nevada's gaming industry and to further Nevada's policy to: (i) assure the financial stability of corporate gaming operators and their affiliates; (ii) preserve the beneficial aspects of conducting business in the corporate form; and (iii) promote a neutral environment for the orderly governance of corporate affairs. Approvals are, in certain circumstances, required from the Nevada Commission before the Company can make exceptional repurchases of voting securities above the current market price thereof and before a corporate acquisition opposed by management can be consummated. The Nevada Act also requires prior approval of a plan of recapitalization proposed by the Company's Board of Directors in response to a tender offer made directly to the Registered Corporation's stockholders for the purposes of acquiring control of the Registered Corporation.

        License fees and taxes, computed in various ways depending on the type of gaming or activity involved, are payable to the State of Nevada and to the counties and cities in which the Nevada licensee's respective operations are conducted. Depending upon the particular fee or tax involved, these fees and taxes are payable either monthly, quarterly, or annually.

        Any person who is licensed, required to be licensed, registered, required to be registered, or is under common control with such persons (collectively, "Licensees"), and who is or proposes to become involved in a gaming venture outside of Nevada is required to deposit with the Nevada Board, and thereafter maintain, a revolving fund in the amount of $15,000 to pay the expenses of investigation of the Nevada Board of their participation in such foreign gaming. The revolving fund is subject to increase or decrease in the discretion of the Nevada Commission. Thereafter, Licensees are required to comply with certain reporting requirements imposed by the Nevada Act. A Licensee is also subject to disciplinary action by the Nevada Commission if it knowingly violates any laws of the foreign jurisdiction pertaining to the foreign gaming operation, fails to conduct the foreign gaming operation in accordance with the standards of honesty and integrity required of Nevada gaming operations, engages in activities that are harmful to the State of Nevada or its ability to collect gaming taxes and fees, or employs a person in the foreign operation who has been denied a license or finding of suitability in Nevada on the grounds of personal unsuitability.

        IMPACT OF RESORT HOTEL LEGISLATION. The Speedway Property and the Reno Property are subject to legislation passed in 1991 by the Nevada Legislature, which is commonly referred to as the Resort Hotel Legislation. The key portions of this legislation are found in Section 463.1605 of the Nevada Revised Statutes ("NRS"). NRS 463.1605 essentially provides that the Nevada Commission

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shall not approve a non-restricted gaming license for an establishment located in either Clark County or Washoe County, Nevada, unless the establishment is a resort hotel. A resort hotel is defined to include an establishment held out to the public as a hotel with more than 200 rooms available for sleeping accommodations, at least one bar with capacity for more than 30 patrons, and at least one restaurant with capacity for more than 60 patrons. A county, city or town may require resort hotels to meet standards in addition to those required by NRS 463.1605 as a condition to issuance of a gaming license by the particular county, city or town. The City of Reno has by ordinance adopted a 201-room requirement for resort hotels. The Nevada Properties are exempt from NRS 463.1605 because these locations have held non-restricted gaming licenses. The grandfathered exemptions, however, are lost in the event gaming is abandoned within the meaning of the statute and local regulations. The March 1999 commencement of gaming operations at the Speedway Property and the April 1999 commencement at the Reno Property preserved the grandfathered status of the Nevada Properties. Moreover, the Reno Property has more than 201 rooms and therefore, under current ordinance, would qualify as a resort hotel, notwithstanding the fact that the Company is no longer conducting gaming operations at that location. The failure to keep the grandfathered exemption to NRS 463.1605 and the local regulations governing resort hotels (by abandonment of gaming operations) would have a material adverse effect on the Company.

        COMPLIANCE WITH OTHER LAWS. The Company and facilities are also subject to a variety of other rules and regulations, including zoning, construction and land-use laws and regulations in Nevada and West Virginia governing the serving of alcoholic beverages. Mountaineer Park, and the Speedway Property derive a significant portion of their other revenues from the sale of alcoholic beverages. Any interruption or termination of the ability to serve alcoholic beverages would have a material adverse effect on the Company's business, financial condition and results of operations.

        RESTRICTIONS ON SHARE OWNERSHIP AND TRANSFER. Unless prior approval of the West Virginia Lottery Commission is obtained, the sale of five percent or more of the voting stock of the license holder or any corporation that controls the license holder or the sale of a license holder's assets (other than in the ordinary course of business), or any interest therein, to any person not previously determined by the Lottery Commission to have satisfied the licensing qualifications, voids the license. With respect to the State of Nevada, any beneficial holder of a Registered Corporation's voting securities (or rights to acquire such securities), regardless of the number of shares owned, may be required to file an application, be investigated and have his suitability as a beneficial holder of the registered Corporation's voting securities determined if the Nevada Commission has reason to believe that such ownership would otherwise be inconsistent with the declared policies of the State of Nevada. The applicant must pay all costs of investigation incurred by the Nevada Gaming Authorities in conducting any such investigation. Nevada law requires any person who acquires more than 5% of a Registered Corporation's voting securities to report the acquisition to the Nevada Commission. The Nevada Act requires that beneficial owners of more than 10% of the voting securities apply to the Nevada Commission for a finding of suitability within thirty days after the Chairman of the Nevada Board mails the written notice requiring such filing.

        APPLICATION OF ENVIRONMENTAL REGULATIONS. Generally, the Company and its subsidiaries are subject to a variety of federal, state and local governmental laws and regulations relating to the use, storage, discharge, emission and disposal of hazardous materials. Failure to comply with such laws could result in the imposition of severe penalties or restrictions on operations by government agencies or courts that could materially adversely affect the Company's operations. The Company does not have insurance to cover environmental liabilities, if any, other than certain limited coverage with respect to the Reno Property.

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ITEM 2. PROPERTIES

HOTEL, GAMING, RACING AND OTHER PROPERTY

        Mountaineer Park owns approximately 1,694 acres of land in Chester, West Virginia and has contracts to purchase an additional 574 acres near the resort. The resort occupies approximately 231 acres, including approximately 4,100 feet of frontage on the Ohio River, and is comprised of the thoroughbred racetrack, clubhouse, grandstand, and stables, the hotel and Speakeasy Gaming Saloon, the spa, conference center and events center, and parking. Mountaineer's Woodview Golf Course is constructed on a separate 175-acre parcel. The remaining acreage is largely undeveloped.

        The Speedway Property sits on approximately 6.1 acres and consists of one two-story building and one three-story building with a total of 131 hotel rooms and an outdoor swimming pool. The Speedway Property also has a restaurant and lounge facilities, as well as a 15,600 square foot casino building with parking for 474 cars.

        The Reno Property sits on approximately 1.74 acres in downtown Reno and consists of an eleven-story tower that contains 236 hotel rooms. The Reno Property is located at 6th and Lake Streets in Reno and has parking for approximately 274 cars. The tower also has a restaurant, a deli and two bars. The Reno Property has an 8,000 square foot casino area and a convention facility of approximately 7,900 square feet.

        Substantially all of the Company's assets are pledged to secure the debt evidenced by the Amended and Restated Credit Agreement dated as of August 15, 2000, as further amended, among Mountaineer Park, Inc., Speakeasy Las Vegas, Speakeasy Reno, Presque Isle Downs, Inc., the Company and Wells Fargo Bank, PNC Bank, N.A., National City Bank, and the Bank of Scotland.

EQUIPMENT LEASES

        At December 31, 2001, in connection with gaming and racing operations, Mountaineer Park leased 460 gaming machines, a totalisator system, video tape and closed circuit television systems and other equipment required for its operations. At December 31, 2001, Speakeasy Las Vegas leased 219 slot machines, and outdoor signs required for its operations. At December 31, 2001, Speakeasy Reno leased outdoor signs, a dishwashing machine and coin operated telephones required for its business operations.

ITEM 3. LEGAL PROCEEDINGS

        The Company and its subsidiaries are parties to various lawsuits, which have arisen in the ordinary course of operating their businesses. The liability, if any, arising from settlements or unfavorable outcomes of such lawsuits is presently unknown.

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

        Not applicable.

ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

        The Company's Common Stock is quoted on NASDAQ National Market under the symbol "MNTG". On March 26, 2002, the closing trade price for the Company's Common Stock was $14.49. As of March 26, 2002, there were approximately 810 stockholders of record of the Company's Common Stock.

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        The Company historically has not paid cash dividends and does not intend to pay such dividends in the foreseeable future. Under the Company's and its lenders' credit agreement, the Company is prohibited from paying any dividends without the lenders' consent.

        The following table sets forth the range of high and low bid price quotations for the Common Stock for the two fiscal years ended December 31, 2000 and 2001 and for the period of January 1, 2002 through March 26, 2002. These quotes are believed to be representative of inter-dealer quotations, without retail mark-up, mark-down or commission, and may not necessarily represent actual transactions.

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ITEM 6. SELECTED FINANCIAL DATA

        The selected financial data set forth below as of and for each of the five years ended December 31, 2001, have been derived from the audited consolidated financial statements of the Company, certain of which are included elsewhere in this Report, and should be read in conjunction with those consolidated financial statements (including the notes thereto) and with "Management's Discussion and Analysis of Financial Condition and Results of Operations" also included elsewhere herein.