SECURITIES AND EXCHANGE COMMISSION

                                WASHINGTON, D.C.
                                     20549


                                QUARTERLY REPORT

                    Pursuant to Section 13 or 15 (d) of the
                        Securities Exchange Act of 1934



                      FOR THE QUARTER ENDED MARCH 31, 1998


                        Commission File Number - 0-1607


                            MID-STATE RACEWAY, INC.
               (Exact Name of Registrant as Specified in Charter)
      

             New York                                     15-0555258            
       (State of Incorporation)             (I.R.S. Employer Identification No.)
   

          Vernon, New York                                  13476
(Address of Principal Executive Offices)                  (Zip Code)


                                 (315) 829-2201
                        (Registrant's Telephone Number)



Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months and (2) has been subject to the filing
requirements for at least the past 90 days. Yes___  No___.

Indicate the number of shares outstanding of each of the issuers' classes of
common stock, as of the close of the period covered by this report.


Class                                      Outstanding at March 31, 1998
-----                                      -----------------------------
Common Stock, $0.10 par value                                    250,386



<PAGE>



<TABLE>
<CAPTION>

                                                 A. SUMMARY OF FINANCIAL INFORMATION

                                                       MID-STATE RACEWAY, INC.

                                                     PROFIT AND LOSS INFORMATION



                                                         Three Months        Three Months    
                                                             Ended              Ended           Year Ended
                                                        March 31, 1998      March 31, 1997   December 31, 1997
                                                         0 Racing Days       0 Racing Days     77 Racing Days
                                                       ---------------    ----------------   -----------------   
<S>                                                     <C>                 <C>                 <C>       
Operating Revenues                                      $   928,268         $ 1,065,552         $ 5,381,327
                                                                                                
Operating Expenses                                      $ 1,011,087         $ 1,168,787         $ 5,992,916
                                                        -----------         -----------         -----------

Loss from operations                                        (82,819)           (103,235)           (611,589)
                                                        -----------         -----------         -----------

Other income:                                                                                   
  Commissions for Capital Improvements                            0               1,010              81,952
  Investment Income (loss)                                        0                 144             (21,470)
  Gain on sale of other properties                          391,070                   0                   0
                                                        -----------         -----------         -----------
                                                                                                
    Total Other Income                                      391,070               1,154              60,482
                                                        -----------         -----------         -----------
                                                                                                
Loss before provision for                                                                       
  Taxes                                                     308,251            (102,081)           (551,107)
                                                                                                
Provision (Credit) for                                                                         
  Taxes                                                           0                   0             329,758
                                                        -----------         -----------         -----------
                                                                                                
NET INCOME (LOSS)                                       $   308,251         $  (102,081)        $  (880,865)
                                                        ===========         ===========         ===========
                                                                                                

                                                                                                
Income (Loss) per weighted average shares outstanding   $      1.23         $     (0.41)        $     (3.52)
                                                        ===========         ===========         ===========
                                                                                                
                                                                                                
Cash dividend per share                                 $      0.00         $      0.00         $      0.00
                                                        ===========         ===========         ===========
</TABLE>

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<PAGE>



<TABLE>
<CAPTION>


                                                           A. (CONTINUED)

                                                       MID-STATE RACEWAY, INC.

                                                       STATEMENT OF CASH FLOW


                                                              FOR THE THREE      FOR THE 
                                                               MONTHS ENDED     YEAR ENDED
                                                                 MARCH 31,     DECEMBER 31,
                                                                   1998           1997
              INCREASE (DECREASE) IN CASH                      ------------   ------------


CASH FLOWS FROM OPERATING ACTIVITIES:

<S>                                                             <C>             <C>       
         Net Income (loss)                                      $ 308,251       $(880,865)

         Adjustments to reconcile net income (loss) to
         cash provided by (used in) in operating activities:
           Depreciation                                            46,733         233,356
           Net amortization/accretion of investments                    0              26
           Deferred income taxes                                        0         327,432
           Recoveries of doubtful accounts                              0         (23,000)
           Gain on sale of investment securities                        0          (4,769)
           Gain on sale of other properties                      (391,070)              0
           Loss on disposal of equipment                                0           1,431
         Changes in:
           Restricted cash                                         52,827         128,332
           Accounts receivable                                     70,588          39,880
           Prepaid expenses                                       (70,436)         27,371
           Other assets                                                 0          22,257
           Accounts payable                                        78,470         146,413
           Purse funds                                                  0        (103,210)
           Uncashed winning tickets                               (52,827)        (25,122)
           Deferred retirement benefits                                 0          (1,715)
                                                                ---------       ---------

Net cash provided by (used in) operating activities                42,536        (112,183)
                                                                ---------       ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
         Proceeds from maturities and sales of
           available-for-sale investment securities                     0         104,093
         Proceeds from sale of other properties and equipment     391,071           1,200
         Purchase of properties and equipment                      (9,697)        (33,654)
                                                                ---------       ---------

Net cash provided by investing activities                         381,374          71,639
                                                                ---------       ---------

Net change in cash                                                423,910         (40,544)

Cash, beginning of period                                         195,997         236,541
                                                                ---------       ---------

Cash, end of period                                             $ 619,907       $ 195,997
                                                                =========       =========
</TABLE>


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<PAGE>



                                 A. (CONTINUED)

                MANAGEMENT ANALYSES OF PROFIT AND LOSS INFORMATION
                
The Company's net loss from operations of $82,819 for the quarter ended March
31, 1998 decreased $20,416 over the same period last year. A significant factor
on the reduction of the operating loss was a decrease in operating expenses of
13.5%. Track management continues to focus on the reduction of operating
expenses. Reductions of expenses are being recognized through such efforts as
downsizing of employees in several departments, concessions from unions in
wages, health care benefits, vacations and retirement benefits.

The net income of $308,251 for the quarter ended March 31, 1998 versus a net
loss of $102,081 for the same period last year was the result of the Company
selling 126 acres of surplus vacant land on Collamer Road in Onondaga County to
E.L. Management of Syracuse Corp. for a net gain of #391,070. Edward Leffler, a
Director of the Company, is the sole shareholder of E.L. Management of Syracuse
Corp.

Total wagering on thoroughbred and harness simulcasts during the quarter ended
March 31, 1998 increased by $488,395 (13.5%) over the same period as last year.
This is the first quarterly increase in simulcast handle since 1996.


Subsequent events

In 1998, the Company was fined $416,000 by the New York State Racing and
Wagering Board (the "Board") for instances of non-compliance, and has been
directed to reimburse the Company's capital improvement fund for any
unqualified capital expenditures. However, the Board is indicating its
willingness to abate the fine if the Company demonstrates compliance during the
1998 racing season. Management expects that appropriate compliance will be
demonstrated and that, accordingly, the fines will be abated. However, there can
be no assurance that the fines will be abated. The Company also believes that
qualified capital expenditures exceed the amount provided by the capital
improvement fund and that, accordingly, no reimbursement of unexpended funds
will be required.

The Company continues to take action and explore its options to raise operating
capital, including but not limited to the following:

     a.   The Company is pursuing loans and grants from various from various
          local and state agencies

     b.   The Company has closed on a One Million Dollar (1,000,000) loan
          secured by a mortgage on its race track property in Vernon, New York.


                                       4


<PAGE>



                                 A. (CONTINUED)

                MANAGEMENT ANALYSES OF PROFIT AND LOSS INFORMATION


Subsequent Events (Continued)

The Company will continue to explore any additional options to raise any
additional necessary funds for the Company's operations.

In addition to exploring funding options as set forth above, the Company plans
to do or has done the following to improve its financial condition and improve
the efficiency of its operations:

     a.   Hire new management.

     b.   Replace the food service concessioner.

     c.   Increase the number of events using the facility.

     d.   Eliminate expenditures not necessary to the operation of the facility
          including certain deferred compensation payments.

There can be no assurance that efforts to improve the Company's financial
condition will be successful.


Liquidity and Capital Resources

In 1998, the funding of business operations and capital requirements for
Mid-State Raceway's business will be substantially sourced by cash from
operations, sale of non-operating assets, mortgage loans, and loans and/or
grants from government agencies. The Company's current ratio at March, 31, 1998
was approximately one to one and one-half.


                                       5


<PAGE>



<TABLE>
<CAPTION>
                                             B. CAPITALIZATION AND SHAREHOLDERS' EQUITY

                                                      MID-STATE RACEWAY, INC.

                                                           BALANCE SHEET

                                                MARCH 31, 1998 AND DECEMBER 31, 1997


                                                              MARCH 31,   DECEMBER 31,
                          ASSETS                                 1998         1997
                                                             -----------  ------------
<S>                                                          <C>           <C>      
CURRENT ASSETS                      
  Cash                                                       $   619,907   $   195,997
  Cash restricted for uncashed winning tickets                     9,383        62,210
  Accounts receivable, net of allowance for doubtful
    accounts of $7,000 in 1998 and 1997                          116,428       187,016
  Prepaid insurance, taxes and other expenses                     92,176        21,740
                                                             -----------   -----------
           Total current assets                                  837,894       466,963

PROPERTY, PLANT AND EQUIPMENT
  Land, racing plant and equipment                            12,565,662    12,555,965
  Other Properties                                               121,671       121,672
                                                             -----------   -----------
                                                              12,687,333    12,677,637
  Less accumulated depreciation                               10,866,813    10,820,080
                                                             -----------   -----------
                                                               1,820,520     1,857,557

OTHER ASSETS                                                     105,903       105,903


                                                             $ 2,764,317   $ 2,430,423
                                                             ===========   ===========

           LIABILITIES AND SHAREHOLDERS' EQUITY              

CURRENT LIABILITIES
  Accounts payable and accrued expenses                      $ 1,106,767   $ 1,028,297
  Current deferred retirement expense                            107,565       107,565
  Uncashed winning tickets                                         9,383        62,210
                                                             -----------   -----------
           Total current liabilities                           1,223,715     1,198,072

DEFERRED RETIREMENT BENEFITS                                     906,296       906,296
                                                             -----------   -----------

SHAREHOLDER'S EQUITY
  Common stock, par value $0.10 per share, authorized
  10,000,000 shares; issued and outstanding 250,386 shares        25,039        25,039
  Additional paid-in-capital                                     225,347       225,347
  Retained earnings                                              383,920        75,669
                                                             -----------   -----------
  Total shareholder' equity                                      634,306       326,055
                                                             -----------   -----------

                                                             $ 2,764,317   $ 2,430,423
                                                             ===========   ===========
</TABLE>


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<PAGE>



                          PART II - OTHER INFORMATION


Item 1 through 5 - Not applicable


Item 6 - Exhibits and Reports on Form 8-K

Reports on Form 8-K - There were no reports on Form 8-K filed for the three
months ended March 31, 1998.






                                   SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                   MID-STATE RACEWAY, INC.



Date:     05/20/98                 /s/  JUSTICE M. CHENEY
          --------                 -----------------------------------
                                   Justice M. Cheney, 
                                   President and Chief Executive Officer




Date:     05/20/98                 /s/  JAMES R. WISE
                                   -----------------------------------
                                   James R. Wise, Treasurer & Principal
                                   Financial and Accounting Officer


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