<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

[X]  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
     OF 1934

     For the Quarterly period ended June 30, 2001

                                       OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

     For the transition period from _______________ to _________________

          Commission File No. 0-1607


                             MID-STATE RACEWAY, INC.
--------------------------------------------------------------------------------
      (Exact name of Registrants as specified in their respective charters)


           New York                                    15-0555258
--------------------------------           ---------------------------------
(State or Other Jurisdiction of            (IRS Employer Identification No.)
Incorporation or Organization)


     PO Box 860, Vernon, New York                        13476
----------------------------------------             --------------
(Address of Principal Executive Offices)               (Zip Code)

       Registrant's Telephone Number, Including Area Code: (315) 829-2201
                                                           --------------

     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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

[ ] YES        [X] NO

     Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

[ ] YES        [X] NO

     Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:

         Class                                   Outstanding June 30, 2001
         -----                                   -------------------------
common stock, $0.10 par value                          442,766 shares


<PAGE>

TABLE OF CONTENTS

                                                                           PAGE

PART I.        FINANCIAL INFORMATION

Item 1.   Financial Statements

          Consolidated Balance Sheets
          -June 30, 2001 and December 31, 2000...............................3

          Consolidated Statements of Operations
          -Three months ended June 30, 2001 and June 30, 2000
          -Six months ended June 30, 2001 and June 30, 2000..................5

          Consolidated Statements of Cash Flows
          -Six months ended June 30, 2001 and June 30, 2000..................6

          Notes to Consolidated Financial Statements.........................7

Item 2.   Management's Discussion and Analysis of the Financial
             Condition and Results of Operations.............................8

Item 3.   Quantitative and Qualitative Disclosures About Market Risk........10

Item 4.   Controls and Procedures...........................................10


PART II.       OTHER INFORMATION

Item 1.   Legal Proceedings.................................................10

Item 2.   Changes in Securities and Use of Proceeds.........................11

Item 3.   Defaults Upon Senior Securities...................................11

Item 4.   Submission of Matters to a Vote of Security Holders...............11

Item 5.   Other Information.................................................11

Item 6.   Exhibits and Reports on Form 8-K..................................11

Signatures
Certifications


                                       2
<PAGE>

PART I.  FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS

MID-STATE RACEWAY, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEET
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                            (UNAUDITED)
                                                              JUNE 30,          DECEMBER 31,
                  ASSETS                                       2001                2000
                                                            -----------         -----------
<S>                                                         <C>                 <C>
CURRENT ASSETS
   Cash and cash equivalents                                $   577,434         $   146,180
   Restricted cash                                              201,906             127,568
   Other receivables, net of allowance for doubtful
      accounts of $10,000 in 2001 and 2000                      470,364             311,372
   Investments                                                   37,100             501,475
   Other current assets                                         192,550             164,429
                                                            -----------         -----------

             Total current assets                             1,479,354           1,251,024

PROPERTY, PLANT AND EQUIPMENT
   Land, racing plant and equipment                          17,279,348          17,162,848
   Other Properties                                             121,671             121,671
                                                            -----------         -----------

                                                             17,401,019          17,284,519
   Less accumulated depreciation                             11,711,150          11,551,072
                                                            -----------         -----------

                                                              5,689,869           5,733,447

OTHER ASSETS                                                      2,307               8,904
                                                            -----------         -----------

                                                            $ 7,171,530         $ 6,993,375
                                                            ===========         ===========
</TABLE>

            See notes to unaudited consolidated financial statements


                                       3
<PAGE>


MID-STATE RACEWAY, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEET
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                              (UNAUDITED)
                                                                JUNE 30,           DECEMBER 31,
           LIABILITIES AND SHAREHOLDERS' EQUITY                   2001                 2000
                                                              -----------          -----------
<S>                                                           <C>                  <C>
CURRENT LIABILITIES
   Lines of credit                                            $   352,511          $   347,333
   Current portion of long term debt                            5,018,721            1,963,622
   Accounts payable and accrued expenses                        1,670,632            1,636,262
   Uncashed winning tickets                                        10,898               56,336
   Deposits and other current liabilities                          65,537               26,585
   Retention for capital improvements                              58,231               39,892
   Deferred grant revenue                                         240,000                   --
                                                              -----------          -----------

             Total current liabilities                          7,416,530            4,070,030

LONG TERM DEBT, NET OF CURRENT PORTION                            365,926            2,847,000

SHAREHOLDERS' EQUITY (DEFICIT)

   Common stock, par value $.10 per share; authorized
    10,000,000 shares; issued and outstanding
    442,766 in 2001 and 2000                                       44,277               44,277
   Additional paid-in-capital                                   2,084,909            2,084,909
   Accumulated deficit                                         (2,765,632)          (2,061,867)
   Accumulated other comprehensive income                          25,520                9,026
                                                              -----------          -----------

             Total shareholders' equity (deficit)                (610,926)              76,345
                                                              -----------          -----------

                                                              $ 7,171,530          $ 6,993,375
                                                              ===========          ===========
</TABLE>

            See notes to unaudited consolidated financial statements


                                       4
<PAGE>

MID-STATE RACEWAY, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                         Three Months Ended                Six Months Ended
                                                 June 30, 2001     June 30, 2000    June 30, 2001      June 30, 2000
                                                  27 Racing          23 Racing        27 Racing          23 Racing
                                                     Days              Days              Days               Days
                                                --------------     -------------    --------------     -------------
                                                         (Unaudited)                          (Unaudited)

<S>                                               <C>               <C>               <C>               <C>
Operating Revenues                                $ 2,217,027       $ 2,109,783       $ 3,867,417       $ 3,111,365

Operating Expenses                                  2,738,118         2,436,159         4,362,456         3,315,005
                                                  -----------       -----------       -----------       -----------

Income (loss) from operations                        (521,091)         (326,376)         (495,039)         (203,640)
                                                  -----------       -----------       -----------       -----------

Other income (loss):
   Special events income                                   --                --            70,206                --
   Settlement of lawsuits                                  --            22,753                --            22,753
   Aid from state and local governments                   550            36,249               550            36,249
   Investment income                                    1,182            14,947             2,093            35,426
   Interest expense                                  (155,016)          (43,453)         (278,819)          (85,734)
                                                  -----------       -----------       -----------       -----------
      Total other income (loss)                      (153,284)           30,496          (205,970)            8,694
                                                  -----------       -----------       -----------       -----------

Income (loss) before provision for taxes on
   income and extraordinary item                     (674,375)         (295,880)         (701,009)         (194,946)
                                                  -----------       -----------       -----------       -----------

Provision for taxes on income:
   Currently payable                                       --                --            (2,756)               --
   Deferred benefit                                        --                --                --           376,800
                                                  -----------       -----------       -----------       -----------
                                                           --                --            (2,756)          376,800
                                                  -----------       -----------       -----------       -----------

Income (loss) before extraordinary item              (674,375)         (295,880)         (703,765)          181,854

Extraordinary item - Gain on extinguishment
   of deferred retirement benefit liability,
   net of deferred income taxes                            --                --                --           593,261
                                                  -----------       -----------       -----------       -----------

Net income (loss)                                 $  (674,375)      $  (295,880)      $  (703,765)      $   775,115
                                                  ===========       ===========       ===========       ===========


Income (loss) per common share - basic
and diluted:
   Income (loss) before extraordinary item        $     (1.52)      $     (0.67)      $     (1.59)      $     (0.41)
                                                  ===========       ===========       ===========       ===========
   Extraordinary item                                      --                --                --       $      1.34
                                                  ===========       ===========       ===========       ===========
   Net income (loss)                              $     (1.52)      $     (0.67)      $     (1.59)      $      1.75
                                                  ===========       ===========       ===========       ===========

Cash dividend per share                           $        --       $        --       $        --       $        --
                                                  ===========       ===========       ===========       ===========
</TABLE>

            See notes to unaudited consolidated financial statements

                                       5
<PAGE>


MID-STATE RACEWAY, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                     SIX MONTHS ENDED
                                                                   JUNE 30,        JUNE 30,
                                                                    2001             2000
                                                                  ---------       -----------
                                                                         (Unaudited)
<S>                                                               <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

   Net income (loss)                                              $(703,765)      $   775,115

   Adjustments to reconcile net loss to net cash used
      in operating activities:
      Settlement of lawsuits                                             --          (991,961)
      Depreciation                                                  160,078            86,430
      Change in allowance for doubtful accounts                          --           (87,000)
      Realized and unrealized (gain) loss on investments              4,777                --
      Imputed interest expense                                      123,295                --
   Changes in:
      Restricted cash                                               (74,338)           24,930
      Accounts and grants receivable                               (158,992)          103,689
      Other current assets                                          (28,121)         (151,371)
      Other assets                                                    6,597           (36,511)
      Accounts payable                                               34,370           287,807
      Real estate taxes payable                                          --            88,000
      Uncashed winning tickets and other current liabilities         (6,486)          (53,732)
      Deferred revenue                                              240,000                --
      Retention for capital improvements                             18,339           (78,679)

                                                                  ---------       -----------
         Net cash used in operating activities                     (384,246)          (33,283)
                                                                  ---------       -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Proceeds from maturities and sales of available-for-sale
      investment securities                                         476,092                --
   Purchase of available-for-sale investment securities                  --          (349,081)
   Purchase of properties and equipment                            (116,500)         (717,995)
   Purchase of hotel, net of Trustee claim                               --           (25,399)

                                                                  ---------       -----------
      Net cash used in investing activities                         359,592        (1,092,475)
                                                                  ---------       -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from debt                                               508,472           125,385
   Principal payments on capital leases                             (52,564)               --

                                                                  ---------       -----------
      Net cash provided by financing activities                     455,908           125,385
                                                                  ---------       -----------

Net increase (decrease) in cash and cash equivalents                431,254        (1,000,373)

Cash and cash equivalents at beginning of period                    146,180         1,113,529
                                                                  ---------       -----------

Cash and cash equivalents at end of period                        $ 577,434       $   113,156
                                                                  =========       ===========
</TABLE>

            See notes to unaudited consolidated financial statements

                                       6
<PAGE>

MID-STATE RACEWAY, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------

1. BASIS OF PRESENTATION

The accompanying consolidated financial statements of Mid-State Raceway, Inc.
and Subsidiary (the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by accounting
principles generally accepted in the United States of America for complete
financial statements. The balance sheet as of December 31, 2000 has been derived
from the audited balance sheet included in the Company's annual report filed on
Form 10-K. In the opinion of management, quarterly results include all
adjustments (consisting of only normal recurring adjustments) that the Company
considers necessary for a fair presentation of such information for interim
periods. Results shown for the latest interim period are not necessarily
indicative of the results to be obtained for a full fiscal year.

The unaudited financial statements include the accounts of the Company and its
subsidiary. These financial statements have not been reviewed by independent
accountants as required. Upon completion of a review, an amendment to this Form
10Q will be filed if necessary. All material intercompany transactions and
balances have been eliminated in consolidation.

2. COMPREHENSIVE INCOME

The components of comprehensive income (loss) were as follows:

<TABLE>
<CAPTION>
                                                     Six Months ended
                                               June 30, 2001   June 30, 2000
                                               -------------   -------------
<S>                                              <C>             <C>
Net Income (loss)                                $(703,765)      $ 544,395
Other comprehensive income (loss):
Unrealized gain (loss) on securities
   available for sale, net of tax effect of
   $10,996 in 2001 and $16,213 in 2000              16,494         (24,320)
                                                 ---------       ---------

Comprehensive income (loss)                      $(687,271)      $ 520,075
                                                 =========       =========
</TABLE>


3. REAL ESTATE TAXES PAYABLE

Amounts recorded for real estate taxes at December 31, 2000 were not paid in
2001 and became delinquent. Certain of these amounts were repaid in 2002 and the
remaining amounts will be paid in monthly instalments of $10,000 per month from
March 2003 to December 2003 and $16,974 per month from January 2004 to December
2005 pursuant to an agreement with the County of Oneida.


                                       7
<PAGE>

MID-STATE RACEWAY, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------

4.   LINE OF CREDIT

The revolving line of credit in the amount of $351,000 was terminated in October
2001 and fully repaid in January 2002.

5.   LONG-TERM DEBT

During 2001 the Company was in default on certain long-term debt due to
non-payment of interest and/or principal. In March 2002 substantially all of the
Company's long-term debt was refinanced through a $8,500,000 mortgage loan
agreement with ALL Capital, LLC (an unaffiliated company). The refinancing
included repayment of a $700,000 line of credit agreement which was initiated in
2001.

6.   PURCHASE OPTION AGREEMENT

In September 2001 the Board of Director's authorized its President and Chief
Executive Officer to execute an exclusive option agreement for the sale of the
Company to a group of private purchasers. Consistent with the execution of the
option agreement the purchasers provided a $700,000 line of credit previously
discussed. In June 2002 management notified the group of purchasers that option
agreement had been terminated. As a result of the termination the Company may be
required to pay $130,000 to the group.

7.   DELINQUENT SECURITIES AND EXCHANGE COMMISSION (SEC) FILINGS

The Company is delinquent in filing a number of periodic reports, including
annual and quarterly financial information, required to be filed with the SEC.
The consequences of the Company's failure to file these reports and the actions,
if any, that the SEC might initiate against the Company in this connection, are
not presently determinable.

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

                              RESULTS OF OPERATIONS

OPERATING REVENUES

During the quarter ended June 30, 2001 operating revenue increased by $107,244
or 5% when compared to the quarter ended June 30, 2000 and by $756,052 or 24%
for the six months ended June 30, 2001 compared to the six months ended June 30,
2000. This increase in revenue results from an increase in number of racing days
in the quarter and six month period ended June 30, 2001 compared to June 30,
2000 (27 days versus 23 days) which increased wagering. In addition, the hotel
was acquired in June 2000 and the three and six months ended June 30, 2001
include revenue from room rentals and food and beverage concessions for the
entire period in 2001.


                                       8
<PAGE>

OPERATING EXPENSES

Operating expenses increased by $301,959 or 12% for the quarter ended June 30,
2001 when compared to the quarter ended June 30, 2000. For the six months ended
June 30, 2001, expenses increased by $1,047,451 or 32% when compared to the six
months ended June 30, 2000. These increases are mainly due to increases in
payroll and benefits, simulcast expenses, utilities, and food and beverage costs
due to the increased operating revenue discussed above.

INTEREST EXPENSE

Increase in interest expense of $111,563 in the quarter ended June 30, 2001
compared to the quarter ended June 30, 2000 and $193,085 in the six months ended
June 30, 2001 compared to the six months ended June 30, 2000 is due to the
increase in the amount of long-term debt in the prior twelve months to provide
funds for operations.

INCOME TAXES

Income tax expense was not significant in the quarter or six months ended June
30, 2001 due to the loss incurred from operations. Income tax expense of
$376,092 for the six months ended June 30, 2000 represents the tax effect of the
extraordinary gain on the extinguishment of the deferred retirement benefit
liability recognized in 2000.

NET INCOME (LOSS)

The net loss for the quarter ended June 30, 2001 was $378,495 higher than the
net loss in the quarter ended June 30, 2000. The loss for the six months ended
June 30, 2001 was $703,765 compared to income of $775,115 for the six months
ended June 30, 2000. This is the result of the extraordinary gain of $970,061
recognized in 2000 for the extinguishment of the deferred retirement liability
as well as increased interest expense in 2001. The increased operating revenues
in 2001 were offset by increased expenses and did not provide substantial
increases in profitability in 2001.

                         LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2001 the Company had $577,434 of cash and cash equivalents versus
$146,180 at December 31, 2000. Operating losses for the six months ended June
30, 2001 were funded by sales of investments in the amount of $476,092, and debt
proceeds. Remaining investments at fair market value are $37,100 at June 30,
2001.

Proceeds from debt were $508,472 for the six months ended June 30, 2001
increasing cash and cash equivalents by $431,254 for the six-month period.
Increase in current portion of long-term debt from December 31, 2000 is due to
$2,816,000 due to a third party bankruptcy trustee for the purchase of the
hotel. This amount was due February 2002 but repaid in March 2002 per
refinancing discussed in the notes to the financial statements.


                                       9
<PAGE>

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There were no material changes in the Company's market risk or related
strategies during the quarter ended June 30, 2001.

ITEM 4.  CONTROLS AND PROCEDURES

(a)  Disclosure Controls and Procedures.

Within the 90 days before the date of this Form 10-Q, we evaluated the
effectiveness of the design and operation of our "disclosure controls and
procedures." Mid-State Raceway, Inc. and Subsidiary conducted this evaluation
under the supervision and with the participation of management, including our
Chief Executive Officer and Principal Financial and Accounting Officer.

(i) Definition of Disclosure Controls and Procedures.

Disclosure controls and procedures are controls and other procedures that are
designed with the objective of ensuring that information required to be
disclosed in our periodic reports filed under the Exchange Act, such as this
report, is recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms. As defined by the SEC, such disclosure
controls and procedures are also designed with the objective of ensuring that
such information is accumulated and communicated to our management, including
the Chief Executive Officer and Principal Financial and Accounting Officer, in
such a manner as to allow timely disclosure decisions.

(ii) Limitations on the Effectiveness of Disclosure Controls and Procedures and
Internal Controls.

The Company recognizes that a system of disclosure controls and procedures (as
well as a system of internal controls), no matter how well conceived and
operated, cannot provide absolute assurance that the objectives of the system
are met. Further, the design of such a system must reflect the fact that there
are resource constraints, and the benefits of controls must be considered
relative to their costs. Because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance that all
control issues have been detected. These inherent limitations include the
realities that judgments in decision-making can be faulty, and that breakdowns
can occur because of simple error or mistake. Additionally, controls can be
circumvented in a number of ways. Because of the inherent limitations in a
cost-effective control system, system failures may occur and not be detected.

(iii) Conclusions with Respect to Our Evaluation of Disclosure Controls and
Procedures.

Subject to the limitations described above, our Chief Executive Officer and
Principal Financial and Accounting Officer have concluded that our disclosure
controls and procedures are effective in timely alerting them to material
information relating to Mid-State Raceway, Inc. and subsidiary required to be
included in The Company's periodic SEC filings.

(b) Changes in Internal Controls.

There have been no significant changes in The Company's internal controls or in
other factors that could significantly affect these controls subsequent to the
date of their evaluation.

PART II.   OTHER INFORMATION

  ITEM 1.  LEGAL PROCEEDINGS

There were no material changes to any legal proceedings during the quarter ended
June 30, 2001.


                                       10
<PAGE>

     ITEM 2.   CHANGES IN SECURITIES AND USE OF PROCEEDS

None.

     ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

See Note 5 of Notes to Consolidated Financial Statements.

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

None.

      ITEM 5.  OTHER INFORMATION

None.

     ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

Exhibit 31.1 Certification of Chief Executive Officer
Exhibit 31.2 Certification of Principal Financial and Accounting Officer
Exhibit 32.1 Sarbanes-Oxley Chief Executive Officer
Exhibit 32.2 Sarbanes-Oxley Principal Financial and Accounting Officer


                                       11
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities and
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: JANUARY 10, 2004                  BY: /S/ DAVID E. WILSON
                                           -----------------------------------
                                                David E. Wilson
                                                Chief Operating Officer

                                        BY: /S/ ROSE FRAWERT
                                           -----------------------------------
                                                Rose Frawert
                                                Principal Financial and
                                                Accounting Officer

                                       12