Magna Entertainment Corp. announces results for the third quarter ended September 30, 2007



    AURORA, ON, Nov. 1 /CNW/ - Magna Entertainment Corp. ("MEC") (NASDAQ:  
MECA; TSX: MEC.A) today reported its financial results for the third quarter
ended September 30, 2007.

    
                                 Three months ended      Nine months ended
                                    September 30,           September 30,
                              -----------------------------------------------
                                  2007        2006        2007        2006
    -------------------------------------------------------------------------
                                                 (unaudited)

    Revenues(i)               $  114,532  $  112,028  $  601,769  $  569,270

    Earnings (loss) before
     interest, taxes,
     depreciation and
     amortization
     ("EBITDA")(i)            $  (26,053) $  (21,043) $    1,622  $    5,252

    Net loss
      Continuing operations   $  (49,811) $  (47,709) $  (70,779) $  (72,692)
      Discontinued
       operations(ii)                  -      (3,033)          -      (2,176)
    -------------------------------------------------------------------------
    Net loss                  $  (49,811) $  (50,742) $  (70,779) $  (74,868)
    -------------------------------------------------------------------------

    Diluted loss per share
      Continuing operations   $    (0.46) $    (0.44) $    (0.66) $    (0.68)
      Discontinued
       operations(ii)                  -       (0.03)          -       (0.02)
    -------------------------------------------------------------------------
    Total diluted loss per
     share                    $    (0.46) $    (0.47) $    (0.66) $    (0.70)
    -------------------------------------------------------------------------

    (i)   Revenues and EBITDA for all periods presented are from continuing
          operations only.
    (ii)  Discontinued operations for 2006 include the Fontana Golf Club, the
          sale of which was completed on November 1, 2006, the Magna Golf
          Club, the sale of which was completed on August 25, 2006, and the
          operations of a restaurant and related real estate in the United
          States, the sale of which was completed on May 26, 2006.

           All amounts are reported in U.S. dollars in thousands,
                          except per share figures.
    -------------------------------------------------------------------------
    

    Frank Stronach, MEC's Chairman and Interim Chief Executive Officer,
commented: "While we are very disappointed with our results this quarter, we
are making progress on the debt elimination plan that we announced in
mid-September. We have listed four of our properties for sale with real estate
brokers and engaged a U.S. investment bank to assist in soliciting potential
purchasers and managing the sales process for certain of our assets and to
help us evaluate partnership, joint venture and strategic investment
opportunities. We remain firmly committed to implementing the debt elimination
plan on a timely basis."

    Blake Tohana, MEC's Executive Vice-President and Chief Financial Officer,
remarked: "Although we are moving forward with our Corporate cost reduction
initiatives and have seen some improvement at our PariMax operations,
including XpressBet(R) and HRTV(TM), our financial results continue to be
weak. We recognize that we must significantly improve Gulfstream Park's poor
slots performance and we recently hired Steve Calabro, a gaming executive with
more than 25 years industry experience, as MEC's Vice-President of Gaming
Operations. Steve has already identified multiple improvement opportunities
for Gulfstream Park's slots operation, including implementing a more effective
and targeted marketing approach, changing out game types and denominations and
creating a dedicated video poker area. We are also continuing to implement
various profit improvement initiatives for Gulfstream Park's upcoming 2008
race meet."

    Our racetracks operate for prescribed periods each year. As a result, our
racing revenues and operating results for any quarter will not be indicative
of our racing revenues and operating results for the year.

    Revenues were $114.5 million for the three months ended September 30,
2007, an increase of $2.5 million or 2.2% compared to $112.0 million for the
three months ended September 30, 2006. The increased revenues were primarily
due to:

    
    -   Florida revenues above the prior year period by $10.9 million
        primarily due to the Gulfstream Park casino facility, which generated
        $9.0 million of gaming revenues in the third quarter of 2007;

    -   PariMax revenues above the prior year period by $4.5 million as a
        result of a full period of results of AmTote in 2007, as we completed
        the acquisition of the remaining 70% equity interest in AmTote in
        July 2006;

    -   Southern U.S. operations above the prior year period by $2.1 million
        primarily due to five additional live race days at Lone Star Park in
        the third quarter of 2007 compared to the third quarter of 2006 as
        race days cancelled due to weather in June 2007 were made up
        during the third quarter of 2007;

    -   Real estate and other operations above the prior year period by
        $2.0 million due to increased sales of housing units at our European
        residential development;

    -   California revenues below the prior year period by $13.1 million due
        to a change in the racing calendar at Golden Gate Fields, which
        resulted in 29 fewer live race days compared to the prior year
        period; and

    -   Northern U.S. operations below the prior year period by $2.3 million
        primarily due to a planned reduction of 19 live race days at The
        Meadows as the grandstand was demolished to accommodate a new
        grandstand/casino reconstruction project by Millennium-Oaktree, as
        well as fewer live race days, lower handle and decreased attendance
        at Thistledown.
    

    Revenues were $601.8 million for the nine months ended September 30,
2007, an increase of $32.5 million or 5.7% compared to $569.3 million for the
nine months ended September 30, 2006. The increased revenues were primarily
due to some of the same factors noted above for the three months ended
September 30, 2007, including a $30.8 million increase in Florida revenues and
a $25.9 million increase in PariMax revenues, partially offset by a
$14.5 million decrease in California revenues and a $5.4 million decrease in
revenues at our Northern U.S. operations. A 15.2% increase in North American
wagering handle at XpressBet(R) also contributed to the increase in PariMax
revenues.

    EBITDA loss of $26.1 million for the three months ended September 30,
2007 increased $5.0 million or 23.8% from a loss of $21.0 million in the three
months ended September 30, 2006 and was impacted by the following:

    
    -   PariMax operations above the prior year period by $3.2 million as a
        result of improved performance at XpressBet(R), reduced losses at
        HRTV(TM) with the formation of the joint venture with Churchill Downs
        Incorporated in April 2007, and a full period of results of AmTote;

    -   Predevelopment, pre-opening and other costs decreased from the prior
        year period by $3.9 million primarily due to lower spending on
        alternative gaming initiatives and costs incurred in the prior year
        period relating to certain financing initiatives;

    -   Florida operations below the prior year period by $4.2 million as
        increased gaming revenues at Gulfstream Park were more than offset by
        higher marketing and operating costs for the new casino facility;

    -   California operations below the prior year period by $4.0 million due
        to a change in the racing calendar at Golden Gate Fields, which
        resulted in 29 fewer live race days compared to the prior year
        period, and decreased stabling and vanning reimbursements at Santa
        Anita Park and Golden Gate Fields as the backsides were closed during
        the third quarter of 2007 for the synthetic track installation at
        both of these racetracks;

    -   Corporate and other below the prior year period by $2.3 million due
        to employee termination payments of $3.8 million paid to the former
        owners of The Maryland Jockey Club, partially offset by cost
        reduction initiatives; and

    -   Non-cash write-down of long-lived assets of $1.4 million in the third
        quarter of 2007 relating to our Porter, New York real estate
        property, which has been classified as an asset held for sale.
    

    EBITDA of $1.6 million for the nine months ended September 30, 2007
decreased $3.6 million or 69.1% from $5.3 million in the nine months ended
September 30, 2006. EBITDA for the nine months ended September 30, 2007 was
negatively impacted for the same factors noted above which affected EBITDA for
the third quarter of 2007, except that for the nine months ended September 30,
2007, our European operations EBITDA was above the prior year period by
$2.7 million primarily due to cost reduction efforts at Magna Racino(TM) and
our Corporate and other EBITDA was above the prior year period by $0.8 million
as higher employee severance and termination costs incurred during the nine
months ended September 30, 2007 were more than offset by other cost
reductions.

    Net loss from continuing operations of $49.8 million for the three months
ended September 30, 2007 increased $2.1 million or 4.4% from a net loss from
continuing operations of $47.7 million in the three months ended September 30,
2006. The increase in net loss from continuing operations is due to EBITDA
decreases as noted above, partially offset by lower net interest expense
attributable to the repayment of a previous bridge loan facility with our
parent in November 2006, reduced borrowings under our $40.0 million senior
secured revolving credit facility and repayment of other debt over the past
year from the proceeds of various asset sales, partially offset by increased
borrowings on our Gulfstream Park project financing arrangements with our
parent company. Net loss from continuing operations of $70.8 million for the
nine months ended September 30, 2007 decreased $1.9 million or 2.6% from a net
loss from continuing operations of $72.7 million in the nine months ended
September 30, 2006 for the same reasons as previously noted for the three
months ended September 30, 2007.

    During the three months ended September 30, 2007, cash used for
operations was $33.8 million, which increased $9.5 million from cash used for
operations of $24.3 million in the third quarter of 2006, primarily due to the
increase in net loss from continuing operations and decreases in items not
involving current cash flows and changes in non-cash working capital balances
in 2007 relative to the prior year period. Cash used for investing activities
during the three months ended September 30, 2007 was $18.6 million, which
included $2.7 million of proceeds on the sale of real estate and fixed assets,
partially offset by real estate property and fixed asset additions of
$20.6 million and other asset additions of $0.7 million. Cash provided from
financing activities during the three months ended September 30, 2007 of
$31.3 million includes proceeds from bank indebtedness of $25.2 million and
net borrowings of $8.1 million from our parent company, partially offset by
net repayments of $2.0 million of long-term debt.

    We will hold a conference call to discuss our third quarter results on
Friday November 2, 2007 at 10:00 a.m. EST. The number to use for this call is
1-800-926-4402. Please call 10 minutes prior to the start of the conference
call. The dial-in number for overseas callers is 212-231-2900. We will also
web cast the conference call at www.magnaentertainment.com. If you have any
teleconferencing questions, please call Karen Richardson at 905-726-7465.

    MEC, North America's largest owner and operator of horse racetracks,
based on revenue, acquires, develops, owns and operates horse racetracks and
related pari-mutuel wagering operations, including off-track betting
facilities. MEC also develops, owns and operates casinos in conjunction with
its racetracks where permitted by law. MEC owns and operates AmTote
International, Inc., a provider of totalisator services to the pari-mutuel
industry, XpressBet(R), a national Internet and telephone account wagering
system, as well as MagnaBet(TM) internationally. Pursuant to joint ventures,
MEC has a fifty percent interest in HorseRacing TV(TM), a 24-hour horse racing
television network and TrackNet Media Group, LLC, a content management company
formed for distribution of the full breadth of MEC's horse racing content.

    This press release contains "forward-looking statements" within the
meaning of applicable securities legislation, including Section 27A of the
United States Securities Act of 1933, as amended (the "Securities Act"), and
Section 21E of the United States Securities Exchange Act of 1934, as amended
(the "Exchange Act") and forward-looking information as defined in the
Securities Act (Ontario) (collectively referred to as forward-looking
statements). These forward-looking statements are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995 and
the Securities Act (Ontario) and include, among others, statements regarding:
the potential impact of the September 2007 adopted debt elimination plan on
our debt reduction efforts, as to which there can be no assurance of success;
expectations as to our ability to complete asset sales at the appropriate
prices and in a timely manner; the impact of the new bridge loan facility;
expectations as to our ability to administer the new bridge loan facility;
strategies and plans; expectations as to financing and liquidity requirements
and arrangements; expectations as to operational improvements; expectations as
to cost savings, revenue growth and earnings; the time by which certain
redevelopment projects, transactions or other objectives will be achieved;
estimates of costs relating to environmental remediation and restoration;
proposed new racetracks or other developments, products and services;
expectations as to the timing and receipt of government approvals and
regulatory changes in gaming and other racing laws and regulations;
expectations that claims, lawsuits, environmental costs, commitments,
contingent liabilities, labor negotiations or agreements, or other matters
will not have a material adverse effect on our consolidated financial
position, operating results, prospects or liquidity; projections, predictions,
expectations, estimates, beliefs or forecasts as to our financial and
operating results and future economic performance; and other matters that are
not historical facts.

    Forward-looking statements should not be read as guarantees of future
performance or results, and will not necessarily be accurate indications of
whether or the times at or by which such performance or results will be
achieved. Undue reliance should not be placed on such statements.
Forward-looking statements are based on information available at the time
and/or management's good faith assumptions and analyses made in light of our
perception of historical trends, current conditions and expected future
developments, as well as other factors we believe are appropriate in the
circumstances and are subject to known and unknown risks, uncertainties and
other unpredictable factors, many of which are beyond the Company's control,
that could cause actual events or results to differ materially from such
forward-looking statements. Important factors that could cause actual results
to differ materially from our forward-looking statements include, but may not
be limited to, material adverse changes: in general economic conditions, the
popularity of racing and other gaming activities as recreational activities,
the regulatory environment affecting the horse racing and gaming industries;
our ability to obtain or maintain government and other regulatory approvals
necessary or desirable to proceed with proposed real estate developments;
increased regulation affecting certain of our non-racetrack operations, such
as broadcasting ventures; and our ability to develop, execute or finance our
strategies and plans within expected timelines or budgets. In drawing
conclusions set out in our forward-looking statements above, we have assumed,
among other things, that there will not be any material adverse changes: in
general economic conditions, the popularity of horse racing and other gaming
activities, the regulatory environment, and our ability to develop, execute or
finance our strategies and plans as anticipated.

    Forward-looking statements speak only as of the date the statements were
made. We assume no obligation to update forward-looking statements to reflect
actual results, changes in assumptions or changes in other factors affecting
forward-looking statements. If we update one or more forward-looking
statements, no inference should be drawn that we will make additional updates
with respect thereto or with respect to other forward-looking statements.



    
    MAGNA ENTERTAINMENT CORP.
    CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
    -------------------------------------------------------------------------
    (Unaudited)
    (U.S. dollars in thousands, except per share figures)

                                 Three months ended      Nine months ended
                                    September 30,           September 30,
                              -----------------------------------------------
                                  2007        2006        2007        2006
    -------------------------------------------------------------------------
                                           (restated               (restated
                                            -note 8)                -note 8)
    Revenues
    Racing and gaming
      Pari-mutuel wagering    $   58,272  $   70,761  $  401,565  $  425,801
      Gaming                      22,525      13,565      73,723      43,054
      Non-wagering                31,040      26,985     120,895      96,673
    -------------------------------------------------------------------------
                                 111,837     111,311     596,183     565,528
    Real estate and other          2,695         717       5,586       3,742
    -------------------------------------------------------------------------
                                 114,532     112,028     601,769     569,270
    -------------------------------------------------------------------------

    Costs and expenses
    Racing and gaming
      Pari-mutuel purses,
       awards and other           32,938      43,045     243,259     265,674
      Gaming taxes, purses
       and other                  12,756       6,532      42,741      20,898
      Operating costs             71,065      60,883     249,649     215,385
      General and
       administrative             19,559      18,020      55,578      52,249
    -------------------------------------------------------------------------
                                 136,318     128,480     591,227     554,206
    -------------------------------------------------------------------------
    Real estate and other
      Operating costs (recovery)   1,185        (177)      2,915       2,136
      General and administrative     152           9         561          33
    -------------------------------------------------------------------------
                                   1,337        (168)      3,476       2,169
    -------------------------------------------------------------------------
    Predevelopment, pre-opening
     and other costs                 451       4,324       1,869       7,418
    Depreciation and
     amortization                 11,848      11,252      33,061      31,251
    Interest expense, net         12,680      16,277      37,348      45,141
    Write-down of long-lived
     assets                        1,444           -       1,444           -
    Equity loss                    1,035         435       2,131         225
    -------------------------------------------------------------------------
                                 165,113     160,600     670,556     640,410
    -------------------------------------------------------------------------
    Loss from continuing
     operations before income
     taxes                       (50,581)    (48,572)    (68,787)    (71,140)
    Income tax expense (benefit)    (770)       (863)      1,992       1,552
    -------------------------------------------------------------------------
    Loss from continuing
     operations                  (49,811)    (47,709)    (70,779)    (72,692)
    Loss from discontinued
     operations                        -      (3,033)          -      (2,176)
    -------------------------------------------------------------------------
    Net loss                     (49,811)    (50,742)    (70,779)    (74,868)
    Other comprehensive
     income (loss)
      Foreign currency
       translation adjustment      2,112        (706)      4,122       6,572
      Change in fair value of
       interest rate swap           (327)       (133)       (423)        (33)
    -------------------------------------------------------------------------
    Comprehensive loss        $  (48,026) $  (51,581) $  (67,080) $  (68,329)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Loss per share for Class A
     Subordinate Voting Stock
     and Class B Stock:
      Basic and Diluted
        Continuing operations $    (0.46) $    (0.44) $    (0.66) $    (0.68)
        Discontinued
         operations                    -       (0.03)          -       (0.02)
    -------------------------------------------------------------------------
    Loss per share            $    (0.46) $    (0.47) $    (0.66) $    (0.70)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Weighted average number of
     shares of Class A
     Subordinate Voting Stock
     and Class B Stock
     outstanding during the
     period (in thousands):
      Basic and Diluted          107,726     107,498     107,669     107,445
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes



    MAGNA ENTERTAINMENT CORP.
    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
    -------------------------------------------------------------------------
    (Unaudited)
    (U.S. dollars in thousands)
                                 Three months ended      Nine months ended
                                    September 30,           September 30,
                              -----------------------------------------------
                                  2007        2006        2007        2006
    -------------------------------------------------------------------------
                                           (restated               (restated
                                            -note 8)                -note 8)
    Cash provided from (used for):

    Operating activities of
     continuing operations
    Net loss from continuing
     operations               $  (49,811) $  (47,709) $  (70,779) $  (72,692)
    Items not involving
     current cash flows           13,030      17,704      34,198      47,867
    -------------------------------------------------------------------------
                                 (36,781)    (30,005)    (36,581)    (24,825)
    Changes in non-cash
     working capital balances      3,021       5,741     (11,614)    (15,431)
    -------------------------------------------------------------------------
                                 (33,760)    (24,264)    (48,195)    (40,256)
    -------------------------------------------------------------------------

    Investing activities of
     continuing operations
    Acquisition of business,
     net of cash acquired              -      (9,347)          -      (9,347)
    Real estate property and
     fixed asset additions       (20,610)    (12,725)    (59,698)    (68,600)
    Other asset disposals
     (additions)                    (692)      1,149      (3,178)        302
    Proceeds on disposal of
     real estate properties
     and fixed assets              2,602         653       5,243       3,478
    Proceeds on real estate
     sold to parent                  100           -      88,009           -
    Proceeds on real estate
     sold to a related party           -           -           -       5,578
    -------------------------------------------------------------------------
                                 (18,600)    (20,270)     30,376     (68,589)
    -------------------------------------------------------------------------

    Financing activities of
     continuing operations
    Proceeds from bank
     indebtedness                 25,199      18,129      40,940      18,129
    Proceeds from indebtedness
     and long-term debt with
     parent                       10,189       6,272      26,518      66,849
    Proceeds from long-term
     debt                            205       6,927       4,345      12,134
    Repayment of bank
     indebtedness                      -           -     (21,515)     (5,500)
    Repayment of long-term
     debt with parent             (2,072)     (1,600)     (6,125)     (3,400)
    Repayment of long-term debt   (2,207)     (2,501)    (51,349)    (12,498)
    -------------------------------------------------------------------------
                                  31,314      27,227      (7,186)     75,714
    -------------------------------------------------------------------------

    Effect of exchange rate
     changes on cash and
     cash equivalents                210        (210)        131        (506)
    -------------------------------------------------------------------------
    Net cash flows used for
     continuing operations       (20,836)    (17,517)    (24,874)    (33,637)
    -------------------------------------------------------------------------

    Cash provided from
     (used for) discontinued
     operations
    Operating activities of
     discontinued operations           -      (6,677)          -      (1,299)
    Investing activities of
     discontinued operations           -      46,056           -      47,435
    Financing activities of
     discontinued operations           -     (26,699)          -     (32,427)
    -------------------------------------------------------------------------
    Net cash flows provided
     from discontinued
     operations                        -      12,680           -      13,709
    -------------------------------------------------------------------------

    Net decrease in cash and
     cash equivalents during
     the period                  (20,836)     (4,837)    (24,874)    (19,928)
    Cash and cash equivalents,
     beginning of period          54,253      35,791      58,291      50,882
    -------------------------------------------------------------------------
    Cash and cash equivalents,
     end of period            $   33,417  $   30,954  $   33,417  $   30,954
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes



    MAGNA ENTERTAINMENT CORP.
    CONSOLIDATED BALANCE SHEETS
    -------------------------------------------------------------------------
    (REFER TO NOTE 1 - GOING CONCERN)
    (Unaudited)
    (U.S. dollars and share amounts in thousands)

                                                  September 30,  December 31,
                                                          2007          2006
                                                  ---------------------------
                                                                   (restated
                                                                    - note 7)
                                   ASSETS
    -------------------------------------------------------------------------
    Current assets:
      Cash and cash equivalents                   $     33,417  $     58,291
      Restricted cash                                   28,603        34,194
      Accounts receivable                               31,656        35,949
      Due from parent                                    5,313         6,648
      Income taxes receivable                              327           580
      Inventories                                        8,866         6,384
      Prepaid expenses and other                         9,837         8,884
      Assets held for sale                              29,150             -
    -------------------------------------------------------------------------
                                                       147,169       150,930
    -------------------------------------------------------------------------
    Real estate properties, net                        807,889       815,766
    Fixed assets, net                                   85,717        93,141
    Racing licenses                                    109,868       109,868
    Other assets, net                                    6,880         4,664
    Future tax assets                                   45,220        42,388
    Assets held for sale                                     -        30,128
    -------------------------------------------------------------------------
                                                  $  1,202,743  $  1,246,885
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                     LIABILITIES AND SHAREHOLDERS' EQUITY
    -------------------------------------------------------------------------
    Current liabilities:
      Bank indebtedness                           $     25,940  $      6,515
      Accounts payable                                  55,839        76,105
      Accrued salaries and wages                         8,366         8,792
      Customer deposits                                  2,468         2,531
      Other accrued liabilities                         52,247        56,228
      Long-term debt due within one year                52,531        85,754
      Due to parent                                    110,086         3,108
      Deferred revenue                                   3,491         6,098
      Liabilities related to assets held for sale        1,047             -
    -------------------------------------------------------------------------
                                                       312,015       245,131
    -------------------------------------------------------------------------
    Long-term debt                                      81,883        93,859
    Long-term debt due to parent                        93,426       177,250
    Convertible subordinated notes                     222,254       221,437
    Other long-term liabilities                         17,180        17,484
    Future tax liabilities                              91,010        90,059
    Liabilities related to assets held for sale              -         1,047
    -------------------------------------------------------------------------
                                                       817,768       846,267
    -------------------------------------------------------------------------

    Shareholders' equity:
    Class A Subordinate Voting Stock
     (Issued: 2007 - 49,260; 2006 - 49,055)            319,833       319,087
    Class B Stock
     (Convertible into Class A Subordinate
     Voting Stock) (Issued: 2007 and 2006 - 58,466)    394,094       394,094
    Contributed surplus                                 91,803        41,718
    Other paid-in-capital                                2,016         1,410
    Accumulated deficit                               (467,077)     (396,298)
    Accumulated comprehensive income                    44,306        40,607
    -------------------------------------------------------------------------
                                                       384,975       400,618
    -------------------------------------------------------------------------
                                                  $  1,202,743  $  1,246,885
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes



    MAGNA ENTERTAINMENT CORP.
    NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
    -------------------------------------------------------------------------
    (Unaudited)
    (all amounts in U.S. dollars unless otherwise noted and all tabular
    amounts in thousands, except per share figures)

    1.  Going Concern

        These interim consolidated financial statements of Magna
        Entertainment Corp. (the "Company") have been prepared on a going
        concern basis, which contemplates the realization of assets and the
        discharge of liabilities in the normal course of business for the
        foreseeable future. The Company has incurred net losses of
        $87.4 million, $105.3 million and $95.6 million for the years ended
        December 31, 2006, 2005 and 2004, respectively, has incurred a net
        loss of $70.8 million for the nine months ended September 30, 2007,
        and has an accumulated deficit of $467.1 million and a working
        capital deficiency of $164.8 million at September 30, 2007.
        Accordingly, the Company's ability to continue as a going concern is
        in substantial doubt and is dependent on the Company generating cash
        flows that are adequate to sustain the operations of the business,
        renew or extend current financing arrangements and meet its
        obligations with respect to secured and unsecured creditors, none of
        which is assured. During the nine months ended September 30, 2007,
        the Company completed asset sale transactions for proceeds totaling
        approximately $89.1 million. On September 12, 2007, the Company's
        Board of Directors approved a debt elimination plan designed to
        eliminate net debt by December 31, 2008 by generating aggregate
        proceeds of approximately $600.0 - $700.0 million from the sale of
        assets, entering into strategic transactions involving certain of the
        Company's racing, gaming and technology operations, and a possible
        future equity issuance. In addition, to address immediate liquidity
        concerns and provide sufficient time to implement the debt
        elimination plan, the Company has arranged $100.0 million of funding,
        comprised of (i) a $20.0 million private placement of the Company's
        Class A Subordinate Voting Stock to Fair Enterprise Limited ("Fair
        Enterprise"), a company that forms part of an estate planning vehicle
        for the family of Mr. Frank Stronach, the Chairman and Interim Chief
        Executive Officer of the Company (refer to note 17(b)); and (ii) an
        $80.0 million short-term bridge loan from a subsidiary of MI
        Developments Inc. ("MID"), the Company's controlling shareholder
        (refer to note 14(a)(i)). The success of the debt elimination plan is
        not determinable at this time. These interim consolidated financial
        statements do not give effect to any adjustments which would be
        necessary should the Company be unable to continue as a going concern
        and, therefore, be required to realize its assets and discharge its
        liabilities in other than the normal course of business and at
        amounts different from those reflected in the consolidated financial
        statements.

    2.  Summary of Significant Accounting Policies

        Basis of Presentation

        The accompanying unaudited interim consolidated financial statements
        have been prepared in accordance with United States generally
        accepted accounting principles ("U.S. GAAP") for interim financial
        information and with instructions to Form 10-Q and Article 10 of
        Regulation S-X. Accordingly, they do not include all of the
        information and footnotes required by U.S. GAAP for complete
        financial statements. The preparation of the interim consolidated
        financial statements in conformity with U.S. GAAP requires management
        to make estimates and assumptions that affect the amounts reported in
        the interim consolidated financial statements and accompanying notes.
        Actual results could differ from these estimates. In the opinion of
        management, all adjustments, which consist of normal and recurring
        adjustments, necessary for fair presentation have been included. For
        further information, refer to the consolidated financial statements
        and footnotes thereto included in the Company's annual report on Form
        10-K for the year ended December 31, 2006.

        Seasonality

        The Company's racing business is seasonal in nature. The Company's
        racing revenues and operating results for any quarter will not be
        indicative of the racing revenues and operating results for the year.
        The Company's racing operations have historically operated at a loss
        in the second half of the year, with the third quarter generating the
        largest operating loss. This seasonality has resulted in large
        quarterly fluctuations in revenues and operating results.

        Comparative Amounts

        Certain of the comparative amounts have been reclassified to reflect
        assets held for sale and discontinued operations.

        Impact of Recently Issued Accounting Standards

        In September 2006, the Financial Accounting Standards Board ("FASB")
        issued Statement of Financial Accounting Standard No. 157, Fair Value
        Measurements ("SFAS 157"). SFAS 157 defines fair value, establishes a
        framework for measuring fair value in accordance with generally
        accepted accounting principles and expands disclosures about fair
        value measurements. The provisions of SFAS 157 are effective for
        fiscal years beginning after November 15, 2007. The Company is
        currently reviewing SFAS 157, but has not yet determined the impact
        on the Company's consolidated financial statements.

        In February 2007, the FASB issued Statement of Financial Accounting
        Standard No. 159, The Fair Value Option for Financial Assets and
        Liabilities ("SFAS 159"). SFAS 159 allows companies to voluntarily
        choose, at specified election dates, to measure certain financial
        assets and financial liabilities, as well as certain non-financial
        instruments that are similar to financial instruments, at fair value
        (the "fair value option"). The election is made on an instrument-by-
        instrument basis and is irrevocable. If the fair value option is
        elected for an instrument, SFAS 159 specifies that all subsequent
        changes in fair value for that instrument be reported in earnings.
        The provisions of SFAS 159 are effective for fiscal years beginning
        after November 15, 2007. The Company is currently reviewing SFAS 159,
        but has not yet determined the impact on the Company's consolidated
        financial statements.

    3.  Accounting Change

        In July 2006, the FASB issued FASB Interpretation 48, Accounting for
        Uncertainty in Income Taxes ("FIN 48"), which clarifies the
        accounting for uncertainty in income taxes recognized in an entity's
        financial statements in accordance with Statement of Financial
        Accounting Standards No. 109, Accounting for Income Taxes. FIN 48
        requires an entity to recognize the tax benefit of uncertain tax
        positions only when it is more likely than not, based on the
        position's technical merits, that the position would be sustained
        upon examination by the respective taxing authorities. The tax
        benefit is measured as the largest benefit that is more than
        fifty-percent likely of being realized upon final settlement with the
        respective taxing authorities. Effective January 1, 2007, the Company
        adopted the provisions of FIN 48 on a retroactive basis, which did
        not result in any charge to accumulated deficit as a cumulative
        effect of an accounting change or adjustment to the liability for
        unrecognized tax benefits. Accordingly, the adoption of FIN 48 did
        not have an effect on the results of operations or financial position
        of the Company.

        As of January 1, 2007, the Company had $2.0 million of unrecognized
        income tax benefits and $0.3 million of related accrued interest and
        penalties (net of any tax effect), all of which could ultimately
        reduce the Company's effective tax rate. The Company is currently
        under audit in Austria. Although it is not possible to accurately
        predict the timing of the conclusion of the audit, the Company does
        not anticipate that the Austrian audit relating to the years 2002
        through 2004 will be completed by the end of 2007. Given the stage of
        completion of the audit, the Company does not currently estimate
        significant changes to unrecognized income tax benefits over the next
        year. In addition, the Company does not anticipate any other
        significant changes to unrecognized income tax benefits over the next
        year.

        It is the Company's continuing policy to account for interest and
        penalties associated with income tax obligations as a component of
        income tax expense. The Company did not recognize any interest and
        penalties as provision for income taxes in the accompanying
        consolidated statements of operations and comprehensive loss for the
        three and nine months ended September 30, 2007 as the maximum
        interest and penalty period have elapsed.

        As of January 1, 2007, the following tax years remained subject to
        examination by the major tax jurisdictions:

        Major Jurisdictions                                   Open Years
        ---------------------------------------------------------------------

        Austria                                            2002 through 2006
        Canada                                             2003 through 2006
        United States                                      2003 through 2006

        The Company is subject to income taxes in many state and local taxing
        jurisdictions in Canada and the United States, many of which are
        still open to tax examinations. Management does not believe these
        represent a significant financial exposure to the Company.

    4.  Income Taxes

        In accordance with U.S. GAAP, the Company estimates its annual
        effective tax rate at the end of each of the first three quarters of
        the year, based on current facts and circumstances. The Company has
        estimated a nominal annual effective tax rate for the entire year and
        accordingly has applied this effective tax rate to the loss from
        continuing operations before income taxes for the three and nine
        months ended September 30, 2007 and 2006, resulting in an income tax
        recovery of $0.8 million and $0.9 million for the three months ended
        September 30, 2007 and 2006, respectively, and an income tax expense
        of $2.0 million and $1.6 million for the nine months ended
        September 30, 2007 and 2006, respectively. The income tax expense
        for the nine months ended September 30, 2007 and 2006 primarily
        represents income tax expense recognized from certain of the
        Company's U.S. operations that are not included in the Company's U.S.
        consolidated income tax return.

    5.  Acquisition

        On August 22, 2003, MEC Maryland Investments Inc. ("MEC Maryland"), a
        wholly-owned subsidiary of the Company, acquired a 30% equity
        interest in AmTote International, Inc. ("AmTote") for a total cash
        purchase price, including transaction costs, of $4.3 million. On
        July 26, 2006, MEC Maryland acquired the remaining 70% equity
        interest of AmTote for a total cash purchase price of $9.3 million,
        including transaction costs of $0.1 million, net of cash acquired of
        $5.5 million. AmTote is a provider of totalisator services to the
        North American pari-mutuel industry with service contracts with over
        70 North American racetracks and other wagering entities. The results
        of AmTote have been consolidated from July 26, 2006 and are included
        in the racing and gaming - PariMax operations segment. Prior to
        July 26, 2006, the results of AmTote were accounted for on an equity
        basis.

        The purchase price has been allocated to the assets and liabilities
        acquired as follows:

        Non-cash working capital                                  $    1,203
        Fixed assets                                                  12,691
        Other assets                                                     127
        Long-term debt                                                (1,470)
        Other long-term liabilities                                     (980)
        Future tax liabilities                                        (2,224)
        ---------------------------------------------------------------------
        Net assets acquired and total purchase price,
         net of cash acquired                                     $    9,347
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    6.  Sale of The Meadows

        On November 14, 2006, the Company completed the sale of all of the
        outstanding shares of Washington Trotting Association, Inc., Mountain
        Laurel Racing, Inc. and MEC Pennsylvania Racing, Inc. (collectively
        "The Meadows"), each a wholly-owned subsidiary of the Company,
        through which the Company owned and operated The Meadows, a
        standardbred racetrack in Pennsylvania, to PA Meadows, LLC, a company
        jointly owned by William Paulos and William Wortman, controlling
        shareholders of Millennium Gaming, Inc., and a fund managed by
        Oaktree Capital Management, LLC ("Oaktree" and together, with PA
        Meadows, LLC, "Millennium-Oaktree"). On closing, the Company received
        cash consideration of $171.8 million, net of transaction costs of
        $3.2 million, and a holdback agreement, under which $25.0 million is
        payable to the Company over a five-year period, subject to offset for
        certain indemnification obligations. Under the terms of the holdback
        agreement, the Company agreed to release the security requirement for
        the holdback amount, defer subordinate payments under the holdback,
        defer receipt of holdback payments until the opening of the permanent
        casino at The Meadows and defer receipt of holdback payments to the
        extent of available cash flows as defined in the holdback agreement,
        in exchange for Millennium-Oaktree providing an additional
        $25.0 million of equity support for PA Meadows, LLC. The Company also
        entered into a racing services agreement whereby the Company pays
        $50 thousand per annum and continues to operate, for its own account,
        the racing operations at The Meadows for at least five years. The
        transaction proceeds of $171.8 million were allocated to the assets
        of The Meadows as follows: (i) $7.2 million was allocated to the
        long-lived assets representing the fair value of the underlying real
        estate and fixed assets based on appraised values; and
        (ii) $164.6 million was allocated to the intangible assets
        representing the fair value of the racing/gaming licenses based on
        applying the residual method to determine the fair value of the
        intangible assets. On the closing date of the transaction, the net
        book value of the long-lived assets was $18.4 million, resulting in a
        non-cash impairment loss of $11.2 million relating to the long-lived
        assets, and the net book value of the intangible assets was
        $32.6 million, resulting in a gain of $132.0 million on the sale of
        the intangible assets. This gain was reduced by $5.6 million,
        representing the net present value of the operating losses expected
        over the term of the racing services agreement. Accordingly, the net
        gain recognized by the Company on the disposition of the intangible
        assets was $126.4 million for the year ended December 31, 2006.

        Given that the racing services agreement was effectively a lease of
        property, plant and equipment and since the amount owing under the
        holdback note is to be paid to the extent of available cash flows as
        defined in the holdback agreement, the Company was deemed to have
        continuing involvement with the long-lived assets for accounting
        purposes. As a result, the sale of The Meadows' real estate and fixed
        assets was precluded from sales recognition and not accounted for as
        a sale-leaseback, but rather using the financing method of accounting
        under U.S. GAAP. Accordingly, $12.8 million of the proceeds were
        deferred, representing the fair value of long-lived assets of
        $7.2 million and the net present value of the operating losses
        expected over the term of the racing services agreement of
        $5.6 million, and recorded as "other long-term liabilities" on the
        consolidated balance sheet at the date of completion of the
        transaction. The deferred proceeds are being recognized in the
        consolidated statements of operations and comprehensive loss over the
        five-year term of the racing services agreement and/or at the point
        when the sale-leaseback subsequently qualifies for sales recognition.
        For the three and nine months ended September 30, 2007, the Company
        recognized $0.8 million and $1.2 million, respectively, of the
        deferred proceeds in earnings, which is recorded as an offset to
        racing and gaming "general and administrative" expenses on the
        accompanying consolidated statements of operations and comprehensive
        loss. With respect to the $25.0 million holdback agreement, the
        Company will recognize this consideration upon the settlement of the
        indemnification obligations and as payments are received.

    7.  Assets Held for Sale

        (a) On August 9, 2007, the Company announced its intention to sell
            real estate properties located in Dixon, California; Ocala,
            Florida and Porter, New York and has begun activities to sell
            these properties, including formally listing each of the
            properties for sale with a real estate broker. Accordingly, at
            September 30, 2007, these real estate properties are classified
            as "assets held for sale" on the consolidated balance sheets in
            accordance with Statement of Financial Accounting Standard
            No. 144, Accounting for Impairment or Disposal of Long-Lived
            Assets ("SFAS 144"). In accordance with the terms of the
            Company's bridge loan agreement with a subsidiary of MID, the
            Company is required to use the net proceeds from the sale of
            these real estate properties to pay down principal amounts
            outstanding under the bridge loan and the amount of such net
            proceeds will permanently reduce the committed amount of the
            bridge loan.

        (b) The Company's assets held for sale and related liabilities at
            September 30, 2007 and December 31, 2006 are shown below. All
            assets held for sale and related liabilities are classified as
            current at September 30, 2007 as the assets and related
            liabilities described in section (a) above are expected to be
            sold within one year from the balance sheet date.

                                                  September 30,  December 31,
                                                          2007          2006
              	                                   ---------------------------
                                     ASSETS
            -----------------------------------------------------------------
            Real estate properties, net
              Dixon, California                   $     19,139  $     18,711
              Ocala, Florida                             8,399         8,427
              Porter, New York(i)                        1,612         2,990
            -----------------------------------------------------------------
                                                  $     29,150  $     30,128
            -----------------------------------------------------------------
            -----------------------------------------------------------------

                                   LIABILITIES
            -----------------------------------------------------------------
            Future tax liabilities                $      1,047  $      1,047
            -----------------------------------------------------------------
            -----------------------------------------------------------------

            (i)   In connection with the plan to sell the Porter, New York
                  real estate, the Company recognized a non-cash impairment
                  loss of $1.4 million at September 30, 2007, which
                  represents the excess of the carrying value of the asset
                  over the estimated fair value. The impairment loss is
                  included in the real estate and other operations segment.

        (c) On September 12, 2007, the Company's Board of Directors
            approved a debt elimination plan designed to eliminate net debt
            by generating aggregate proceeds of approximately
            $600.0 - $700.0 million from the sale of certain assets, entering
            into strategic transactions involving the Company's racing,
            gaming and technology operations, and a possible future equity
            issuance (refer to note 1). In addition to the sale of real
            estate described in section (a) above, the debt elimination plan
            also contemplates the sale of real estate properties located in
            Aventura and Hallandale, Florida, both adjacent to Gulfstream
            Park; Anne Arundel County, Maryland, adjacent to Laurel Park; and
            Ebreichsdorf, Austria, adjacent to the Magna Racino(TM). The
            Company also intends to explore selling its membership interests
            in the mixed-use developments at Gulfstream Park in Florida and
            Santa Anita Park in California that the Company is pursuing under
            joint venture arrangements with Forest City Enterprises, Inc.
            ("Forest City") and Caruso Affiliated, respectively. The Company
            also intends to sell Great Lakes Downs in Michigan and has
            announced that the 2007 race meet will be the last that MI
            Racing, Inc., a wholly-owned subsidiary of the Company, will run
            at Great Lakes Downs; Thistledown in Ohio; and its interest in
            Portland Meadows in Oregon. The Company also intends to explore
            other strategic transactions involving other racing, gaming and
            technology operations, including: partnerships or joint ventures
            in respect of the existing gaming facility at Gulfstream Park;
            partnerships or joint ventures in respect of potential
            alternative gaming operations at certain of the Company's other
            racetracks that currently do not have gaming operations; the
            possible sale of Remington Park, a horse racetrack and gaming
            facility in Oklahoma City; and transactions involving the
            Company's technology operations, which may include one or more of
            the assets that comprise the Company's PariMax business. At
            September 30, 2007, all of the criteria required to classify an
            asset held for sale or operation as discontinued operations
            pursuant to the provisions of SFAS 144 were not met and
            accordingly these assets and operations continue to be classified
            as held and used. Once the criteria to classify an asset as held
            for sale or operation as discontinued operations pursuant to the
            provisions of SFAS 144 are met, the Company will reclassify these
            assets to "assets held for sale" and "discontinued operations" as
            and when appropriate.

    8.  Discontinued Operations

        (a) On November 1, 2006, a wholly-owned subsidiary of the Company
            completed the sale of the Fontana Golf Club located in
            Oberwaltersdorf, Austria to a subsidiary of Magna International
            Inc. ("Magna"), a related party, for a sale value of
            Euros 30.0 million (U.S. $38.3 million), which included cash
            consideration of Euros 13.2 million (U.S. $16.9 million), net
            of transaction costs, and approximately Euros 16.8 million
            (U.S. $21.4 million) of debt assumed by Magna.  The gain at the
            date of disposition of approximately $20.9 million, net of tax,
            was recorded as a contribution of equity in contributed surplus
            on the accompanying consolidated balance sheets.

        (b) On August 25, 2006, a wholly-owned subsidiary of the Company
            completed the sale of the Magna Golf Club located in Aurora,
            Ontario, Canada to Magna, for cash consideration of
            Cdn. $51.8 million (U.S. $46.4 million), net of transaction
            costs. The Company recognized an impairment loss of
            $1.2 million at the date of disposition equal to the excess of
            the Company's carrying value of the assets disposed over their
            fair values at the date of disposition. Of the sale proceeds,
            Cdn. $32.6 million (U.S. $29.3 million) was used to pay all
            amounts owing under certain loan agreements with Bank Austria
            Creditanstalt AG related to the Magna Golf Club.

        (c) On May 26, 2006, the Company completed the sale of a restaurant
            and related real estate in the United States and received cash
            consideration of $2.0 million, net of transaction costs, and
            recognized a gain at the date of disposition of approximately
            $1.5 million.

        (d) The Company's results of operations related to discontinued
            operations for the three and nine months ended September 30,
            2006 are as follows:

                                                  Three months   Nine months
                                                         ended         ended
                                                  September 30, September 30,
                                                          2006          2006
            -----------------------------------------------------------------
            Results of Operations
            Revenues                              $      4,381  $     13,909
            Costs and expenses                           3,759        10,584
            -----------------------------------------------------------------
                                                           622         3,325
            Depreciation and amortization                  606         2,047
            Interest expense, net                          593         1,934
            Impairment loss recorded on
             disposition                                 1,202         1,202
            -----------------------------------------------------------------
            Loss before gain on disposition             (1,779)       (1,858)
            Gain on disposition                              -         1,495
            -----------------------------------------------------------------
            Loss before income taxes                    (1,779)         (363)
            Income tax expense                           1,254         1,813
            -----------------------------------------------------------------
            Net loss                              $     (3,033) $     (2,176)
            -----------------------------------------------------------------
            -----------------------------------------------------------------

            The Company did not have any assets or liabilities related to
            discontinued operations at September 30, 2007 or December 31,
            2006.

    9.  Bank Indebtedness and Long-term Debt

        (a) The Company has a $40.0 million senior secured revolving credit
            facility with a Canadian financial institution, which was
            scheduled to mature on October 1, 2007, but on September 13, 2007
            was amended and extended to January 31, 2008. The credit
            facility is available by way of U.S. dollar loans and letters of
            credit. Loans under the facility are secured by a first charge on
            the assets of Golden Gate Fields and a second charge on the
            assets of Santa Anita Park, and are guaranteed by certain
            subsidiaries of the Company. At September 30, 2007, the Company
            had borrowings of $15.0 million (December 31, 2006 - nil) under
            the credit facility and had issued letters of credit totaling
            $24.7 million (December 31, 2006 - $24.7 million), such that
            $0.3 million was unused and available. The loans under the
            facility bear interest at the U.S. Base rate plus 5% or the
            London Interbank Offered Rate ("LIBOR") plus 6%. The weighted
            average interest rate on the loans outstanding under the credit
            facility at September 30, 2007 was 9.26% (December 31, 2006 -
            nil).

            At September 30, 2007, the Company was not in compliance with
            one of the financial covenants contained in the credit agreement.
            A waiver for the financial covenant breach at September 30, 2007
            was obtained from the lender.

        (b) A wholly-owned subsidiary of the Company that owns and operates
            Santa Anita Park has a $10.0 million revolving loan arrangement
            under its existing credit facility with a U.S. financial
            institution, which was scheduled to mature on October 8, 2007,
            but on October 2, 2007 was amended and extended to October 31,
            2012 (refer to note 17(d)). The revolving loan agreement is
            guaranteed by the Company's wholly-owned subsidiary, the Los
            Angeles Turf Club, Incorporated ("LATC") and is secured by a
            first deed of trust on Santa Anita Park and the surrounding
            real property, an assignment of the lease between LATC, the
            racetrack operator, and The Santa Anita Companies, Inc. ("SAC")
            and a pledge of all of the outstanding capital stock of LATC
            and SAC. At September 30, 2007, the Company had borrowings of
            $8.6 million (December 31, 2006 - $6.5 million) under the
            revolving loan agreement. Borrowings under the revolving loan
            agreement bear interest at the U.S. Prime rate. The weighted
            average interest rate on the borrowings outstanding under the
            revolving loan agreement at September 30, 2007 was 7.75%
            (December 31, 2006 - 8.25%).

        (c) On May 11, 2007, a wholly-owned subsidiary of the Company,
            AmTote, completed a refinancing of its existing credit facilities
            with a new lender. The refinancing includes: (i) a $3.0 million
            revolving credit facility to finance working capital
            requirements, available by way of U.S. dollar loans and letters
            of credit, bearing interest at LIBOR plus 2.5%, with a maturity
            date of May 11, 2008; (ii) a $4.2 million term loan for the
            repayment of AmTote's debt outstanding under its existing term
            loan facilities, bearing interest at LIBOR plus 2.75%, with a
            maturity date of May 11, 2011; and (iii) a $10.0 million term
            loan to finance up to 80% of eligible capital costs related to
            tote service contracts, bearing interest at LIBOR plus 2.75%,
            with a maturity date of May 11, 2012. Loans under the credit
            facilities are secured by a first charge on the assets and a
            pledge of stock of AmTote.

            At September 30, 2007, the Company had (i) borrowed $2.4 million
            under the $3.0 million revolving credit facility, which is
            included in "bank indebtedness" on the consolidated balance
            sheets; (ii) borrowed $3.5 million under the $4.2 million term
            loan, which is included in "long-term debt" on the consolidated
            balance sheets; and (iii) no borrowings under the $10.0 million
            term loan. The weighted average interest rates on the borrowings
            outstanding under the revolving credit facility and term loan at
            September 30, 2007 were 8.22% and 8.47%, respectively.

            At September 30, 2007, the Company was not in compliance with
            certain of the financial covenants contained in the credit
            agreement. A waiver for the financial covenants breach at
            September 30, 2007 was obtained from the lender.

        (d) On July 24, 2007, one of the Company's European subsidiaries
            amended and extended its Euros 3.9 million bank term loan by
            increasing the amount available under the bank term loan to
            Euros 4.0 million (U.S. $5.7 million), bearing interest at the
            Euro Overnight Index Average rate plus 3.0% per annum, and
            extending the term to July 31, 2008. At September 30, 2007, this
            bank term loan is fully drawn.

    10. Capital Stock

        (a) Changes in Class A Subordinate Voting Stock and Class B Stock for
            the three and nine months ended September 30, 2007 are shown in
            the following table (number of shares and stated value have been
            rounded to the nearest thousand):

                              Class A
                            Subordinate
                           Voting Stock      Class B Stock        Total
                       ------------------ ----------------- -----------------
                        Number of  Stated Number of  Stated Number of  Stated
                          Shares    Value   Shares    Value   Shares    Value
            -----------------------------------------------------------------
            Issued and
             outstanding
             at December
             31, 2006     49,055 $319,087   58,466 $394,094  107,521 $713,181
            Issued under
             the Long-term
             Incentive Plan  204      741        -        -      204      741
            -----------------------------------------------------------------
            Issued and
             outstanding
             at March 31,
             2007 and
             June 30,
             2007         49,259  319,828   58,466  394,094  107,725  713,922
            Issued under
             the Long-term
             Incentive Plan    1        5        -        -        1        5
            -----------------------------------------------------------------
            Issued and
             outstanding
             at September
             30, 2007     49,260 $319,833   58,466 $394,094  107,726 $713,927
            -----------------------------------------------------------------
            -----------------------------------------------------------------

        (b) The following table (number of shares have been rounded to the
            nearest thousand) presents the maximum number of shares of
            Class A Subordinate Voting Stock and Class B Stock that would be
            outstanding if all of the outstanding options and convertible
            subordinated notes issued and outstanding at September 30, 2007
            were exercised or converted:

                                                            Number of Shares
            -----------------------------------------------------------------
            Class A Subordinate Voting Stock outstanding              49,260
            Class B Stock outstanding                                 58,466
            Options to purchase Class A Subordinate Voting
             Stock                                                     5,090
            8.55% Convertible Subordinated Notes, convertible
             at $7.05 per share                                       21,276
            7.25% Convertible Subordinated Notes, convertible
             at $8.50 per share                                        8,824
            -----------------------------------------------------------------
                                                                     142,916
            -----------------------------------------------------------------
            -----------------------------------------------------------------

    11. Long-term Incentive Plan

        The Company's Long-term Incentive Plan (the "Plan") (adopted in 2000
        and amended in 2007) allows for the grant of non-qualified stock
        options, incentive stock options, stock appreciation rights,
        restricted stock, bonus stock and performance shares to directors,
        officers, employees, consultants, independent contractors and agents.
        A maximum of 9.2 million shares of Class A Subordinate Voting Stock
        remain available to be issued under the Plan, of which 7.8 million
        are available for issuance pursuant to stock options and tandem stock
        appreciation rights and 1.4 million are available for issuance
        pursuant to any other type of award under the Plan.

        During 2005, the Company introduced an incentive compensation program
        for certain officers and key employees, which awarded performance
        shares of Class A Subordinate Voting Stock under the Plan. The number
        of shares of Class A Subordinate Voting Stock underlying the
        performance share awards were based either on a percentage of a
        guaranteed bonus or a percentage of total 2005 compensation divided
        by the market value of the Class A Subordinate Voting Stock on the
        date the program was approved by the Compensation Committee of the
        Board of Directors of the Company. These performance shares vested
        over a six or eight-month period to December 31, 2005 and were
        distributed, subject to certain conditions, in two equal
        installments. The first distribution occurred in March 2006 and the
        second distribution occurred in March 2007. At December 31, 2005,
        there were no non-vested performance share awards and there were
        199,471 vested performance share awards with a weighted average
        grant-date market value of either U.S. $6.26 or Cdn. $7.61 per share.
        During the year ended December 31, 2006, 131,751 of these vested
        performance shares were issued with a stated value of $0.8 million
        and 4,812 performance share awards were forfeited (of which 115,408
        vested performance shares were issued with a stated value of
        $0.7 million for the nine months ended September 30, 2006).
        Accordingly, at December 31, 2006, there were 62,908 performance
        share awards vested with a weighted average grant-date market value
        of either U.S. $6.26 or Cdn. $7.61 per share. During the nine months
        ended September 30, 2007, all of these performance shares were issued
        with a stated value of $0.2 million. At September 30, 2007, there are
        no performance shares remaining to be issued under the 2005 incentive
        compensation arrangement. The Company recognized no compensation
        expense related to the 2005 incentive compensation arrangement for
        the three and nine months ended September 30, 2007 and 2006.

        In 2006, the Company continued the incentive compensation program as
        described in the immediately preceding paragraph. The program was
        similar in all respects, except that the 2006 performance shares
        vested over a 12-month period to December 31, 2006 and were
        distributed, subject to certain conditions, prior to March 31, 2007.
        For the year ended December 31, 2006, 162,556 performance share
        awards were granted under the Plan with a weighted average grant-date
        market value of either U.S. $6.80 or Cdn. $7.63 per share, 1,616
        performance shares were issued with a nominal stated value and 42,622
        performance share awards were forfeited (of which 162,556 performance
        share awards were granted, 1,616 performance shares were issued and
        12,490 performance share awards were forfeited during the nine months
        ended September 30, 2006). Accordingly, at December 31, 2006, there
        were 118,318 performance share awards vested with a weighted average
        grant-date market value of either U.S. $6.80 or Cdn. $7.63 per share.
        During the nine months ended September 30, 2007, 111,841 performance
        shares were issued with a stated value of $0.4 million and 6,477
        performance share awards were forfeited. At September 30, 2007, there
        are no performance shares remaining to be issued under the 2006
        incentive compensation arrangement. The Company recognized no
        compensation expense related to the 2006 incentive compensation
        arrangement for the three and nine months ended September 30, 2007
        and recognized approximately $0.2 million and $0.8 million of
        compensation expense related to the 2006 incentive compensation
        arrangement for the three and nine months ended September 30, 2006,
        respectively.

        At September 30, 2007, there is no unrecognized compensation expense
        related to these performance share award arrangements.

        During the nine months ended September 30, 2007, 30,941 shares with a
        stated value of $0.1 million (during the nine months ended
        September 30, 2006 - 25,896 shares with a stated value of
        $0.2 million) were issued to the Company's directors in payment of
        services rendered.

        The Company grants stock options to certain directors, officers, key
        employees and consultants to purchase shares of the Company's Class A
        Subordinate Voting Stock. All of such stock options give the grantee
        the right to purchase Class A Subordinate Voting Stock of the Company
        at a price no less than the fair market value of such stock at the
        date of grant. Generally, stock options under the Plan vest over a
        period of two to six years from the date of grant at rates of 1/7th
        to 1/3rd per year and expire on or before the tenth anniversary of
        the date of grant, subject to earlier cancellation upon the
        occurrence of certain events specified in the stock option agreements
        entered into by the Company with each recipient of options.

        Information with respect to shares subject to option at September 30,
        2007 and 2006 is as follows (number of shares subject to option in
        the following tables are expressed in whole numbers and have not been
        rounded to the nearest thousand):

                                        Shares              Weighted Average
                                   Subject to Option         Exercise Price
                               ----------------------  ----------------------
                                    2007        2006        2007        2006
        ---------------------------------------------------------------------
        Balance outstanding
         at January 1          4,905,000   4,827,500   $    6.08   $    6.14
        Forfeited or expired(i) (166,000)          -        6.74           -
        ---------------------------------------------------------------------
        Balance outstanding
         at March 31           4,739,000   4,827,500        6.06        6.14
        Forfeited or expired(i)  (25,000)    (64,000)       5.71        6.80
        ---------------------------------------------------------------------
        Balance outstanding
         at June 30            4,714,000   4,763,500        6.07        6.13
        Granted                  390,000           -        3.20           -
        Forfeited or expired(i)  (14,000)          -        5.20           -
        ---------------------------------------------------------------------
        Balance outstanding
         at September 30       5,090,000   4,763,500   $    5.85   $    6.13
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        (i)   Options forfeited or expired were primarily as a result of
              employment contracts being terminated and voluntary employee
              resignations.

                                 Options Outstanding     Options Exercisable
                               ----------------------  ----------------------
                                    2007        2006        2007        2006
        ---------------------------------------------------------------------
        Number                 5,090,000   4,763,500   4,435,668   4,279,700
        Weighted average
         exercise price        $    5.85   $    6.13   $    6.02   $    6.08
        Weighted average
         remaining contractual
         life (years)                4.0         4.3         3.2         3.9
        ---------------------------------------------------------------------

        At September 30, 2007, the 5,090,000 stock options outstanding had
        exercise prices ranging from $2.78 to $7.24 per share. During the
        nine months ended September 30, 2007, the 390,000 stock options
        granted had a weighted-average fair value of $1.36 per option (for
        the nine months ended September 30, 2006 - no options were granted).
        The fair value of stock option grants is estimated at the date of
        grant using the Black-Scholes option valuation model with the
        following assumptions:

                                                  Three months   Nine months
                                                      ended         ended
                                                  September 30, September 30,
                                                 ----------------------------
                                                   2007   2006   2007   2006
        ---------------------------------------------------------------------
        Risk free interest rates                  4.15%    N/A  4.15%    N/A
        Dividend yields                               -    N/A      -    N/A
        Volatility factor of expected
         market price of Class A Subordinate
         Voting Stock                             0.559    N/A  0.559    N/A
        Weighted average expected life (years)     5.00    N/A   5.00    N/A
        ---------------------------------------------------------------------

        The Black-Scholes option valuation model was developed for use in
        estimating the fair value of traded options that require the input of
        highly subjective assumptions including the expected stock price
        volatility. Because the Company's stock options have characteristics
        significantly different from those of traded options and because
        changes in the subjective input assumptions can materially affect the
        fair value estimate, in management's opinion, the existing models do
        not necessarily provide a reliable single measure of the fair value
        of the Company's stock options.

        The compensation expense recognized for the three and nine months
        ended September 30, 2007 related to stock options is approximately
        $0.5 million and $0.6 million, respectively (for the three and nine
        months ended September 30, 2006 - $0.1 million and $1.2 million,
        respectively). At September 30, 2007, the total unrecognized
        compensation expense related to stock options is $0.6 million, which
        is expected to be recognized in expense over a period of 4.0 years.

        For the three and nine months ended September 30, 2007, the Company
        recognized total compensation expense of $0.5 million and
        $0.7 million, respectively (for the three and nine months ended
        September 30, 2006 - $0.4 million and $2.1 million, respectively),
        relating to performance share awards, director compensation and stock
        options under the Plan.

    12. Other Paid-in-Capital

        Other paid-in-capital consists of accumulated stock option
        compensation expense less the fair value of stock options at the date
        of grant that have been exercised and reclassified to share capital.
        Changes in other paid-in-capital for the three and nine months ended
        September 30, 2007 and 2006 are shown in the following table:

                                                            2007        2006
        ---------------------------------------------------------------------
        Balance at January 1                          $    1,410  $        -
        Stock-based compensation expense                      73         772
        ---------------------------------------------------------------------
        Balance at March 31                                1,483         772
        Stock-based compensation expense                      70         289
        ---------------------------------------------------------------------
        Balance at June 30                                 1,553       1,061
        Stock-based compensation expense                     463         135
        ---------------------------------------------------------------------
        Balance at September 30                       $    2,016  $    1,196
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    13. Loss Per Share

        The following is a reconciliation of the numerator and denominator of
        the basic and diluted loss per share computations (in thousands,
        except per share amounts):

                                 Three months ended      Nine months ended
                                    September 30,           September 30,
                              -----------------------------------------------
                                  2007        2006        2007        2006
        ---------------------------------------------------------------------
                               Basic and   Basic and   Basic and   Basic and
                                 Diluted     Diluted     Diluted     Diluted
        ---------------------------------------------------------------------
        Loss from continuing
         operations           $  (49,811) $  (47,709) $  (70,779) $  (72,692)
        Loss from discontinued
         operations                    -      (3,033)          -      (2,176)
        ---------------------------------------------------------------------
        Net loss              $  (49,811) $  (50,742) $  (70,779) $  (74,868)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Weighted average number
         of shares outstanding:
          Class A Subordinate
           Voting Stock           49,260      49,032      49,203      48,979
          Class B Stock           58,466      58,466      58,466      58,466
        ---------------------------------------------------------------------
                                 107,726     107,498     107,669     107,445
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Loss per share:
          Continuing
           operations         $    (0.46) $    (0.44) $    (0.66) $    (0.68)
          Discontinued
           operations                  -       (0.03)          -       (0.02)
        ---------------------------------------------------------------------
        Loss per share        $    (0.46) $    (0.47) $    (0.66) $    (0.70)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        As a result of the net loss for the three and nine months ended
        September 30, 2007, options to purchase 5,090,000 shares and notes
        convertible into 30,100,124 shares have been excluded from the
        computation of diluted loss per share since the effect is anti-
        dilutive.

        As a result of the net loss for the three and nine months ended
        September 30, 2006, options to purchase 4,763,500 shares, notes
        convertible into 30,100,124 shares and 231,056 performance share
        awards have been excluded from the computation of diluted loss per
        share since the effect is anti-dilutive.

    14. Transactions with Related Parties

        (a) The Company's indebtedness, long-term debt and accrued interest
            payable due to parent consists of the following:

                                                   September 30, December 31,
                                                           2007         2006
            -----------------------------------------------------------------
            Bridge Loan Facility (i)                 $    8,740   $        -
            Gulfstream Park Project Financing
              Tranche 1 (ii)                            130,611      131,350
              Tranche 2 (iii)                            24,132       18,617
              Tranche 3 (iv)                             12,822            -
            Remington Park Project Financing (v)         27,207       30,391
            -----------------------------------------------------------------
                                                        203,512      180,358
            Less: due within one year                  (110,086)      (3,108)
            -----------------------------------------------------------------
                                                     $   93,426   $  177,250
            -----------------------------------------------------------------
            -----------------------------------------------------------------

            (i)   Bridge Loan Facility

                  On September 12, 2007, the Company entered into a bridge
                  loan agreement with a subsidiary of MID, pursuant to which
                  up to $80.0 million of financing will be made available to
                  the Company, subject to certain conditions. The bridge loan
                  matures on May 31, 2008, is non-revolving and bears
                  interest at a rate of LIBOR plus 10.0% per annum, subject
                  to a 1.0% increase in the event the Company has not, by
                  December 31, 2007, completed asset sales (or executed asset
                  sale agreements acceptable to MID) or completed equity
                  financings (other than the Fair Enterprise private
                  placement) with aggregate net proceeds of $50.0 million.
                  If, by February 29, 2008, the Company has not entered into
                  agreements acceptable to MID for asset sales that would
                  yield aggregate net proceeds sufficient to repay the entire
                  outstanding loan amount, the interest rate increases by an
                  additional 1.0%. An arrangement fee of $2.4 million was
                  paid to MID on closing and there is a commitment fee equal
                  to 1.0% per annum (payable in arrears) on the undrawn
                  portion of the $80.0 million maximum loan commitment. In
                  addition, on February 29, 2008, there is an additional
                  arrangement fee equal to 1% of the maximum principal amount
                  then available under this facility. The bridge loan is
                  required to be repaid by way of the payment of the net
                  proceeds of any asset sale, any equity offering (other than
                  the Fair Enterprise private placement) or any debt
                  offering, subject to specified amounts required to be paid
                  to eliminate other prior-ranking indebtedness. The bridge
                  loan is secured by essentially all of the assets of the
                  Company and by guarantees provided by certain subsidiaries
                  of the Company. The guarantees are secured by charges over
                  the lands owned by Golden Gate Fields, Santa Anita Park and
                  Thistledown, and charges over the lands in Dixon,
                  California and Ocala, Florida, as well as by pledges of the
                  shares of certain of the Company's subsidiaries. The bridge
                  loan is also cross-defaulted to all other obligations to
                  MID and to other significant indebtedness of the Company
                  and certain of its subsidiaries. Pursuant to the terms of
                  the bridge loan, advances after January 15, 2008 are
                  subject to MID being satisfied that the Company's
                  $40.0 million senior secured revolving credit facility will
                  be further extended to at least April 30, 2008 or that
                  satisfactory refinancing of that facility has been
                  arranged. In addition, the first advance that would result
                  in the then outstanding loan amount under the bridge loan
                  exceeding $40.0 million is subject to MID being satisfied
                  that the Company is in compliance with, can reasonably be
                  expected to be able to implement, and is using all
                  commercially reasonable efforts to implement the debt
                  elimination plan.

                  During the three and nine months ended September 30, 2007,
                  the Company received loan advances of $11.5 million and
                  incurred interest expense of $0.1 million, such that at
                  September 30, 2007, $11.6 million was outstanding under the
                  bridge loan facility, including $0.1 million of accrued
                  interest payable. During the three and nine months ended
                  September 30, 2007, the Company amortized $0.2 million of
                  loan origination costs such that at September 30, 2007,
                  $2.8 million of net loan origination costs have been
                  recorded as a reduction of the outstanding loan balance.
                  The loan balance is being accreted to its face value over
                  the term to maturity. The weighted average interest rate on
                  the borrowings outstanding under the bridge loan at
                  September 30, 2007 is 15.6%.

            (ii)  Gulfstream Park Project Financing - Tranche 1

                  In December 2004, certain of the Company's subsidiaries
                  entered into a $115.0 million project financing arrangement
                  with a subsidiary of MID, for the reconstruction of
                  facilities at Gulfstream Park. This project financing
                  arrangement was amended on July 22, 2005 in connection with
                  the Remington Park loan as described in note 14(a)(v)
                  below. The project financing was made by way of progress
                  draw advances to fund reconstruction. The loan has a ten-
                  year term from the completion date of the reconstruction
                  project, which was February 1, 2006. Prior to the
                  completion date, amounts outstanding under the loan bore
                  interest at a floating rate equal to 2.55% per annum above
                  MID's notional cost of borrowing under its floating rate
                  credit facility, compounded monthly. After the completion
                  date, amounts outstanding under the loan bear interest at a
                  fixed rate of 10.5% per annum, compounded semi-annually.
                  Prior to January 1, 2007, interest was capitalized to the
                  principal balance of the loan. Commencing January 1, 2007,
                  the Company is required to make monthly blended payments of
                  principal and interest based on a 25-year amortization
                  period commencing on the completion date. The loan contains
                  cross-guarantee, cross-default and cross-collateralization
                  provisions. The loan is guaranteed by the Company's
                  subsidiaries that own and operate Remington Park and the
                  Palm Meadows Training Center and is collateralized
                  principally by security over the lands forming part of the
                  operations at Gulfstream Park, Remington Park and Palm
                  Meadows and over all other assets of Gulfstream Park,
                  Remington Park and Palm Meadows, excluding licenses and
                  permits. During the three and nine months ended
                  September 30, 2007, the Company incurred interest expense
                  of $3.4 million and $10.3 million, repaid accrued interest
                  of $3.4 million and $9.1 million, and repaid outstanding
                  principal of $0.3 million and $2.1 million, respectively,
                  such that at September 30, 2007, $133.8 million was
                  outstanding under this project financing arrangement,
                  including $1.1 million of accrued interest payable. During
                  the three and nine months ended September 30, 2007, the
                  Company amortized loan origination costs of $0.1 million
                  and $0.3 million, respectively, such that at September 30,
                  2007, $3.2 million of net loan origination costs have been
                  recorded as a reduction of the outstanding loan balance.
                  The loan balance is being accreted to its face value over
                  the term to maturity.

                  On September 12, 2007, certain amendments were made to the
                  Gulfstream Park and Remington Park project financings. In
                  return for MID agreeing to waive any applicable make-whole
                  payments for repayments made under either of the project
                  financings prior to May 31, 2008, the required amendments
                  provide, among other things, that under the Gulfstream Park
                  project financing arrangement: (i) Gulfstream Park's
                  obligations are now guaranteed by the Company; and (ii)
                  $100.0 million of indebtedness under the Gulfstream Park
                  project financings must be repaid by May 31, 2008.

            (iii) Gulfstream Park Project Financing - Tranche 2

                  On July 26, 2006, certain of the Company's subsidiaries
                  that own and operate Gulfstream Park entered into an
                  amending agreement relating to the existing Gulfstream Park
                  project financing arrangement with a subsidiary of MID by
                  adding an additional tranche of $25.8 million, plus lender
                  costs and capitalized interest, to fund the design and
                  construction of phase one of the slots facility to be
                  located in the existing Gulfstream Park clubhouse building,
                  as well as related capital expenditures and start-up costs,
                  including the acquisition and installation of approximately
                  500 slot machines. The second tranche of the Gulfstream
                  Park financing has a five-year term and bears interest at a
                  fixed rate of 10.5% per annum, compounded semi-annually.
                  Prior to January 1, 2007, interest on this tranche was
                  capitalized to the principal balance of the loan. Beginning
                  January 1, 2007, this tranche requires blended payments of
                  principal and interest based on a 25-year amortization
                  period commencing on that date. Advances related to phase
                  one of the slots facility were made available by way of
                  progress draw advances and there is no prepayment penalty
                  associated with this tranche. The Gulfstream Park project
                  financing facility was further amended to introduce a
                  mandatory annual cash flow sweep of not less than 75% of
                  Gulfstream Park's total excess cash flow, after permitted
                  capital expenditures and debt service, to be used to repay
                  the additional principal amount being made available under
                  the new tranche. A lender fee of $0.3 million (1% of the
                  amount of this tranche) was added to the principal amount
                  of the loan as consideration for the amendments. During the
                  three and nine months ended September 30, 2007, the Company
                  received loan advances of $0.7 million and $5.5 million,
                  incurred interest expense of $0.6 million and $1.8 million,
                  repaid accrued interest of $0.6 million and $1.5 million,
                  and repaid outstanding principal of $0.1 million and
                  $0.3 million, respectively, such that at September 30,
                  2007, $24.8 million was outstanding under this project
                  financing arrangement, including $0.2 million of accrued
                  interest payable. During the three and nine months ended
                  September 30, 2007, the Company amortized loan origination
                  costs of $0.1 million and $0.2 million, respectively, such
                  that at September 30, 2007, $0.7 million of net loan
                  origination costs have been recorded as a reduction of the
                  outstanding loan balance. The loan balance is being
                  accreted to its face value over the term to maturity.

            (iv)  Gulfstream Park Project Financing - Tranche 3

                  On December 22, 2006, certain of the Company's subsidiaries
                  that own and operate Gulfstream Park entered into an
                  additional amending agreement relating to the existing
                  Gulfstream Park project financing arrangement with a
                  subsidiary of MID by adding an additional tranche of
                  $21.5 million, plus lender costs and capitalized interest,
                  to fund the design and construction of phase two of the
                  slots facility, as well as related capital expenditures and
                  start-up costs, including the acquisition and installation
                  of approximately 700 slot machines. This third tranche of
                  the Gulfstream Park financing has a five-year term and
                  bears interest at a rate of 10.5% per annum, compounded
                  semi-annually. Prior to May 1, 2007, interest on this
                  tranche was capitalized to the principal balance of the
                  loan. Beginning May 1, 2007, this tranche requires blended
                  payments of principal and interest based on a 25-year
                  amortization period commencing on that date. Advances
                  related to phase two of the slots facility are made
                  available by way of progress draw advances and there is no
                  prepayment penalty associated with this tranche. A lender
                  fee of $0.2 million (1% of the amount of this tranche) was
                  added to the principal amount of the loan as consideration
                  for the amendments on January 19, 2007, when the first
                  funding advance was made available to the Company. During
                  the three and nine months ended September 30, 2007, the
                  Company received loan advances of $1.1 million and
                  $13.1 million, accrued interest of $0.3 million and
                  $0.6 million, of which $0.1 million has been capitalized to
                  the principal balance of the loan, repaid accrued interest
                  of $0.3 million and $0.4 million, and repaid outstanding
                  principal of $0.1 million and $0.2 million, respectively,
                  such that at September 30, 2007, $13.3 million was
                  outstanding under this project financing arrangement,
                  including $0.1 million of accrued interest payable. During
                  the three and nine months ended September 30, 2007, the
                  Company amortized loan origination costs of $0.1 million
                  and $0.1 million, respectively, such that at September 30,
                  2007, $0.4 million of net loan origination costs have been
                  recorded as a reduction of the outstanding loan balance.
                  The loan balance is being accreted to its face value over
                  the term to maturity.

            (v)   Remington Park Project Financing

                  In July 2005, the Company's subsidiary that owns and
                  operates Remington Park entered into a $34.2 million
                  project financing arrangement with a subsidiary of MID for
                  the build-out of the casino facility at Remington Park.
                  Advances under the loan were made by way of progress draw
                  advances to fund the capital expenditures relating to the
                  development, design and construction of the casino
                  facility, including the purchase and installation of
                  electronic gaming machines. The loan has a ten-year term
                  from the completion date of the reconstruction project,
                  which was November 28, 2005. Prior to the completion date,
                  amounts outstanding under the loan bore interest at a
                  floating rate equal to 2.55% per annum above MID's notional
                  cost of LIBOR borrowing under its floating rate credit
                  facility, compounded monthly. After the completion date,
                  amounts outstanding under the loan bear interest at a fixed
                  rate of 10.5% per annum, compounded semi-annually. Prior to
                  January 1, 2007, interest was capitalized to the principal
                  balance of the loan. Commencing January 1, 2007, the
                  Company is required to make monthly blended payments of
                  principal and interest based on a 25-year amortization
                  period commencing on the completion date. Certain cash from
                  the operations of Remington Park must be used to pay
                  deferred interest on the loan plus a portion of the
                  principal under the loan equal to the deferred interest on
                  the Gulfstream Park construction loan. The loan is secured
                  by all assets of Remington Park, excluding licenses and
                  permits. The loan is also secured by a charge over the
                  Gulfstream Park lands and a charge over the Palm Meadows
                  Training Center and contains cross-guarantee, cross-default
                  and cross-collateralization provisions. During the three
                  and nine months ended September 30, 2007, the Company
                  incurred interest expense of $0.7 million and $2.3 million,
                  repaid accrued interest of $0.8 million and $2.1 million,
                  and repaid outstanding principal of $1.6 million and
                  $3.5 million, respectively, such that at September 30,
                  2007, $28.4 million was outstanding under this project
                  financing arrangement, including $0.2 million of accrued
                  interest payable. During the three and nine months ended
                  September 30, 2007, the Company amortized a nominal amount
                  and $0.1 million, respectively, of loan origination costs,
                  such that at September 30, 2007, $1.2 million of net loan
                  origination costs have been recorded as a reduction of the
                  outstanding loan balance. The loan balance is being
                  accreted to its face value over the term to maturity.

        (b) At September 30, 2007, $5.3 million (December 31, 2006 -
            $6.5 million) of the funds the Company placed into escrow with
            MID remain in escrow.

        (c) On September 24, 2007, the Company exercised its option to
            acquire the remaining voting and equity interests in The Maryland
            Jockey Club, pursuant to an agreement with certain companies
            controlled by Joseph De Francis, a member of the Company's Board
            of Directors, and Karin De Francis. Under the terms of the
            option agreement, the Company paid $18.3 million plus interest on
            October 5, 2007. At September 30, 2007 and December 31, 2006,
            this obligation was reflected as "long-term debt due within one
            year" on the accompanying consolidated balance sheets and was
            secured by letters of credit under the Company's senior secured
            revolving credit facility.

        (d) On June 7, 2007, the Company sold 205 acres of land and
            buildings, located in Bonsall, California, and on which the San
            Luis Rey Downs Training Center is situated, to MID for cash
            consideration of approximately $24.0 million. The Company also
            has entered into a lease agreement whereby a subsidiary of the
            Company will lease the property from MID for a three-year period
            on a triple-net lease basis, which provides for a nominal annual
            rent in addition to operating costs that arise from the use of
            the property. The lease is terminable at any time by either party
            on four-months notice. The gain on sale of the property of
            approximately $17.7 million, net of tax, has been reported as a
            contribution of equity in contributed surplus.

        (e) On March 28, 2007, the Company sold a 157 acre parcel of excess
            land adjacent to the Palm Meadows Training Center, located in
            Palm Beach County, Florida and certain development rights to MID
            for cash consideration of $35.0 million. The gain on sale of the
            excess land and development rights of approximately
            $16.7 million, net of tax, has been reported as a contribution of
            equity in contributed surplus.

            On February 7, 2007, MID acquired all of the Company's interests
            and rights in a 34 acre parcel of residential development land in
            Aurora, Ontario, Canada for cash consideration of
            Cdn. $12.0 million (U.S. $10.1 million), which was equal to the
            carrying value of the land.

            On February 7, 2007, MID also acquired a 64 acre parcel of excess
            land at Laurel Park in Howard County, Maryland for cash
            consideration of $20.0 million. The gain on sale of the excess
            land of approximately $15.7 million, net of tax, has been
            reported as a contribution of equity in contributed surplus.

            The Company has been granted profit participation rights in
            respect of each of these three properties under which it is
            entitled to receive 15% of the net proceeds from any sale or
            development after MID achieves a 15% internal rate of return.

        (f) The Company has entered into a consulting agreement with MID,
            dated September 12, 2007, under which MID will provide consulting
            services to the Company's management and Board of Directors in
            connection with the debt elimination plan. The Company is
            required to reimburse MID for its expenses, but there are no fees
            payable to MID in connection with the consulting agreement. The
            consulting agreement may be terminated by either party under
            certain circumstances.

        (g) On March 31, 2006, the Company sold a non-core real estate
            property located in the United States to Magna for total proceeds
            of $5.6 million, net of transaction costs. The gain on sale of
            the property of approximately $2.9 million, net of tax, has been
            reported as a contribution of equity in contributed surplus. In
            accordance with the terms of the senior secured revolving credit
            facility, the Company used the net proceeds from this transaction
            to repay principal amounts outstanding under this credit
            facility.

    15. Commitments and Contingencies

        (a) The Company generates a substantial amount of its revenues from
            wagering activities and, therefore, it is subject to the risks
            inherent in the ownership and operation of a racetrack. These
            include, among others, the risks normally associated with changes
            in the general economic climate, trends in the gaming industry,
            including competition from other gaming institutions and state
            lottery commissions, and changes in tax and gaming laws.

        (b) In the ordinary course of business activities, the Company may be
            contingently liable for litigation and claims with, among others,
            customers, suppliers and former employees. Management believes
            that adequate provisions have been recorded in the accounts where
            required. Although it is not possible to accurately estimate the
            extent of potential costs and losses, if any, management
            believes, but can provide no assurance, that the ultimate
            resolution of such contingencies would not have a material
            adverse effect on the financial position of the Company.

        (c) On May 18, 2007, ODS Technologies, L.P., doing business as TVG
            Network, filed a summons against the Company, HRTV, LLC and
            XpressBet, Inc. seeking an order that the defendants be enjoined
            from infringing certain patents relating to interactive wagering
            systems and for an award for damages to compensate for the
            infringement. An Answer to Complaint, Affirmative Defenses and
            Counterclaims have been filed on behalf of the defendants. At the
            present time, the final outcome related to this action cannot be
            accurately determined by management.

        (d) At September 30, 2007, the Company has letters of credit issued
            with various financial institutions of $1.0 million to guarantee
            various construction projects related to activity of the Company.
            These letters of credit are secured by cash deposits of the
            Company. The Company also has letters of credit issued under its
            senior secured revolving credit facility of $24.7 million (refer
            to note 9(a)).

        (e) The Company has provided indemnities related to surety bonds and
            letters of credit issued in the process of obtaining licenses and
            permits at certain racetracks and to guarantee various
            construction projects related to activity of its subsidiaries. At
            September 30, 2007, these indemnities amounted to $6.1 million
            with expiration dates through 2008.

        (f) Contractual commitments outstanding at September 30, 2007, which
            related to construction and development projects, amounted to
            approximately $2.2 million.

        (g) At September 30, 2007, one of the Company's wholly-owned
            subsidiaries, SAC, had entered into three interest rate swap
            contracts, one on March 1, 2007, one on April 27, 2007 and one on
            July 26, 2007, all with effective dates of October 1, 2007, which
            fix the rate of interest at 6.98%, 7.06% and 7.24% per annum,
            respectively, to October 8, 2009 on a notional amount of
            $10.0 million per contract of the outstanding balance under the
            SAC term loan facility.

        (h) On March 4, 2007, the Company entered into a series of customer-
            focused agreements with Churchill Downs Incorporated ("CDI") in
            order to enhance wagering integrity and security, to own and
            operate HorseRacing TV(TM) ("HRTV(TM)"), to buy and sell horse
            racing content, and to promote the availability of horse racing
            signals to customers worldwide. These agreements involved the
            formation of a joint venture, TrackNet Media Group, LLC
            ("TrackNet Media"), a reciprocal content swap agreement and the
            purchase by CDI from the Company of a 50% interest in HRTV(TM).
            TrackNet Media is the vehicle through which the Company and CDI
            horse racing content is made available to third parties,
            including racetracks, off-track betting facilities, casinos and
            advance deposit wagering companies. TrackNet Media will also
            purchase horse racing content from third parties to be made
            available through the Company's and CDI's respective outlets.
            Under the reciprocal content swap agreement, the Company and CDI
            will exchange their respective horse racing signals. To
            facilitate the sale of 50% of HRTV(TM) to CDI, on March 4, 2007,
            HRTV, LLC was created with an effective date of April 27, 2007.
            Both the Company and CDI are required to make quarterly capital
            contributions, on an equal basis, until October 2009 to fund the
            operations of HRTV, LLC; however, the Company may under certain
            circumstances be responsible for additional capital commitments.
            The Company's share of the required capital contributions to
            HRTV, LLC is expected to be approximately $7.0 million of which
            $0.8 million has been contributed to September 30, 2007.

        (i) On November 15, 2006, the Company opened the slots facility at
            Gulfstream Park, which now offers 1,221 slot machines, of which
            516 slot machines were available on November 15, 2006 and an
            additional 705 slot machines were available on March 20, 2007.
            The Company opened the slots facilities despite an August 2006
            decision rendered by the Florida First District Court of Appeals
            that reversed a lower court decision granting summary judgment in
            favor of "Floridians for a Level Playing Field" ("FLPF"), a group
            in which Gulfstream Park is a member. The Court ruled that a
            trial is necessary to determine whether the constitutional
            amendment adopting the slots initiative, approved by Floridians
            in the November 2004 election, was invalid because the petitions
            bringing the initiative forward did not contain the minimum
            number of valid signatures. FLPF filed an application for a
            rehearing, rehearing en banc before the full panel of the Florida
            First District Court of Appeals and Certification by the Florida
            Supreme Court. On November 30, 2006, in a split decision, the en
            banc court affirmed the August 2006 panel decision and certified
            the matter to the Florida Supreme Court, which stayed the
            appellate court ruling pending its jurisdictional review of the
            matter. On September 27, 2007, the Florida Supreme Court ruled
            that the matter was not procedurally proper for consideration by
            the court. Its order effectively remanded the matter to the trial
            court for a trial on the merits. A trial on the merits will
            likely take over a year to fully develop and could take as many
            as three years to achieve a full factual record and trial court
            ruling for an appellate court to review. The Company believes
            that the August 2006 decision rendered by the Florida First
            District Cou rt of Appeals is incorrect and that any allegations
            of fraud in the securing of the petitions will ultimately be
            disproven at the trial level, and accordingly, we have proceeded
            to open the slots facility. At September 30, 2007, the carrying
            value of the fixed assets related to the slots facility is
            approximately $32.0 million. If the August 2006 decision rendered
            by the Florida First District Court of Appeals is correct, the
            Company may incur a write-down of these fixed assets.

        (j) In May 2005, a Limited Liability Company Agreement was entered
            into with Forest City concerning the planned development of "The
            Village at Gulfstream Park(TM)". That agreement contemplates the
            development of a mixed-use project consisting of residential
            units, parking, restaurants, hotels, entertainment, retail
            outlets and other commercial use projects on a portion of the
            Gulfstream Park property. Forest City is required to contribute
            up to a maximum of $15.0 million as an initial capital
            contribution. The Company is obligated to contribute 50% of any
            equity amounts in excess of $15.0 million as and when needed,
            however, to September 30, 2007, the Company has not made any such
            contributions. At September 30, 2007, approximately $28.0 million
            of costs have been incurred by The Village at Gulfstream Park,
            LLC, which have been funded by a construction loan and equity
            contributions from Forest City. The Company has reflected its
            share of equity amounts in excess of $15.0 million, of
            approximately $2.8 million, as an obligation which is included in
            "other accrued liabilities" on the accompanying consolidated
            balance sheets. The Limited Liability Company Agreement also
            contemplated additional agreements, including a ground lease, a
            reciprocal easement agreement, a development agreement, a leasing
            agreement and a management agreement which were executed upon
            satisfaction of certain conditions. Upon the opening of The
            Village at Gulfstream Park(TM), construction of which commenced
            in late June 2007, annual cash receipts (adjusted for certain
            disbursements and reserves) will first be distributed to the
            Forest City partner, subject to certain limitations, until such
            time as the initial contribution accounts of the partners are
            equal. Thereafter, the cash receipts are generally expected to be
            distributed to the partners equally, provided they maintain their
            equal interest in the partnership. The annual cash payments made
            to the Forest City partner to equalize the partners' initial
            contribution accounts will not exceed the amount of the annual
            ground rent.

        (k) On September 28, 2006, certain of the Company's affiliates
            entered into definitive operating agreements with certain Caruso
            Affiliated affiliates regarding the proposed development of The
            Shops at Santa Anita on approximately 51 acres of undeveloped
            lands surrounding Santa Anita Park. This development project,
            first contemplated in an April 2004 Letter of Intent which also
            addressed the possibility of developing undeveloped lands
            surrounding Golden Gate Fields, contemplates a mixed-use
            development with approximately 800,000 square feet of retail,
            entertainment and restaurants as well as 4,000 parking spaces.
            Westfield Corporation ("Westfield"), a developer of a neighboring
            parcel of land, has challenged the manner in which the
            entitlement process for the development of the land surrounding
            Santa Anita Park has been proceeding. On May 16, 2007, Westfield
            commenced civil litigation in the Los Angeles Superior Court in
            an attempt to overturn the Arcadia City Council's approval and
            granting of entitlements related to the construction of The Shops
            at Santa Anita. In addition, on May 21, 2007, Arcadia First!
            filed a petition against the City of Arcadia to overturn the
            entitlements and named the Company and certain of its
            subsidiaries as real parties in interest. If either Westfield or
            Arcadia First! is ultimately successful in its challenge,
            development efforts could potentially be delayed or suspended.
            The first hearings on the merits of the petitioners' claims are
            scheduled to be heard before the trial judge during the third
            week of April 2008. To September 30, 2007, the Company has
            expended approximately $9.7 million on these initiatives, of
            which $3.4 million was paid during the nine months ended
            September 30, 2007. These amounts have been recorded as "real
            estate properties, net" on the accompanying consolidated balance
            sheets. Under the terms of the Letter of Intent, the Company may
            be responsible to fund additional costs, however, to
            September 30, 2007, the Company has not made any such payments.

        (l) The Meadows participates in a multi-employer defined benefit
            pension plan for which the pension plan's total vested
            liabilities exceed its assets. An updated actuarial valuation is
            in the process of being obtained, however, based on allocation
            information currently provided by the plan, the portion of the
            estimated unfunded liability for vested benefits attributable to
            The Meadows is approximately $3.7 million. Effective November 1,
            2007, the New Jersey Sports & Exposition Authority ("NJSEA")
            withdrew from the plan and The Meadows now remains the only
            participant in the plan. In light of the NJSEA's withdrawal from
            the plan, the Company is considering its options with respect to
            The Meadows' participation in the plan and has yet to determine
            whether The Meadows will also withdraw from the plan. As part of
            the indemnification obligations under the holdback agreement with
            Millennium-Oaktree, a withdrawal liability that may be triggered
            if The Meadows decides to withdraw from the plan will be settled
            under the holdback agreement (refer to note 6).

    16. Segment Information

        Operating Segments

        The Company's reportable segments reflect how the Company is
        organized and managed by senior management. The Company has two
        principal operating segments: racing and gaming operations and real
        estate and other operations. The racing and gaming segment has been
        further segmented to reflect geographical and other operations as
        follows: (1) California operations include Santa Anita Park, Golden
        Gate Fields and San Luis Rey Downs; (2) Florida operations include
        Gulfstream Park's racing and gaming operations and the Palm Meadows
        Training Center; (3) Maryland operations include Laurel Park, Pimlico
        Race Course, Bowie Training Center and the Maryland off-track betting
        network; (4) Southern U.S. operations include Lone Star Park,
        Remington Park's racing and gaming operations and its off-track
        betting network; (5) Northern U.S. operations include The Meadows and
        its off-track betting network, Thistledown, Great Lakes Downs,
        Portland Meadows and the Oregon off-track betting network and the
        North American production and sales operations for StreuFex(TM);
        (6) European operations include Magna Racino(TM) and the European
        production and sales operations for StreuFex(TM); (7) PariMax
        operations include XpressBet(R), HRTV(TM) to April 27, 2007,
        MagnaBet(TM), RaceONTV(TM), AmTote and the Company's equity
        investments in Racing World Limited, TrackNet Media and HRTV, LLC
        from April 28, 2007; and (8) Corporate and other operations include
        costs related to the Company's corporate head office, cash and other
        corporate office assets and investments in racing related real estate
        held for development. Eliminations reflect the elimination of
        revenues between business units. The real estate and other operations
        segment includes the Company's residential housing development.
        Comparative amounts reflected in segment information for the three
        and nine months ended September 30, 2006 have been reclassified to
        reflect MagnaBet(TM) and RaceONTV(TM) in PariMax operations rather
        than in European operations.

        The Company uses revenues and earnings (loss) before interest, income
        taxes, depreciation and amortization ("EBITDA") as key performance
        measures of results of operations for purposes of evaluating
        operating and financial performance internally. Management believes
        that the use of these measures enables management and investors to
        evaluate and compare, from period to period, operating and financial
        performance of companies within the horse racing industry in a
        meaningful and consistent manner as EBITDA eliminates the effects of
        financing and capital structures, which vary between companies.
        Because the Company uses EBITDA as a key measure of financial
        performance, the Company is required by U.S. GAAP to provide the
        information in this note concerning EBITDA. However, these measures
        should not be considered as an alternative to, or more meaningful
        than, net income (loss) as a measure of the Company's operating
        results or cash flows, or as a measure of liquidity.

        The accounting policies of each segment are the same as those
        described in the "Summary of Significant Accounting Policies" section
        of the Company's annual report on Form 10-K for the year ended
        December 31, 2006.

        The following summary presents key information about reported
        segments for the three and nine months ended September 30, 2007 and
        2006 and at September 30, 2007 and December 31, 2006:

                                 Three months ended      Nine months ended
                                    September 30,           September 30,
                              -----------------------------------------------
                                  2007        2006        2007        2006
        ---------------------------------------------------------------------
        Revenues
        California operations $    8,010  $   21,116  $  167,756  $  182,223
        Florida operations        11,129         254     109,685      78,921
        Maryland operations       18,961      19,136      88,530      90,871
        Southern U.S. operations  34,167      32,048     107,379     107,698
        Northern U.S. operations  20,441      22,763      64,108      69,532
        European operations        1,995       2,711       6,180       6,967
        PariMax operations        18,307      13,801      62,807      36,893
        ---------------------------------------------------------------------
                                 113,010     111,829     606,445     573,105
        Corporate and other          151          34         257         118
        Eliminations              (1,324)       (552)    (10,519)     (7,695)
        ---------------------------------------------------------------------
        Total racing and gaming
         operations              111,837     111,311     596,183     565,528

        Total real estate and
         other operations          2,695         717       5,586       3,742
        ---------------------------------------------------------------------

        Total revenues        $  114,532  $  112,028  $  601,769  $  569,270
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

                                 Three months ended      Nine months ended
                                    September 30,           September 30,
                              -----------------------------------------------
                                  2007        2006        2007        2006
        ---------------------------------------------------------------------
        Earnings (loss) before
         interest, income
         taxes, depreciation
         and amortization
         ("EBITDA")
        California operations $   (6,436) $   (2,403) $   13,627  $   20,285
        Florida operations        (8,500)     (4,317)     (3,217)      6,109
        Maryland operations       (1,767)     (1,792)      8,024       8,147
        Southern U.S. operations   1,956       2,281       8,997      11,798
        Northern U.S. operations    (529)       (569)     (2,151)       (855)
        European operations       (2,754)     (2,467)     (5,620)     (8,291)
        PariMax operations           473      (2,689)      3,224      (5,214)
        ---------------------------------------------------------------------
                                 (17,557)    (11,956)     22,884      31,979
        Corporate and other       (7,959)     (5,648)    (20,059)    (20,882)
        Predevelopment, pre-
         opening and other costs    (451)     (4,324)     (1,869)     (7,418)
        ---------------------------------------------------------------------
        Total racing and
         gaming operations       (25,967)    (21,928)        956       3,679
        ---------------------------------------------------------------------
        Real estate and
         other operations          1,358         885       2,110       1,573
        Write-down of long-
         lived assets             (1,444)          -      (1,444)          -
        ---------------------------------------------------------------------
        Total real estate and
         other operations            (86)        885         666       1,573
        ---------------------------------------------------------------------

        Total EBITDA          $  (26,053) $  (21,043) $    1,622  $    5,252
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Reconciliation of EBITDA to Net Loss

                                        Three months ended September 30, 2007
                                        -------------------------------------
                                            Racing   Real Estate
                                          and Gaming   and Other
                                          Operations  Operations       Total
        ---------------------------------------------------------------------
        EBITDA (loss) from continuing
         operations                       $  (25,967) $      (86) $  (26,053)
        Interest expense, net                 12,612          68      12,680
        Depreciation and amortization         11,840           8      11,848
        ---------------------------------------------------------------------
        Loss from continuing operations
         before income taxes              $  (50,419) $     (162)    (50,581)
        Income tax benefit                                              (770)
        ---------------------------------------------------------------------
        Net loss                                                  $  (49,811)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

                                        Three months ended September 30, 2006
                                        -------------------------------------
                                            Racing   Real Estate
                                          and Gaming   and Other
                                          Operations  Operations       Total
        ---------------------------------------------------------------------
        EBITDA (loss) from continuing
         operations                       $  (21,928) $      885  $  (21,043)
        Interest expense (income), net        16,462        (185)     16,277
        Depreciation and amortization         11,246           6      11,252
        ---------------------------------------------------------------------
        Income (loss) from continuing
         operations before income taxes   $  (49,636) $    1,064     (48,572)
        Income tax benefit                                              (863)
        ---------------------------------------------------------------------
        Loss from continuing operations                              (47,709)
        Loss from discontinued operations                             (3,033)
        ---------------------------------------------------------------------
        Net loss                                                  $  (50,742)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

                                         Nine months ended September 30, 2007
                                         ------------------------------------
                                            Racing   Real Estate
                                          and Gaming   and Other
                                          Operations  Operations       Total
        ---------------------------------------------------------------------
        EBITDA from continuing operations $      956  $      666  $    1,622
        Interest expense, net                 37,203         145      37,348
        Depreciation and amortization         33,037          24      33,061
        ---------------------------------------------------------------------
        Income (loss) from continuing
         operations before income taxes   $  (69,284) $      497     (68,787)
        Income tax expense                                             1,992
        ---------------------------------------------------------------------
        Net loss                                                  $  (70,779)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

                                         Nine months ended September 30, 2006
                                         ------------------------------------
                                            Racing   Real Estate
                                          and Gaming   and Other
                                          Operations  Operations       Total
        ---------------------------------------------------------------------
        EBITDA from continuing operations $    3,679  $    1,573  $    5,252
        Interest expense (income), net        45,660        (519)     45,141
        Depreciation and amortization         31,221          30      31,251
        ---------------------------------------------------------------------
        Income (loss) from continuing
         operations before income taxes   $  (73,202) $    2,062     (71,140)
        Income tax expense                                             1,552
        ---------------------------------------------------------------------
        Loss from continuing operations                              (72,692)
        Loss from discontinued operations                             (2,176)
        ---------------------------------------------------------------------
        Net loss                                                  $  (74,868)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

                                                  September 30,  December 31,
                                                          2007          2006
        ---------------------------------------------------------------------
                                                                   (restated
                                                                    -note 7)
        Total Assets
        California operations                      $   286,481  $    309,443
        Florida operations                             354,577       361,550
        Maryland operations                            165,801       171,135
        Southern U.S. operations                       144,873       141,213
        Northern U.S. operations                        51,324        46,913
        European operations                             56,223        55,624
        PariMax operations                              44,018        41,625
        ---------------------------------------------------------------------
                                                     1,103,297     1,127,503
        Corporate and other                             58,938        55,370
        ---------------------------------------------------------------------
        Total racing and gaming operations           1,162,235     1,182,873
        Total real estate and other operations          11,358        33,884
        Assets held for sale                            29,150        30,128
        ---------------------------------------------------------------------
        Total assets                               $ 1,202,743  $  1,246,885
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    17. Subsequent Events

        (a) On October 31, 2007, the Company filed a registration statement
            on Form S-8 for the purpose of registering additional securities
            of the same class as those registered under a currently effective
            registration statement on Form S-8, originally filed with the
            Securities and Exchange Commission (the "Commission") on
            March 14, 2000. The original registration statement registered an
            aggregate of 8,000,000 shares of Class A Subordinate Voting Stock
            under the Company's Plan. On April 16, 2007, the Company filed
            with the Commission a definitive Proxy Statement, which included
            a proposal for stockholder approval to increase the overall
            number of shares available for awards under the Plan by 2,000,000
            shares of Class A Subordinate Voting Stock, which proposal was
            approved by the Company's stockholders on May 9, 2007.

        (b) On October 29, 2007, the Company completed a $20.0 million
            private placement of the Company's Class A Subordinate Voting
            Stock to Fair Enterprise. Pursuant to the terms of the
            subscription agreement entered into on September 13, 2007, Fair
            Enterprise was issued 8.9 million shares of Class A Subordinate
            Voting Stock at a price of $2.25 per share. The price per share
            was set at the greater of (i) 90% of the volume weighted average
            price per share of Class A Subordinate Voting Stock on NASDAQ for
            the five trading days commencing on September 13, 2007; and
            (ii) U.S. $1.91, being 100% of the volume weighted average price
            per share of Class A Subordinate Voting Stock on NASDAQ for the
            five trading days immediately preceding September 13, 2007 (the
            date of announcement of the private placement). Prior to this
            transaction, Fair Enterprise owned approximately 7.5% of the
            issued and outstanding Class A Subordinate Voting Stock. As a
            result of the completion of the private placement, the percentage
            of Class A Subordinate Voting Stock beneficially owned by Fair
            Enterprise has increased to approximately 21.6% of the issued and
            outstanding Class A Subordinate Voting Stock, representing
            approximately 10.8% of the equity of the Company. The shares of
            Class A Subordinate Voting Stock issued pursuant to the
            subscription agreement were issued and sold in a private
            transaction exempt from registration under Section 4(2) of the
            Securities Act of 1933, as amended.

        (c) On September 24, 2007, the Company exercised its option to
            acquire the remaining voting and equity interests in The Maryland
            Jockey Club, pursuant to an agreement with certain companies
            controlled by Joseph De Francis, a member of the Company's Board
            of Directors, and Karin De Francis. Under the terms of the option
            agreement, the Company paid $18.3 million plus interest on
            October 5, 2007. At September 30, 2007 and December 31, 2006,
            this obligation was reflected as "long-term debt due within one
            year" on the accompanying consolidated balance sheets and is
            secured by letters of credit under the Company's senior secured
            revolving credit facility.

        (d) On October 2, 2007, a wholly-owned subsidiary of the Company that
            owns and operates Santa Anita Park amended and extended its term
            and revolving loan arrangements with a U.S. financial
            institution. The principal amendments to the term and revolving
            loan agreements included reducing the amount available under the
            revolving loan facility from $10.0 million to $7.5 million,
            requiring the aggregate outstanding principal under the revolving
            loan facility to be fully repaid for a period of 60 consecutive
            days during each year, increasing the amount available under the
            term loan facility from $60.0 million to $67.5 million, reducing
            the monthly principal repayments under the term loan facility to
            $375 thousand, extending the maturity date for both facilities to
            October 31, 2012 and modifying certain financial covenants.
    





For further information:

For further information: Blake Tohana, Executive Vice-President and
Chief Financial Officer, Magna Entertainment Corp., 337 Magna Drive, Aurora,
ON L4G 7K1, Tel: (905) 726-7493

Organization Profile

MAGNA ENTERTAINMENT CORP.

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