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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002 OR

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

FOR THE TRANSITION PERIOD FROM __________TO___________

Commission file number 000-25306

EQUUS GAMING COMPANY L.P.
-------------------------------------------------------
(Exact name of registrant as specified in its charter)

Virginia 54-1719877
--------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

El Comandante Race Track
Main Building First Floor
65th Infantry Avenue
Rd. 3 Km. 15.3
Canovanas, PR 00729
-----------------------------------------------------
(Address of Principal Executive Offices and Zip Code)

(787) 641-5844
-----------------------------------------------------
(Registrant's telephone number, including area code)


-----------------------------------------------------
(Former name, former address and former fiscal year, if
changed since last report)

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

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date (November 1, 2002). 14,389,824
Class A Units





EQUUS GAMING COMPANY L.P.
FORM 10 Q
INDEX

PAGE
NUMBER
------

PART I - FINANCIAL INFORMATION


Item 1. Consolidated Financial Statements

Consolidated Statements of Operations for the Nine
Months and Three months ended September 30, 2002 and 2001 (Unaudited) 3

Consolidated Statements of Comprehensive Loss for the
Nine months and Three months ended September 30, 2002 and 2001 (Unaudited) 5

Consolidated Balance Sheets at September 30, 2002 (Unaudited)
and December 31, 2001 (Unaudited) 6

Consolidated Statement of Changes in Partners' Deficit for the
Nine Months and Three months ended September 30, 2002 (Unaudited) 8

Consolidated Statements of Cash Flows for the Nine Months and Three
Months Ended September 30, 2002 and 2001 (Unaudited) 9

Notes to Consolidated Financial Statements 11

Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations 30
Liquidity and Capital Resources 35


PART II - OTHER INFORMATION

Item 1. Legal Proceedings 39
Item 2. Material Modifications of Rights of Registrant's Securities 42
Item 3. Default upon Senior Securities 42
Item 4. Submission of Matters to a Vote of Security Holders 42
Item 5. Other Information 42
Item 6. Exhibits and Reports on Form 8-K 42

Signatures 43

Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 43

Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 44



2



EQUUS GAMING COMPANY L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,

(UNAUDITED)

2002 2001
------------ -------------

REVENUES:
Commissions on wagering $37,849,342 $ 38,581,909
Gain(Loss) on sale of assets 5,639 (1,149,579)
Other revenues 3,552,069 3,366,848
------------ -------------
41,407,050 40,799,178
------------ -------------
EXPENSES:
Payments to horseowners 19,919,485 20,771,999
Salaries, wages and employee benefits 5,952,560 6,757,868
Operating expenses 7,070,326 8,413,056
General and administrative 3,562,240 4,778,776
Marketing, television and satellite costs 3,147,819 4,407,323
Financial expenses 6,661,872 7,263,359
Depreciation and amortization 2,831,151 2,907,981
------------ -------------
49,145,453 55,300,362
------------ -------------

LOSS BEFORE INCOME TAXES AND MINORITY INTEREST (7,738,403) (14,501,184)

PROVISION FOR INCOME TAXES 37,581 127,451
------------ -------------


LOSS BEFORE MINORITY INTEREST (7,775,984) (14,628,635)


MINORITY INTEREST IN LOSSES (759,851) (1,101,944)
------------ -------------

NET LOSS $(7,016,133) $(13,526,691)
============ =============


ALLOCATION OF NET LOSS:
General partners $ (70,161) $ (135,267)
Limited partners (6,945,972) (13,391,424)
------------ -------------
$(7,016,133) $(13,526,691)
------------ -------------
BASIC AND DILUTED LOSS PER UNIT AMOUNTS: $ (0.49) $ (0.94)
============ =============
WEIGHTED AVERAGE UNITS OUTSTANDING 14,389,824 14,389,824
------------ -------------

The accompanying notes are an integral part of these consolidated statements



3



EQUUS GAMING COMPANY L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30,

(UNAUDITED)

2002 2001
------------ ------------

REVENUES:
Commissions on wagering $11,554,678 $11,807,009
Gain on sale of investment - -
Other revenues 1,512,651 1,180,639
------------ ------------
13,067,329 12,987,648
------------ ------------
EXPENSES:
Payments to horseowners 6,068,212 6,349,152
Salaries, wages and employee benefits 1,936,665 2,384,290
Operating expenses 2,644,402 2,709,358
General and administrative 1,154,151 1,803,555
Marketing, television and satellite costs 1,277,163 1,307,141
Financial expenses 2,523,342 1,971,499
Depreciation and amortization 1,167,277 1,017,181
------------ ------------
16,771,212 17,542,176
------------ ------------

LOSS BEFORE INCOME TAXES AND MINORITY INTEREST (3,703,883) (4,554,528)

PROVISION FOR INCOME TAXES 11,366 16,609
------------ ------------

LOSS BEFORE MINORITY INTEREST (3,715,249) (4,571,137)

MINORITY INTEREST IN LOSSES (447,040) (164,213)
------------ ------------

NET LOSS $(3,268,209) $(4,406,924)
============ ============


ALLOCATION OF NET LOSS:
General partners $ (32,682) $ (44,069)
Limited partners (3,235,527) (4,362,855)
------------ ------------
$(3,268,209) $(4,406,924)
------------ ------------
BASIC AND DILUTED LOSS PER UNIT AMOUNTS: $ (0.23) $ (0.31)
============ ============
WEIGHTED AVERAGE UNITS OUTSTANDING 14,389,824 14,389,824
------------ ------------

The accompanying notes are an integral part of these consolidated statements



4




EQUUS GAMING COMPANY L.P.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
FOR THE NINE AND THREE MONTHS ENDED SEPTEMBER 30,

(UNAUDITED)

FOR THE NINE MONTHS ENDED SEPTEMBER 30,

2002 2001
------------ -------------

NET LOSS $(7,016,133) $(13,526,691)

OTHER COMPREHENSIVE LOSS:

Currency translation adjustments 632,537 21,819

COMPREHENSIVE LOSS $(6,383,596) $(13,504,872)
------------ -------------

FOR THE THREE MONTHS ENDED SEPTEMBER 30,

2002 2001
------------ -------------

NET (LOSSES) EARNINGS $(3,268,209) $ (4,406,924)

OTHER COMPREHENSIVE (LOSSES) INCOME:

Currency translation adjustments 396,950 184,417

------------ -------------
COMPREHENSIVE (LOSSES) INCOME $(2,871,259) $ (4,222,507)
------------ -------------

The accompanying notes are an integral part of these consolidated statements



5




EQUUS GAMING COMPANY L.P.
CONSOLIDATED BALANCE SHEETS

ASSETS


SEPTEMBER 30 DECEMBER 31
2002 2001
-------------- -------------
(UNAUDITED) (UNAUDITED)

CASH AND CASH EQUIVALENTS:
Unrestricted $ 335,500 $ 917,731
Restricted 780,433 469,886
-------------- -------------
1,115,933 1,387,617
-------------- -------------

PROPERTY AND EQUIPMENT:
Land 8,472,287 8,773,596
Building and improvements 51,148,901 51,404,903
Equipment 18,484,023 16,564,768
-------------- -------------
78,105,211 76,743,267
Accumulated depreciation (28,283,714) (24,947,693)
-------------- -------------
49,821,497 51,795,574
-------------- -------------

DEFERRED COSTS, NET:
Financing 678,585 1,133,065
Other 434,339 27,254
-------------- -------------
1,112,924 1,160,319
-------------- -------------

OTHER ASSETS:
Accounts receivable, net 3,722,302 3,535,264
Notes receivable 64,830 160,301
Other assets 1,449,294 892,324
-------------- -------------
5,236,426 4,587,889
-------------- -------------

$ 57,286,780 $ 58,931,399
============== =============

The accompanying notes are an integral part of these consolidated statements



6



EQUUS GAMING COMPANY L.P.
CONSOLIDATED BALANCE SHEETS

(continued)

LIABILITIES AND PARTNERS' DEFICIT


SEPTEMBER 30 DECEMBER 31
2002 2001
-------------- -------------
(UNAUDITED) (UNAUDITED)

FIRST MORTGAGE NOTES:
Principal, net of note discount of
$317,779 and $538,169 $ 54,136,221 $ 53,915,831
Accrued interest 8,210,182 3,492,926
-------------- -------------
62,346,403 57,408,757
-------------- -------------

OTHER LIABILITIES:
Accounts payable and accrued liabilities 23,846,269 24,526,507
Outstanding winning tickets and refunds 2,021,605 1,693,721
Notes payable 6,997,702 6,100,182
Capital lease obligations 865,361 1,256,335
-------------- -------------
33,730,937 33,576,745
-------------- -------------

DEFERRED INCOME TAXES 3,741,411 3,741,411
-------------- -------------

MINORITY INTEREST (1,846,942) (1,494,082)
-------------- -------------

COMMITMENTS AND CONTINGENCIES, SEE NOTE 2

PARTNERS' DEFICIT
General Partner (959,980) (1,105,861)
Limited Partners - 20,000,000 units authorized;
14,389,824 units issued and outstanding. (39,725,049) (33,195,571)
-------------- -------------
(40,685,029) (34,301,432)
-------------- -------------

$ 57,286,780 $ 58,931,399
============== =============

The accompanying notes are an integral part of these consolidated statements



7



EQUUS GAMING COMPANY L.P.
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002

(UNAUDITED)


GENERAL LIMITED
PARTNERS PARTNERS TOTAL
------------ ------------- -------------

BALANCES, DECEMBER 31, 2001 $(1,105,861) $(33,195,571) $(34,301,432)

Net loss for the period (70,161) (6,945,972) (7,016,133)

Currency translation adjustments 6,325 626,212 632,537


------------ ------------- -------------
BALANCES, SEPTEMBER 30, 2002 $(1,169,697) $(39,515,331) $(40,685,028)
============ ============= =============

The accompanying notes are an integral part of these consolidated statements



8



EQUUS GAMING COMPANY L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002
(UNAUDITED)

2002 2001
------------ -------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $(7,016,133) $(13,526,691)
------------ -------------
Adjustments to reconcile net (loss) income to
net cash provided by operating activities-
Loss on sale of investment 1,149,579
Gain on sale of assets (5,639)
Depreciation and amortization 4,105,292 3,499,703
Deferred income tax provision - 61,309
Minority interest (759,851) (1,101,944)
Currency translation adjustments 1,597,049 617,319
Decrease (increase) in assets-
Accounts receivable (187,038) (503,542)
Prepayments and other assets (556,969) (105,941)
Increase (decrease) in liabilities-
Accounts payable and accrued liabilities 4,037,016 4,723,788
Outstanding winning tickets and refunds 327,884 435,463
------------ -------------
Total adjustments 8,557,744 8,775,734
------------ -------------

Net cash provided by operating activities 1,541,611 (4,750,957)
------------ -------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (2,214,586) (4,508,992)
Deferred costs 398,545 196,475
Decrease (increase) in notes receivable, net 95,471 286,301
Panama desconsolidation (83,895)
Purchase of Panama Preferred Stocks (3,089,231)
------------ -------------
Net cash provided by (used in) investing activities (1,720,570) (7,199,342)
------------ -------------

The accompanying notes are an integral part of these consolidated statements



9



EQUUS GAMING COMPANY L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,


2002 2001
----------- ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Loan proceeds from affiliates $ - $ 3,288,454
Proceeds from working capital loan from United Tote 931,956
Issuance of preferred stock net of costs 6,882,037
Payments of financing costs (599,271)
Payments on notes payable and capital
lease obligations (425,410) (4,157,178)
----------- ------------
Net cash used in financing activities (92,725) 6,013,313
----------- ------------

NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (271,684) (5,936,987)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,387,617 7,437,301

----------- ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $1,115,933 $ 1,500,314
=========== ============

SUPPLEMENTAL INFORMATION:
Interest paid $ 363,493 $ 8,173,896

The accompanying notes are an integral part of these consolidated statements



10

EQUUS GAMING COMPANY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES:


Equus Gaming Company L.P. (the "Company"), a Virginia limited partnership,
is engaged in thoroughbred racing, wagering and other gaming businesses in the
Caribbean and South America. Through its subsidiaries, the Company operates
three racetracks and manages an extensive off-track betting ("OTB") system in
the various countries where the Company operates.

The Company has a 99% interest in Housing Development Associates S.E.
("HDA") who has a 100% interest in the El Comandante Group ("ECG"), which is
comprised of HDA, El Comandante Management Company LLC ("ECMC"), the manager of
El Comandante Race Track and El Comandante Capital Corporation ("ECCC"), the
issuer of the First Mortgage Notes (See Note 3 below). El Comandante is the
only licensed thoroughbred racing facility in Puerto Rico. The track has been
operated by ECG since January 1, 1998. Satellites Services International,
Inc. ("SSI") and Agency Betting Network, Inc. ("ABN") are wholly owned
subsidiaries of the Company. SSI will provide up-link services, satellite
time (contracted from a third party), and leasing of video and data
telecommunication equipment to transmit (or simulcast) live races from and to
the Company's racetracks and OTB agencies, including live races from outside the
Company's operational territories to the Company's agency distribution network
in order to increase the level of wagering revenues through the OTB systems.
ABN is establishing and operating an OTB agency system in Colombia in
conjunction with Los Comuneros Race Track in Medellin, Colombia ("Los
Comuneros"), owned and operated by Equus Comuneros S.A. ("Equus-Comuneros"), of
which the Company has a 50% ownership. The Colombia OTB system is expected to
operate in Bogota, Medellin and other major cities.

In 1999 the Company initiated a vertical integration process to consolidate
its telecommunications needs into a centralized hub-and-spoke system based at El
Comandante racetrack in Puerto Rico. During 2000 and 2001 the development of
this system encountered significant technical obstacles, which necessitated the
redesigning of its architecture, reallocation of the equipment and ultimately, a
strategic revision of the objectives for the system.

The vertical integration process began with the development of a C-Band
satellite uplink facility in Panama in the fall of 1999 to fulfill the
broadcasting needs of this jurisdiction which, at the time, belonged to the
Company's international network of pari-mutuel operations. By December of that
year the consolidation process had identified VSAT technology via the Ku-Band
medium as the application necessary to address the Company's needs for video and
data transmission throughout its proprietary agency-betting network in Puerto
Rico, Panama, Colombia and the Dominican Republic.

The significant investment made by the Company during 1999-2000 in the
satellite telecommunications equipment required to implement the VSAT system
included the development of a main uplink Hub in Puerto Rico, and of supporting
Ku-Band uplinks to service the markets of Panama and Colombia. Initial steps
were also taken to establish a supporting uplink in the Dominican Republic
although the facility has not been completed at this time.

Several factors altered the course of the VSAT project, and namely, the
incompatibility of this technology with the Autotote system currently in use
throughout the Company's pari-mutuel operations hindered its deployment as the
primary means of transmission for the agency-betting network's wagering data.
Consequently, the Company is in the process of evaluating several alternate
commercial applications for this equipment both in Colombia and Puerto Rico.


11

Conversely, the aforementioned satellite uplink facilities continue to provide
video broadcasting services for the Company's pari-mutuel operations in Puerto
Rico, Colombia and the Dominican Republic. In addition to the alternate
commercial uses being sought for the VSAT equipment, the Company's uplink
facilities are uniquely positioned to provide satellite broadcast services to
prospective clients in Puerto Rico, Colombia, and potentially in the Dominican
Republic.

The Company has a 55% interest in Galapagos, S.A. ("Galapagos"), the
operator since April 1995 of the V Centenario Race Track in the Dominican
Republic ("V Centenario"). The racetrack is government owned and operated by the
subsidiary under a long-term contract.

The Company disposed of its 51% interest in Equus Entertainment de Panama,
S.A., the operator since January, 1998 of the Presidente Remon Race Track in the
Republic of Panama.

On October 9, 2001 the Company entered into the following restructuring
with its minority shareholder of Equus Entertainment de Panama, Wall Street
Securities Trading Group, Inc. effective September 30, 2001:

1) The Company entered into a stock purchase agreement whereby the
Company sold its 204,000 shares of common stock, representing 51% of
the total issued and outstanding shares of Equus Entertainment de
Panama, for release from any obligations resulting from the Panama
operation. The Company recorded a net loss of $1,149,579 on the
transaction.

a. The Company has been released of all prior, present and future
obligations, known or unknown from October 9, 2001, until the
"Termination and Mutual Release" document is signed.

b. The purchaser has committed to using its best efforts to release
the Company from any obligations the Company may have assumed
under its concession from the Government of Panama in operating
and managing Hipodromo Presidente Remon. Until such time as the
aforementioned release is received by the Company, the purchaser
has drafted an "Undertaking and Indemnity" document indemnifying
the Company from any claims by the Government of Panama under the
Concession Agreement.

2) The Company then accepted 3,000 shares of $1,000 par value, preferred
stock in exchange for net claims due the Company. The number of shares
issued were to be reduced if the net claims were less than $2,859,680.
The final net claims on the Company's books amounted to $3,294,391 and
the investment was recorded at that amount as of September 30, 2001.
Terms and conditions of the preferred stock issue are as follows:

a. The shares will be redeemed by the issuer upon the racetrack's
concession agreement being terminated or October 31, 2021,
whichever comes first.

b. The issuer has the option to redeem the shares at par at anytime.

c. No dividends will accumulate up to October 2006; thereafter, the
shares will earn an annual cumulative dividend of 12%, payable
quarterly.

d. The shares have no voting rights except that no change in the
terms of the preferred stock can occur without the consent of the
preferred shareholders.

e. No other preferred shares can be issued with priority over these
shares, and in liquidation these shares have the same priority as
the common shares now existing.


12

f. No dividends will be paid to common shares while accumulated
dividends are payable to the preferred shares.

As of November 1, 2002, the Company has not received copies of the fully
executed documents mentioned above, nor received the 3,000 shares of preferred
stock.

In addition, all attempts to obtain certified financial statements from
Equus Entertainment de Panama as of September 30, 2001 have failed; therefore,
Panama has been "deconsolidated" for year 2001.

The Company also has since 1999 a controlling 50% interest in Equus
Comuneros S.A. ("Equus-Comuneros"), the owner and operator of Los Comuneros,
which it acquired for approximately $2.1 million. In 1999 Equus-Comuneros
received as a capital contribution from the minority stockholder, Los Comuneros
S.A., all assets and liabilities that were employed by the prior operator of Los
Comuneros. The assets mainly consisted of land, buildings and equipment for
approximately $4.7 million and liabilities of approximately $2.6 million. The
liabilities included mainly accounts payable to vendors and horse owners and
certain financial obligations with various maturities through 2004.

By means of Resolution 213 of October 31, 2001, of the Colombian
Superintendency of Societies, Equus Comuneros was accepted for government
supervised restructuring under the provisions of Colombian Law 550 of 1999.

Presently, negotiations with the Comuneros creditors are in process and
will result in one of the following two situations:

1. The creditors believe that Comuneros is a viable operation and will
settle all claims, or

2. The creditors believe that Comuneros is not viable causing an end to
claim negotiations and thereby forcing the government to commence
liquidation pursuant to Colombian law.

Equus Comuneros has not considered it necessary to make any adjustments to
the financial statements with respect to it not being able to continue
operating.

In 2000, the Company was awarded exclusive rights by the Government of
Uruguay to operate the Maronas racetrack in Montevideo and an off-track betting
agency network together with the right to operate up to 1,500 slot machines in 5
locations.

The necessary restoration of the racetrack would, in management's opinion,
require an initial investment of $12 million. Efforts to raise the $12 million
by the due date were unsuccessful. Consequently, the concession expired on June
30, 2001, and the Company's bid bond in the amount of $450,000 was forfeited and
thus, expensed during the fiscal year 2001. Subsequently, the concession was
awarded to another operator in the fourth quarter of 2001, which resulted in the
Company writing off its entire investment as of December 31, 2001.

As noted in the accompanying consolidated financial statements, the Company
has incurred recurring losses from operations, has a partners' deficit of
$40,685,029 and projects a negative cash flow for 2002. These factors, among
others, raise substantial doubt about the Company's ability to continue as a
going concern and to meet its obligations during 2002. The accompanying
financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might result should the Company be unable to
continue as a going concern.


13

Management has plans to overcome the Company's problems as follows:

(i) Request license approval in Colombia and Dominican Republic for casino
and/or sports book operations.

(ii) Continue to Implement cost reductions at all properties.

(iii) Request designation of the El Comandante facility as a tourist zone,
which would allow the addition of slot machines and authorization for
low interest bonds or notes. As of November 1, 2002, such approvals
have not been obtained.

(iv) Expand simulcasting in Colombia and Dominican Republic as well as
expand betting pool races.

(v) Obtain new bank financing or financing by the Wilson family.

There can be no assurance that any of the above will be achieved, or if
achieved, the results will be sufficient to enable the Company to continue to
operate.

On December 15, 2000 and June 15, 2002, the ECG failed to pay interest of
$7.2 million and principal of $10.2 million on the First Mortgage Notes (See
Note 3). This constituted a default under the Indenture. In addition, defaults
have occurred in the performance or breach, of covenants and/or warranties of
HDA and/or ECCC. There have been discussions with representatives of the
Government Development Bank for Puerto Rico and other government officials to
explore ways to obtain funds to bring the interest and principal current on the
Notes.

There can be no assurance that the ECG will obtain the required funding to
bring the delinquent interest and principal current, in which case the note
holders have indicated they intend to exercise their remedies under the
Indenture to declare the principal on the Notes to be due and immediately
payable and to seek a judgment or decree for payment of all money due. ECG has
the sole obligation to cure the defaults.

GOVERNMENT MATTERS

El Comandante is required to pay the Government of Puerto Rico various
taxes on wagering placed on thoroughbred horse races held at or simulcasted by
El Comandante (Puerto Rico). The taxes on wagering are required to be remitted
to the Department of the Treasury of Puerto Rico within two (2) days of the date
wagers are placed. From October 16, 2000 to February 7, 2001, El Comandante
failed to remit tax payments totaling $9,949,182.

On May 24, 2001, ECMC executed a Closing Agreement (the "Agreement") with
the Secretary of the Treasury of Puerto Rico (the "Secretary") whereby ECMC will
settle its assessed debt of unpaid excise taxes and commissions for the period
October, 2000 through February, 2001, in the amount of $11,172,450 (including
interest and late charges), plus an additional assessment of $60,141 (including
interest) for unpaid commissions for the period February 2, 2001 through
February 7, 2001 as follows:

1. Upon execution of the Agreement, ECMC paid $60,141 in full payment of
the February, 2001 assessment.

2. For a six-month period commencing June 1, 2001 and ending November 30,
2001, ECMC will pay $50,000 per week against the October, 2000 through
January, 2001 assessment. After the six-month period, the Secretary
will reevaluate the financial condition of ECMC, and may, upon
reasonable grounds, continue, modify or revoke the Agreement.


14

3. ECMC will continue to pay on a timely basis current excise taxes and
commissions.

4. ECMC will provide and maintain a bond in favor of the Secretary in the
amount of $500,000.

5. In the event ECMC defaults during the term of the Agreement, the
Secretary may accelerate the balance due plus any additional amounts
due as a result of the default.

6. As of September 30, 2002, ECMC has paid a total of $3,500,000 on the
indebtedness.

As of November 1, 2002, ECMC had fully complied with the terms and
provisions of the Agreement.

As of September 30, 2002, Equus Comuneros, S.A. owed the Colombian Tax and
National Customs Administration approximately $1,066,502, including interest,
for withholding at source tax. Management has recently met with the Government
to settle the amount outstanding. The plan proposed to the government is as
follows:

1. Five (5) year amortization of 10%, 15%, 20%, 25% and 30%,
respectively.

2. The Government is requesting a down payment, which is currently being
negotiated.

On August 18, 2001, ECMC executed a Closing Agreement (the "Agreement")
with the Municipality of Canovanas whereby ECMC settled a longstanding dispute
over the payment of the Volume of Business Tax assessed by the municipality.

The following schedule lists the deficiencies by fiscal year with the
corresponding interest and surcharges:

FISCAL INTEREST
TAX TAX AND
YEAR DEFICIENCY SURCHARGES TOTAL
------- ----------- ----------- --------
93/94 $ 74,087 $ 67,913 $142,000
96/97 120,397 68,224 188,621
97/98 126,666 59,110 185,776
98/99 123,366 45,233 168,599
99/00 93,367 24,897 118,264
00/01 116,735 19,455 136,190
----------- ----------- --------

Totals $ 654,618 $ 284,832 $939,450
=========== =========== ========

Prior to settlement, the Company as of June 30, 2001 had accrued a total
liability of $838,396 due for municipal taxes and other charges. On June 30,
2001, the Company recorded additional penalties and interest of $101,054.

The terms of the Agreement are as follows:

1. For the period August 1, 2001 through January 31, 2003, ECMC will pay
the Municipality of Canovanas $5,000 per week.

2. At the end of this eighteen (18) month period, the Municipality can
request full payment of the remaining balance, $559,450, or
renegotiate a final twelve (12) month payoff of the balance.


15

3. Should ECMC default at any time on the agreed payment terms, the
Municipality may declare the entire remaining balance due.

4. To guarantee the timely payments of the amounts due, ECMC has provided
to the Municipality two (2) payments bonds in the amount of $503,732
and $94,886, respectively.

As of November 1, 2002, ECMC was in compliance with the provisions of
the agreement.

On April 2, 2001, the House of Representatives of the Commonwealth of
Puerto Rico presented a resolution ordering an investigation of the operations
of ECMC with emphasis on the fiscal and financial administration of El
Comandante and its tax delinquency. As of October 22, 2001, all requested
information had been submitted by ECMC. The investigation has been completed,
but as of this date the House of Representatives has not issued their report or
otherwise disclosed their findings.

By means of Resolution 213 of October 31, 2001, of the Colombian
Superintendency of Societies, Equus Comuneros was accepted for government
supervised restructuring under the provisions of Colombian Law 550 of 1999.

Presently, negotiations with the Comuneros creditors are in process and
will result in one of the following two situations:

1. The creditors believe that Comuneros is a viable operation and will
settle all claims, or

2. The creditors believe that Comuneros is not viable causing an end to
claim negotiations and thereby forcing the government to commence
liquidation pursuant to Colombian law.

Equus Comuneros has not considered it necessary to make any adjustments to
the financial statements with respect to it not being able to continue
operating.


CONSOLIDATION AND PRESENTATION

The consolidated financial statements as of September 30, 2002 are
unaudited but include all adjustments (consisting of normal recurring
adjustments) which management considers necessary for a fair presentation of the
consolidated results of operations for the interim periods. The operating
results for the nine months ended September 30, 2002 are not necessarily
indicative of results for the year. Net losses per unit are calculated based on
weighted average number of Units outstanding. Outstanding warrants to purchase
Units do not have a material dilutive effect on the calculation of earnings per
Unit.

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States ("GAAP") requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities, if any, at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

These unaudited consolidated financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and note disclosures normally included in financial
statements prepared in accordance with GAAP have been condensed or omitted.
While management believes that the disclosures presented are adequate to make
the information not misleading, it is suggested that these financial statements
be read in conjunction with the financial statements and the notes of the
Company included in the Company's Annual Report filed on Form 10-K for the year
ended December 31, 2001.


16

The Company consolidates the entities in which it has a controlling
interest. The accompanying consolidated financial statements include the
accounts of the Company and its subsidiaries after eliminating all significant
intercompany transactions. All of the entities included in the consolidated
financial statements are hereinafter referred to collectively, when practicable,
as the "Company".

The Company has minority partners in HDA, Galapagos and Equus-Comuneros.
Therefore, the Company recorded minority interest based on the earnings (losses)
of these consolidated subsidiaries that are attributable to the minority
partners, as follows:

FOR THE NINE MONTHS FOR THE THREE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
---------- ------------ ---------- ----------
2002 2001 2002 2001
---------- ------------ ---------- ----------
SUBSIDIARY:
HDA $ (34,880) $ (62,800) $ (14,890) $ (27,650)
Galapagos - - - -
Equus-Panama - - - -
Equus-Comuneros (724,971) (1,039,144) (432,150) (136,563)
---------- ------------ ---------- ----------
$(759,851) $(1,101,944) $(447,040) $(164,213)
---------- ------------ ---------- ----------

In general, the minority interest is calculated based on the ownership
interest of the minority partners. HDA has a minority partner owning a 1%
interest. Galapagos' minority partners own a 45% interest. However, during
the nine months ended September 30, 2002 and 2001 the Company did not recognize
a minority interest in Galapagos' losses amounting to $267,769, and $279,182,
respectively, because the minority partners have no legal obligation to fund
losses in excess of their investment. As of September 30, 2002 the accumulated
losses, not allocated to the minority partners, amount to $2,573,700.
Equus-Comuneros minority partners own a 50% interest.

CURRENCIES

The Company consolidates its accounts with Galapagos and Equus-Comuneros
whose functional currency are the Dominican Republic peso and the Colombian
peso, respectively. The United States dollars ("US$") are also a recording
currency in these countries. US$ are exchanged into those foreign currencies
("FC$") and vice versa through commercial banks and/or the central banks of the
respective countries. The Company remeasures the monetary assets and
liabilities of the foreign subsidiaries that were recorded in US$ into the FC$
using the exchange rates in effect at the balance sheet date (the "current
rate") and all other assets and liabilities and capital accounts, at the
historical rates. The
Company then translates the financial statements of the foreign subsidiaries
from FC$ into US$ using the current rates, for all assets and liabilities, and
the average exchange rates prevailing during the year, for revenues and
expenses.

For the nine months ended September 30, 2002 and 2001, net exchange losses
resulting from re - measurement of accounts, together with losses from foreign
currency transactions, amounted to $961,113 and $373,795 respectively, which
amounts are included as operating expenses. Accumulated net loss from changes
in exchange rates due to the translation of assets and liabilities of the
foreign subsidiaries are included in partners' deficit and at September 30, 2002
and December 31, 2001 amounted to $349,378
and $283,159 respectively.


17

The current exchange rates in Dominican Republic as of September 30, 2002
and 2001 were US$1.00 to FC$17.56 and US$1.00 to FC$17.15, respectively. The
average exchange rates in Dominican Republic prevailing during the nine months
ended September 30, 2002 and 2001 were US$1.00 to FC$17.41 and US$1.00 to
FC$16.99, respectively. The current exchange rate in Colombia as of September
30, 2002 and 2001 were US$1.00 to FC$2,904 and $US1.00 to FC$2,407. The average
exchange rate in Colombia prevailing during the nine months ended September 30,
2002 and 2001 were US$1.00 to FC$2,484 and US$1.00 to FC$2,301.


2. COMMITMENTS AND CONTINGENCIES:

HORSE OWNERS' AGREEMENTS

The Company has separate agreements with the horse owners' confederation of
each country that establishes the amount payable to horse owners as purses in
exchange for the availability of thoroughbred horses for races. Payments to
horse owners are, in general, based on a percentage of wagering.

The Dominican Republic contract expires in December 2005. The Colombia
contract expires on December 31, 2009. It provides for certain minimum
guaranteed payments to horse owners during the first three years ($1.2 million
in 2000, increased in 2001 and 2002 in accordance with an inflation factor).

The Puerto Rico horse owners contract expires in July 2010. Under the
contract, the horse owners are guaranteed minimum earnings of $25,032,000 for
years 2000 and 2001. ECMC is obligated among other things to pay the horse
owners $90,000 annually for administrative costs and 50% of the principal and
interest owed on an outstanding Confederation loan with a principal balance due
of $526,000, plus accrued interest. ECMC also must invest $3,000,000 in
improvements to the racetrack during the 10-year term of the contract, as well
as provide up to $2,000,000 of financing the purchase of horses. Expenses
related to the new horse owners' contract are included in Other Expenses.

On March 16, 2001 an "Addendum to Contract" was executed by the Horse
Owners' Confederation and the Company, whereby the parties jointly agreed to:

(i) Increase the number of simulcast races each live race day from three
(3) to six (6).

(ii) Place three (3) of the simulcast races before the first live race and
place three (3) intermingled races after the fifth live race;.

(iii) Include simulcasting of nine (9) to twelve (12) races on Thursdays of
each week, a day that currently holds no live races.

(iv) In consideration for the above items, ECMC will pay an additional
$1,000,000 to the Horse Owners' Confederation if approved by the
Racing Board.

On June 28, 2001, the Puerto Rico Racing Board granted ECMC the right to
increase the number of simulcast races from the United States from three (3) to
six (6) per live race day. The Order allowed a three (3) month probationary
period commencing July 1, 2001, for ECMC to place three (3) simulcast races
before the first live race and three (3) after the fifth live race.

The Racing Board declined the simulcasting of races during the probationary
period on Thursday's, a day that currently holds no live races.


18

Pending final approval by the Racing Board, ECMC was obligated to pay the
Horse Owners' Confederation $1,000,000.

On October 16, 2001 following a hearing, the Racing Board suspended
effective October 22, all simulcasting temporarily allowed during the
probationary period. Since no final approval was obtained from the Racing
Board for the simulcasting of races, ECMC is no longer obligated to pay the
additional $1,000,000 to the Horse Owners' Confederation.

The Racing Board will allow simulcasting of special events such as the
Breeders' Cup, Kentucky Derby and the Preakness as well as the Caribbean Classic
and the Confraternity Classic from the host country if these races are not held
in Puerto Rico. ECMC is currently doing a cost/benefit analysis to determine
if the limited simulcasting will be economically worthwhile.

WAGERING SERVICES AGREEMENTS

The Company has separate agreements with Autotote Systems, Inc.
("Autotote") and United Tote Company ("United Tote") for providing wagering
services, software and equipment to each racetrack, necessary for the operation
of the off-track betting system. Payments under these contracts prior to July
20, 2002 are summarized as follows:

1. AUTOTOTE
--------

EL COMANDANTE V CENTENARIO LOS COMUNEROS
------------- ------------ ---------------
Expiration date 31-Mar-12 19-Jul-02 01-Jan-08
Cost of services, as a
percentage of wagering 0.65% 0.65% 1.20%
Minimum amount per year $ 800,800 $ 200,000 $ -

As of July 20, 2002, ABN purchased from Autotote the totalisator computer
system equipment and approximately 250 terminals. The purchase price for the
computer system equipment is $125,000 and $500 per complete terminal. ABN shall
pay for the equipment and terminals in 20 equal monthly installments together
with interest at the rate of 8% per annum.

As of July 20, 2002, Galapagos purchased from Autotote the totalisator
computer system equipment and approximately 524 terminals. The purchase price
for the computer system equipment is $135,000 and $500 per complete terminal.
Galapagos shall pay for the equipment and terminals in 20 equal monthly
installments together with interest at the rate of 8% per annum.

2. UNITED TOTE
-----------

In August 2000 the Company obtained a $2.5 million unsecured loan at 3%
over prime due in December 29, 2004. Principal and interest was to be paid
from .25% of the wagering handle for the first four (4) years of the service
contract with United Tote.

Effective April 1, 2002, the Company and United Tote amended and
restated the prior promissory note dated August 11, 2000, for $2,500,000, due
December 29, 2004, as follows:

1. The principal balance was revised to $3,431,955 which includes all
sums remaining due under the prior note, installation costs incurred
by United Tote and totalisator fees due from Comuneros.

2. Interest on the unpaid principal balance at the rate of "prime"
interest plus three (3) percent.


19

3. The note shall become due and payable on July 1, 2003.

4. If the Company obtains substantial financing for video gaming activity
at its racetrack in Puerto Rico, then the terms of the note will be
renegotiated to include an amortization schedule mutually agreed upon
by both parties.


OTHER LONG-TERM AGREEMENTS

El Comandante has also entered in other long-term contracts that are
essential for the operation of its racetracks such as to guarantee television
coverage in Puerto Rico. ECMC has an agreement with S&E Network, Inc. ("S&E")
that requires the purchase of television time for a minimum of 910 hours at the
rate of $725 (effective February 1997) per hour, adjusted annually by CPI, or at
the rate of $900 per hour, also subject to CPI adjustments, if television time
after 7:00 PM is needed. The contract is non-cancelable by either party during
the initial term, which expires on December 2006. The term is automatically
extended for successive 5 year periods by request of ECMC. During this extended
term, the contract can be canceled by S&E, upon payment of liquidating damages
of $2 million plus CPI after January 1997.

On August 1, 2001, El Comandante entered into a five (5) year contract with
Satelites Mexicanos, S.A. de C.V. ("Satmex"), to provide 18MHz of Ku Band
satellite time for the broadcast of its live racing program and potential
resale. The contract also provided for the payment of overtime charges of
$287,364, including interest, incurred in the previous C Band contract.

As of September 30, 2002 El Comandante has failed to pay a total $723,937,
including interest due under the contract. If it is deemed that El Comandante
has terminated the contract, El Comandante is also liable for a termination fee
of $1,063,740. At this time neither El Comandante nor the Company has the
resources to pay the ongoing service charges or the termination fee.

CONTRIBUTIONS

In connection with the termination of the lease agreement of El Comandante,
ECMC assumed certain commitments made by ECOC to make contributions (subject to
availability of funds) to several charitable and educational institutions during
a four-year period ending in 2001. These obligations are included in accounts
payable and, at September 30, 2001 amounted to $290,000. Due to the lack of
available funds no contributions were made in 2001, and there being no further
obligation, the balance was written off at December 31, 2001.


OTHER CONTINGENCIES

During 1999 and 2000, Equus Comuneros, received transfers from the Company
amounting to $1,307,000. According to Colombian law there are certain
limitations on transfers of foreign currency into Colombian entities. There is
the possibility that a regulatory investigation will result in fines and/or
penalties to Equus Comuneros. Equus Comuneros legal counsel is in process of
correcting any violations under Colombian law resulting from these transfers.


3. FIRST MORTGAGE NOTES:

On December 15, 1993, pursuant to a private offering, (i) El Comandante
Capital Corp. ("ECCC"), a single-purpose wholly owned subsidiary of HDA, issued
first mortgage notes in the aggregate principal amount of $68 million (the
"First Mortgage Notes") under an indenture (the "Indenture") between ECCC, HDA
and Banco Popular de Puerto Rico, as trustee (the "Trustee"), and (ii) HDAMC
issued Warrants to purchase 68,000 shares of Class A Common Stock of HDAMC. In
March 1995, the Warrants automatically became exercisable to purchase an
aggregate of 1,205,232 units of the Company from


20

HDAMC (see Note 4). Upon issuance of the Warrants, HDA recorded note discount
of $2,040,000 equal to the fair value of the Warrants. Such note discount is
being amortized using the interest method over the term of the First Mortgage
Notes.

The First Mortgage Notes mature on December 15, 2003 and bear interest at
11.75% payable semiannually. Payment of the First Mortgage Notes is guaranteed
by HDA. The First Mortgage Notes are secured by a first mortgage on El
Comandante and by certain other collateral which together encompass a lien on
(i) the fee interests of HDA in the land and fixtures comprising El Comandante,
(ii) all related equipment, structures, machinery and other property, including
intangible property, ancillary to the operations of El Comandante, and (iii)
substantially all of the other assets and property of HDA, including the capital
stock of ECCC owned by HDA.

During the past years HDA has made early redemptions of First Mortgage
Notes in connection with certain transactions. HDA has also purchased in the
open market First Mortgage Notes which the Company intends to hold until
maturity in cancellation of required partial redemptions in 2000 and 2001, as
explained below. Following is a summary of these transactions:



HELD BY
FACE (PREMIUM) ECG AT
TYPE OF TRANSACTION DATE VALUE DISCOUNT 31-DEC-01
- ------------------------------ ------- ----------- -----------

Redemption Mar-97 $ 737,000 $ - $ -
Redemption Sep-97 2,500,000 (250,000) -
Purchase in open market Dec-98 7,500,000 1,000,000 7,500,000
Redemption, reduced by amount
of notes held by the Company Jan-99 2,620,000 (262,000)(a) (380,000)
Purchase in open market May-99 189,000 22,680 189,000
Redemption reduced by amount
of notes held by the Company Jan-01 563,000 (563,000)
$ 14,109,000 $ 510,680 $ 6,746,000
============ =========== ============


(a) Recorded as an expense by the Company in 1998.


ECCC is required to partially redeem First Mortgage Notes commencing on
December 15, 2000. The stated future maturities of the First Mortgage Notes,
reduced by prior redemptions, are as follows (in thousands):

DUE DURING THE YEAR GROSS PURCHASED IN NET
ENDING DECEMBER 31, AMOUNT OPEN MARKET AMOUNT
------------------- -------- ------------- --------
2001 10,200 6,746 3,454
2002 10,200 - 10,200
2003 40,800 - 40,800
61,200 6,746 54,454
Less - discount (264) 54 (318)
$60,936 $ 6,800 $54,136
======== ============= ========


21

HDA may also redeem First Mortgage Notes at the following redemption
prices (expressed as percentages of principal amount), in each case together
with accrued and unpaid interest:

DURING THE 12 MONTH PERIOD
BEGINNING ON DECEMBER 15,
-------------------------
2000 101.00%
2001 100.00%

On December 15, 2001 and June 15, 2002 the ECG failed to pay interest of
$7.2 million and principal of $10.2 million on the First Mortgage Notes. This
constitutes a default under the Indenture. In addition, defaults have occurred
in the performance or breach, of covenants and/or warranties of HDA and/or ECCC.
There have been discussions with representatives of the Government Bank for
Puerto Rico and other government officials to explore ways to obtain funding to
bring the interest and principal current on the Notes.

It is not expected that the ECG will be able to meet the mandatory maturity
dates of the First Mortgage Notes as set forth above without obtaining
additional financing from lending institutions or investors. Although the ECG
has had discussions with possible lenders and investors, it has received no
commitment or other form of assurance that such financing will be forthcoming.
Absent such financing, the ECG will not be able to meet its long-term
commitments. The Trustee of the First Mortgage Notes has advised the
Company's legal counsel that the bondholders will demand payment in full of the
First Mortgage Notes, as provided by the Indenture.

HDA is required to purchase First Mortgage Notes, at face value, to the
extent that HDA has accumulated excess cash flow, asset sales with net proceeds
in excess of $5 million (to the extent these proceeds are not invested in HDA's
racing business within a year), or a total taking or casualty, or in the event
of a change of control of HDA.

The Indenture contains certain covenants, one of which restricts the amount
of distributions by HDA to its partners, including the Company. Permitted
distributions are limited to approximately 48% of HDA's consolidated net
earnings. In connection with certain approvals required from note holders, HDA
agreed to temporarily reduce these distributions by 17%. HDA is permitted to
make additional cash distributions to partners and other Restricted Payments, as
defined under the Indenture, equal to 44.25% of the excess of HDA's cumulative
consolidated net income after December 31, 1993 over the cumulative amount of
the 48% Distributions, provided that HDA meets a certain minimum debt coverage
ratio. HDA has not met this debt coverage ratio. As of June 30, 2001, HDA had
advanced to the Company approximately $3.8 million against its allowable future
distributions of profits, which was not in conformity with the terms of the
Indenture.

Management repaid these advances with the proceeds of a private placement
offering of Equus Entertainment preferred stock on July 13, 2001. See Note 6,
"Related Party Transactions".


4. HDAMC WARRANTS

Under the Warrant Agreement, the Company was not a "qualified public
company" and therefore HDA, as guarantor of the obligation, made the offer to
purchase 68,000 outstanding Warrants for cash, at a repurchase price of $15.49
per Warrant. The repurchase offer expired on December 15, 1998 when 48,127
Warrants were tendered for a total purchase price of $745,487. This payment,
together with transaction costs, was charged to partners' deficit. Of the
remaining Warrants, 15,216 were exercised in exchange for 269,688 Units of the
Company and, 4,657 Warrants, neither tendered nor exercised, expired. Therefore,
935,557 of the Units previously held by HDAMC were distributed to the Company
and are currently held in treasury.


22

5. BONDS AND NOTES PAYABLE AND CAPITAL LEASES:

The Company's outstanding notes payable consist of the following:



BALANCE AT

MATURITY INTEREST SEPTEMBER 30 DECEMBER 31,
BORROWER DESCRIPTION DATE RATE 2002 2001
- --------------------- --------------- --------- --------- ------------- -------------

Equus-Panama Term loan (c) 25-Apr-00 10.75% - -
Equus-Comuneros Term loans (a) various variable $ 153,542 $ 187,978
Equus Entertainment Note payable (b) 1-Jul-03 P+3.00% 3,431,956 2,500,000
Equus Entertainment Promissory Note (c) On Demand P+1.00% 100,000 100,000
Equus Entertainment Promissory Note (d) On Demand P+1.00% 50,000 50,000
Equus Entertainment Promissory Note (e) On Demand P+1.00% 120,000 120,000
Equus Entertainment Promissory Note (f) On Demand P+1.00% 250,025 250,025
Equus Entertainment Promissory Note (g) On Demand P+1.00% 300,000 300,000
Equus Entertainment Promissory Note (h) On Demand P+1.00% 205,000 205,000
Equus Entertainment Promissory Note (i) On Demand P+1.00% 1,300,000 1,300,000
Satellite Service Int Promissory Note (j) On Demand P+1.00% 53,750 53,750
Equus Entertainment Promissory Note (k) On Demand P+1.00% 563,429 563,429
Equus Entertainment Promissory Note (l) On Demand P+1.00% 330,000 330,000
Equus Entertainment Promissory Note (m) On Demand P+1.00% 70,000 70,000
Equus Entertainment Promissory Note (n) On Demand P+1.00% 70,000 70,000
------------- -------------
$ 6,997,702 $ 6,100,182
============= =============


At September 30, 2002 and December 31, 2001, the prime rate (P) was 4.75%.

(a) Management is in the process of renegotiating the terms of these
financial obligations. Interest rates range from 7% to 14.01% over
Colombia Fixed Term Deposit (FTD) rate. FTD at September 30, 2002 was
7.91%.

(b) In August 2000 the Company obtained a $2.5 million unsecured loan at
3% over prime due December 29, 2004. Effective April 1, 2002, the
Company and United Tote amended and restated the prior promissory note
dated August 11, 2000, for $2,500,000, due December 29, 2004, as
follows:

1. The principal balance was revised to $3,431,955 which includes
all sums remaining due under the prior note, installation costs
incurred by United Tote and totalisator fees due from Comuneros.

2. Interest on the unpaid principal balance at the rate of "prime"
interest plus three (3) percent.

3. The note shall become due and payable on July 1, 2003.

4. If the Company obtains substantial financing for video gaming
activity at its racetrack in Puerto Rico, then the terms of the
note will be renegotiated to include an amortization schedule
mutually agreed upon by both parties.


23

(c) On March 21, 2001, the Company received $100,000 from El Monte
Properties, an entity controlled by the Wilson family who also owns a
controlling interest in the Company under an unsecured promissory note
payable on demand with interest accruing at 1% over prime. The
proceeds were used to purchase El Comandante receivables from
non-Puerto Rico affiliates and working capital.

(d) On March 21, 2001, the Company received $50,000 from Santa Maria
Associates, an entity controlled by the Wilson family who also owns a
controlling interest in the Company under an unsecured promissory note
payable on demand with interest accruing at 1% over prime. The
proceeds were used to purchase El Comandante receivables due from
non-Puerto Rico affiliates and working capital.

(e) On April 6, 2001, the Company received $120,000 from El Monte
Properties, an entity controlled by the Wilson family who also owns a
controlling interest in the Company, under an unsecured promissory
note payable on demand with interest accruing at 1% over prime,
payable on demand by El Monte Properties, controlled by the Wilson
family which also owns a controlling interest in the Company. The
proceeds were used to purchase El Comandante receivables due from
non-Puerto Rico affiliates and working capital.

(f) On April 26, 2001, the Company received $250,025 from Insular
Properties, an entity controlled by the Wilson family who also owns a
controlling interest in the Company, under an unsecured promissory
note payable on demand with interest accruing at 1% over prime. The
proceeds were used to purchase El Comandante receivables due from
non-Puerto Rico affiliates and working capital.

(g) On April 30, 2001, the Company received $300,000 from Insular
Properties, an entity controlled by the Wilson family who also owns a
controlling interest in the Company, under an unsecured promissory
note payable on demand with interest accruing at 1% over prime. The
proceeds were used to purchase El Comandante receivables due from
non-Puerto Rico affiliates and working capital.

(h) On May 11, 2001, the Company received $205,000 from Insular
Properties, an entity controlled by the Wilson family who also owns a
controlling interest in the Company under an unsecured promissory note
payable on demand with interest accruing at 1% over prime. The
proceeds were used to purchase El Comandante receivables due from
non-Puerto Rico affiliates and working capital.

(i) On June 14, 2001, the Company received $1,300,000 from El Monte
Properties, an entity controlled by the Wilson family who also owns a
controlling interest in the Company, under an unsecured promissory
note payable on demand with interest accruing at 1% over prime. The
proceeds were used to purchase El Comandante receivables due from
non-Puerto Rico affiliates and working capital.

(j) On July 20, 2001, Satellites Services International, Inc. received
$53,750 from Santa Maria Associates, an entity controlled by the
Wilson family who also owns a controlling interest in the company,
under an unsecured promissory note, payable on demand with interest
accruing at 1% over prime. The proceeds were used for working capital.

(k) On September 21, 2001, the ECG received $523,429 from Santa Maria
Associates, an entity controlled by the Wilson family who also owns a
controlling interest in the Company, under a unsecured promissory
note, payable on demand with interest accruing at 1% over prime. The
proceeds were used to purchase El Comandante receivables due fro
non-Puerto Rico affiliates and working capital.

(l) On September 21, 2001 Equus-Comuneros received $40,000 from Santa
Maria Associates, an entity controlled by the Wilson family who also
owns a controlling interest in the Company under a promissory note,
payable on demand with interest accruing at 1% over prime. The
proceeds were used for working capital.


24

(m) On September 27, 2001, the Company received $330,000 from Santa Maria
Associates, an entity controlled by the Wilson family, who also owns a
controlling interest in the company, under an unsecured promissory
note, payable on demand with interest accruing at 1% over prime. The
proceeds were used to purchase El Comandante receivables due from
non-Puerto Rico affiliates and working capital.

(n) Throughout the period ended September 30, 2002, the Company received a
net of $70,000 from Interstate Business Corporation, an entity
controlled by the Wilson family, who also owns a controlling interest
in the company, under an unsecured promissory note, payable on demand
with interest accruing at 1% over prime. The proceeds were used to
purchase El Comandante receivables due from non-Puerto Rico affiliates
and working capital.

(o) On November 2, 2001, the Company received $70,000 from Santa Maria
Associates, an entity controlled by the Wilson family, who also owns a
controlling interest in the company, under an unsecured promissory
note, payable on demand with interest accruing at 1% over prime. The
proceeds were used to purchase El Comandante receivables due from
non-Puerto Rico affiliates and working capital.

The Company also guaranteed a $250,000 loan by the operator of the
restaurant at Presidente Remon. The proceeds of this loan were used by
Equus-Panama to finance improvements to the restaurant. On October 9, 2001,
the Company entered into a stock purchase agreement whereby in exchange for
release from all liabilities related to the operation of Equus
Entertainment de Panama, the Company gave to its minority partner, Wall
Street Securities, its 204,000 shares of common stock which represented 51%
of the total issued and outstanding shares of Equus Entertainment de
Panama. At the same time, the Company was released from any further
liability under this loan guarantee.

On October 1998, Equus-Panama issued $4 million in unsecured bonds pursuant
to a public offering. Interest is payable quarterly at the rate of 11% per
annum. The bonds may be redeemed by Equus-Panama prior to June 30, 2001 at
a redemption price of 102% of the principal amount and thereafter at par.
Under the loan documents there are certain restrictions that limit the
capacity of Equus-Panama to incur indebtedness and pay dividends to
shareholders. On October 9, 2001, the Company entered into a stock purchase
agreement whereby in exchange for release from all liabilities related to
the operation of Equus Entertainment de Panama, the Company gave to its
minority partner, Wall Street Securities, its 204,000 shares of common
stock which represented 51% of the total issued and outstanding shares of
Equus Entertainment de Panama. At the same time, the Company was released
from any further liability under this Bond Indenture.


25

The following table summarizes future minimum payments on capital leases
and notes payable of the Company and its consolidated subsidiaries:

DUE DURING THE YEAR CAPITAL NOTES
ENDING SEPTEMBER 30, LEASES PAYABLE
- -------------------- ---------- -----------
2003 $ 229,167 $3,697,302
2004 463,798 25,556
2005 266,501 3,446,042
2006 13,099 -
972,565 7,168,900
Imputed interest (107,204) (171,198)
$ 865,361 $6,997,702
========== ===========

6. RELATED PARTY TRANSACTIONS:

SERVICES AMONG RELATED PARTIES

The following represents a summary of amounts accrued for services rendered
by or from certain related parties, namely, EMC, IBC, American Community
Properties Trust ("ACPT") and Interstate General Company L.P. ("IGC") during the
nine months and three months ended September 30, 2002, 2001.



NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
ENTITY NATURE OF SERVICE 2002 2001 2002 2001
- ------------ --------------------------- -------- -------- -------- --------

Rendered by:
ACPT Support agreement $ - $ 800 $ - $ -
ACPT Rent office Space 14,000 -
EMC Director's fees 58,250 67,450 18,750 21,950
IGC Services of James J. Wilson 61,107 339,638 (891) 132,010
-------- -------- -------- --------
$119,357 $421,888 $17,859 $153,960
======== ======== ======== ========


Throughout 2001 The Company received $3,412,204 from entities controlled by
the Wilson Family who also owns a controlling in the Company. See Note 5.

On July 13, 2001, Kempt Corporation, a Puerto Rico corporation wholly owned
by Wilson Securities Corporation, an entity controlled by the Wilson family,
purchased seven (7) million shares of Equus Entertainment Class A, 12%
cumulative preferred stock, $1.00 par value.

Equus Entertainment then applied $3.8 million to offset the advances
against dividends made to the Company.

Equus Entertainment reimbursed the El Comandante Group (consisting of
Housing Development Associates S.E., El Comandante Capital Corporation and El
Comandante Management Company LLC) for all advances made by the El Comandante
Group to affiliate companies. Equus Entertainment also purchased the
inter-company receivables of the El Comandante Group that were due from
affiliate companies.

The Net proceeds of $6,882,037 were used to pay the following:

1. The June 14, 2001 interest payment on the First Mortgage Notes of
$3,595,500 plus $32,408 of penalty interest for the period June 15,
2001 through July 13, 2001.


26

2. Payoff of $2,604,747 HDA Note payable to FirstBank together with
interest accrued through July 13, 2001, of $14,370.

3. Payoff of $500,000 HDA line of credit with FirstBank together with
interest accrued through July 13, 2001, of $2,903.

4. Advances to consolidated affiliates of $132,108 to cover operational
expenses.


7. FAIR VALUE OF FINANCIAL INSTRUMENTS:

Based on quoted market prices, the fair value of the First Mortgage Notes
as of September 30, 2002 was approximately $34,033,750 (as compared with a
carrying value of $54,136,221). The carrying value of notes payable, capital
leases and notes receivable approximates fair value. These obligations provide
for variable rate interest. The carrying value of accounts receivable and
accounts payable approximates fair value due to their short maturities.


8. SEGMENT INFORMATION:

The Company has identified three reportable segments, based on geographical
considerations: Puerto Rico, Dominican Republic and Colombia. The accounting
policies of the segments are the same as those described in the summary of
accounting policies. The Company evaluates performance based on profit or loss
before income taxes, not including nonrecurring gains and losses and foreign
exchange gains and losses. The following presents the segment information for
the nine months ended September 30, 2002 and 2001 (in thousands).


27



PUERTO DOMINICAN
2002 - NINE MONTHS RICO REPUBLIC COLOMBIA PANAMA URUGUAY TOTAL
--------- ---------- ---------- ---------- --------- ---------

Commissions on wagering $ 34,129 $ 2,408 $ 1,312 $ - $ - $ 37,849
Total revenues 36,786 3,235 1,386 - - 41,407
Financial expenses 6,473 23 166 - - 6,662
Depreciation and amortization 2,396 297 138 - - 2,831
Earnings (Loss) before income -
taxes and minority interest (5,693) (595) (1,450) - - (7,738)
Capital improvements (net) 2,146 142 (74) - - 2,214
Total assets 52,462 2,443 2,382 - - 57,287

2001- NINE MONTHS
Commissions on wagering $ 34,726 $ 2,448 $ 1,408 $ - $ - $ 38,582
Total revenues 35,685 3,569 1,539 - 6 40,799
Financial expenses 6,977 11 267 - 8 7,263
Depreciation and amortization 2,360 291 257 - - 2,908
Earnings (Loss) before income -
taxes and minority interest (11,151) (620) (2,052) - (678) (14,501)
Capital improvements (net) 622 259 (172) - 3,800 4,509
Total assets 58,929 2,187 3,008 - 3,800 67,924

2002- QUARTER
Commissions on wagering $ 10,574 $ 646 $ 335 $ - $ - $ 11,555
Total revenues 11,955 764 349 - - 13,068
Financial expenses 2,456 1 67 - - 2,524
Depreciation and amortization 1,027 98 42 - - 1,167
Earnings (Loss) before income -
taxes and minority interest (2,487) (353) (864) - - (3,704)
Capital improvements (net) 1,979 (3) (380) - - 1,596

2001- QUARTER
Commissions on wagering $ 10,649 $ 692 $ 466 $ - $ - $ 11,807
Total revenues 11,302 1,168 517 - - 12,987
Financial expenses 2,126 (94) (60) - - 1,972
Depreciation and amortization 816 112 89 - - 1,017
Earnings (Loss) before income -
taxes and minority interest (4,212) (63) (264) - (15) (4,554)
Capital improvements (net) 211 96 (158) - 3,800 3,949


9. LEGAL PROCEEDINGS:

The Company had a case in arbitration at the American Arbitration
Association in defense of and against Autotote, involving all the racetracks in
which Equus has an ownership interest. Autotote filed a claim against El
Comandante for unpaid service fees of $186,415 plus interest. El Comandante
agreed to pay this amount but filed a counterclaim against Autotote.

On July 27, 2001 and November 21, 2001 American Arbitration Association
rendered its award decision. The following is a summary of the awards by
racetrack:

EL COMANDANTE, PUERTO RICO

1. El Comandante is to pay Autotote the principal amount of $355,496
in unpaid service fees together with interest of $32,051, accrued
through April 1, 2001.

2. El Comandante shall reimburse Autotote for costs incurred of
$132,500.

3. As of September 30, 2002, the outstanding principal balance was
$826,159 and accrued interest was $2,150.


28

EQUUS - COMUNEROS

1. Comuneros owes the principal amount of $716,762 as of July
20,2002, plus interest of $365,485, for a total of $1,082,247;

2. Provided that all payments due Autotote are made in accordance
with the Agreement dated July 20, 2002, the amount of $1,082,247
will be settled for $450,000, together with simple interest of 8%
per annum from July 20, 2002, until paid in full;

3. $50,000 paid upon execution of the Agreement, July 20, 2002; 4.
$100,000 payable within 120 days following the execution of the
Agreement;

5. Payment on a weekly basis by Comuneros and/or ABN of two (2)
percent, one (1) percent of the handle from electronic lottery
sales in Colombia, and one (1) percent of pari-mutuel sports
wagering handle;

6. Payments pursuant to the Agreement are guaranteed by ABN, SSI,
Equus Entertainment Corp., Affiliates of Comuneros and by
Interstate Business Corporation, which is beneficially owed and
controlled by the Wilson Family who also owns a controlling
interest in the Company.

GALAPAGOS

1. Galapagos owes Autotote the principal amount of $230,578 as of
April 23, 2001, together with interest of $120,308 through
November 21, 2001, the date of the award.

2. For breach of good faith and fair dealings, Autotote owes
Galapagos $800,000, plus interest at the rate of seven (7)
percent per annum from November 21, 2001 to the date of payment.

3. The parties have no further obligations to one another with
respect to lottery operations in the Dominican Republic.

4. The parties shall bear equally the costs of arbitration which
amount to $44,903 each. Any excess funds on deposit shall be
reimbursed to the paying parties in equal amounts.

5. Autotote shall pay Galapagos $150,000 in reimbursement of fees
incurred in the proceedings.

6. Awards will be offset and the net amount owed to Galapagos of
approximately $600,000 will accrue interest at seven (7) percent
until paid.

As of May 1, 2002, a Settlement Agreement (the "Agreement") was executed
between Autotote Systems, Inc ("Autotote") and El Comandante Management Company
LLC ("ECMC") whereby the obligations for each party were settled as follows:

1. Galapagos assigned its rights to receive funds under the net
award in Galapagos' favor.

2. In consideration for ECMC extending their agreement with Autotote
for a ten (10) year period commencing May 1, 2002, and
terminating March 31, 2012, Autotote will write off $55,100 each
year of the net amount due Autotote of $550,688.


29

If for any reason ECMC defaults under this Agreement, or Autotote does not
have the benefit of the license extension then the entire amount owed Autotote,
including interest, less the amounts credited above, shall be reinstated
retroactive to May 1, 2002.

Each entity involved in the arbitration sustains individually the
consequences of the arbiters' final award and there are no performance
guarantees by any other entity including Equus Gaming Company L.P., the parent
company.

Costs incurred by the Company in pursuing the Arbitration with Autotote to
date total $574,042 and have been allocated to each participating entity in the
same proportion that the arbiters awarded the costs incurred by Autotote to each
entity.

On August 18, 2001, ECMC executed a Closing Agreement (the
"Agreement") with the Municipality of Canovanas whereby ECMC settled its
longstanding dispute over the payment of the Volume of Business Tax assessed by
the municipality.


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

The Company's operations consist principally of its interests in
thoroughbred horse race tracks in four countries, each of which is owned and/or
operated by a subsidiary: (i) El Comandante in Puerto Rico, owned by Housing
Development Associates S.E. ("HDA") and operated since January 1, 1998 by El
Comandante Management Company, LLC ("ECMC"), (ii) V Centenario in the Dominican
Republic, operated since April 1995 by Galapagos S.A., ("Galapagos"), and
(iii) Los Comuneros in Medellin, Colombia, owned and operated since early 1999
by Equus Comuneros, S.A. ("Equus-Comuneros").

The following discussion compares the results of operations of the Company
for the three and nine months ended September 30, 2002, with the results for the
three and nine months ended September 30,2001.


RESULTS OF OPERATIONS

QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO QUARTER AND NINE
------------------------------------------------------------------------------
MONTHS ENDED SEPTEMBER 30, 2001
-------------------------------


REVENUES

Consolidated Revenues increased in the third quarter of 2002 by $80,000 or
0.6%, as compared to the same quarter in 2001. Consolidate revenues increased
by, $ 608,000 or (1.5%) for the nine months ended September 30, 2002 to
$41,407,000 as compared to $40,799,000 for the nine months ended September 30,
2001.

COMMISSIONS ON WAGERING

Commissions on wagering decreased by aproximately $ 252,000 or (2.1%) to
$11,555,000 for the third quarter ended September 30, 2002 as compared to
$11,807,000 in the third quarter of 2001. Commissions on wagering decreased by
aproximately $ 733,000 or (1.9%) for the nine months ended


30

September 30, 2002 to $37,849,000 as compared to $38,582,000 for the nine months
ended September 30, 2001. The decrease in commissions was attributable to the
following operations: El Comandante ($597,000), Dominican Republic ($40,000),
and Colombia ($96,000).

During contract negotiations in January 2000, the Puerto Rico horse owners
cancelled their prior approval of simulcast of live races from Puerto Rico to
the Dominican Republic. In February this action was reversed by the Racing
Board. This cancellation had an adverse economic impact on commissions on
wagering in the Dominican Republic and Puerto Rico. In July 2000 the Puerto Rico
Horse owners' Association reached an agreement with El Comandante Management
Company on a new 10-year contract providing for simulcasting of races.

PUERTO RICO. Commissions on wagering at El Comandante decreased $
75,000,(0.7%), to $10,574,000 in the third quarter of 2002 as compared to
$10,649,000 in the third quarter of 2001. Commissions on wagering at El
Comandante decreased $ 597,000, (1.7%) from $34,726,000 for the nine months
ended September 30, 2001 to $ 34,129,000 for the nine months ended September 30,
2002. Commissions on wagering are directly related to the racetrack handle,
which has been in decline and hence a decline in the racetracks' commissions. El
Comandante experienced declines in betting handle as a result of the poor racing
program due to lack of proper scheduling of races by the Government Racing
Authorities.

DOMINICAN REPUBLIC. Commissions on wagering at V Centenario ("Galapagos")
decreased $46,000, (6.6%), to $646,000 in the third quarter of 2002 as compared
to $692,000 in the third quarter of 2001.Commissions on wagering at V Centenario
decreased by $ 40,000, (1.6%) from $2,448,000 for the nine months ended
September 30, 2001 to $ 2,408,000 for the nine months ended September 30, 2002.

COLOMBIA. Commissions on wagering at Comuneros S.A. decreased by
$131,000,(28.1%), to $335,000 in the third quarter of 2002 as compared to
$466,000 in the third quarter of 2001. Commissions on wagering at Comuneros
S.A. decreased by $96,000,(6.8%) from $1,408,000 for the nine months ended
September 30, 2001 to $1,312,000 for the nine months ended September 30, 2002.

NET REVENUES FROM LOTTERY SERVICES

Since June 30, 2000, Autotote has provided services directly to the
Lottery Operations [Dominican International Electronic Lottery, Inc. (LEIDSA)]
and refused to pay Galapagos service fees under its service contract. See Note
9, "Legal Proceedings".

OTHER REVENUES

Other revenues during the three and the nine months ended September 30,
2002 increased by $332,000 and $185,000, respectively, as compared to the same
period in 2001.

EXPENSES

For the reasons set forth below, total expenses during the three and nine
months ended September 30, 2002 decreased by $771,000, (4.4%) and $6,155,000,
(11.1%), respectively, as compared to the same period in 2001. The majority of
this decrease was due to the sale of the
Company's investment in Panama and the corresponding deconsolidation for the
year 2001. Some of these expenses were non-recurring and are reported below
under appropriate categories.


31

PAYMENTS TO HORSE OWNERS

Payments of purses to horse owners during the three and nine months ended
September 30, 2002 decreased by $281,000, (4.4)% and $853,000, (4.1%),
respectively, as compared to the same period in 2001:

Increase
2002 2001 (decrease)
----------- ----------- -----------

ECMC (a) $18,123,000 $18,668,000 $ (545,000)
Dominican Republic 1,204,000 1,185,000 19,000
Colombia 592,000 919,000 (327,000)
----------- ----------- -----------
$19,919,000 $20,772,000 $ (853,000)
=========== =========== ===========

(a) Summary of new horse owners contract provision for ECMC

The new Puerto Rico horse owners contract, signed in July 2000, provides
for a non-recurring cash payment of approximately $1 million. Approximately
$600,000 was accrued in 1999. The remaining $400,000 was charged to operating
expenses in 2000.

Under the El Comandante contract, the horse owners are guaranteed minimum
earnings of $25,032,000 for 2000 and 2001. ECMC is obligated among other items
to pay the horse owners $90,000 annually for administrative costs and 50% of the
principal and interest owed on an outstanding horse owners loan with a principal
balance due of $526,000, plus accrued interest. ECMC must also invest
$3,000,000 in improvements to the racetrack during the 10-year term of the
contract, as well as provide $2,000,000 of financing for the purchase of horses.

On March 16, 2001 an "Addendum to Contract" was executed by the Horse
Owners Confederation and the Company, whereby the parties jointly agreed to:

(i) Increase the number of simulcast races each live race day from three
(3) to six (6).

(ii) Place three (3) of the simulcast races before the first live race and
place three (3) after the fifth live race;.

(iii) Include simulcasting of nine (9) to twelve (12) races on Thursday.
Currently a dark day.

(iv) In consideration for the above items, ECMC will pay an additional
$1,000,000 to the Horse Owners Confederation when and if the
additional simulcasting is approved by the Racing Board.


As of June 28, 2001, The Puerto Rico Racing Board had granted ECMC the
right to increase the number of simulcast races from three (3) to six (6) per
live race day. The order allowed a three (3) month probationary period
commencing July 1, 2001 to place three(3) simulcast races before the first live
race and three (3) after the fifth live race.

The Racing Board declined the simulcasting of races during the probationary
period on Thursday's, a day that currently holds no live races.


32

The additional $1,000,000 to be paid by ECMC to the Horse Owners
Confederation will be deferred until approval is received from the Racing Board
for simulcasting as outlined above.

On October 16, 2001, the Racing Board suspended, effective October 22,
2001, simulcasting permitted during the probationary period but not otherwise.

Simulcasting of special events such as the Breeders' Cup, Kentucky Derby
and the Preakness as well as the Caribbean Classic and the Confraternity Classic
is still permitted. However, ECMC will perform a cost/benefit analysis to
determine if the limited simulcasting is economically viable per event.

FINANCIAL EXPENSES

Financial expenses for the three and nine months ended September 30, 2002
increased by $552,000, 28.0% and decreased by $601,000, (8.3%), respectively, as
compared to the same period in 2001. The increase for the three months ended
September 30, 2002 was due to additional financing costs of the United Tote
loan. The decrease for the nine months ended September 30, 2002 was due to
penalties and interest on the unpaid excise taxes in 2001.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization expenses for the three and nine months ended
September 30, 2002 increased by $150,000, 14.7% and decreased by $77,000,
(2.6%), respectively, as compared to the same period in 2001.

OTHER EXPENSES

Other expenses for the three and nine months ended September 30, 2002
decreased by $1,192,000, (14.5%) and by $4,624,000, (19.0%), respectively, as
compared to the same period in 2001. This decrease is primarily attributable to
the deconsolidation of Panama for 2001.


33



OTHER EXPENSES BY COUNTRY
INCREASE (DECREASE) FOR NINE MONTHS ENDED SEPTEMBER 30, 2002 WHEN COMPARED WITH 2001


Salaries, wages Operating General and Marketing , TV Net (decrease)
Country and benefits expenses administrative and satellite increase
- -------------------------------------------------------------------------------------------------------

Puerto Rico: $ (521,000) $ (512,000) $ (1,333,000) $ (1,011,000) $ (3,377,000)
Total Puerto Rico (521,000) (512,000) (1,333,000) (1,011,000) (3,377,000)
Dominican Rep. (6,000) (398,000) 77,000 (76,000) (403,000)
Colombia (279,000) (324,000) 609,000 (174,000) (168,000)
Uruguay - (107,000) (569,000) (676,000)
------------------------------------------------------------------------------------
$ (806,000) $(1,341,000) $ (1,216,000) $ (1,261,000) $ (4,624,000)
====================================================================================


OTHER EXPENSES BY COUNTRY
INCREASE (DECREASE) FOR THREE MONTHS ENDED SEPTEMBER 30, 2002 WHEN COMPARED WITH 2001

Salaries, wages Operating General and Marketing , TV Net (decrease)
Country and benefits expenses administrative and satellite increase
- -------------------------------------------------------------------------------------------------------

Puerto Rico: $ (364,000) $ (234,000) $ (912,000) $ 21,000 $ (1,489,000)
Dominican Rep. 18,000 30,000 (200,000) (30,000) (182,000)
Colombia (101,000) 151,000 464,000 (21,000) 493,000
Uruguay - (13,000) (1,000) - (14,000)
------------------------------------------------------------------------------------
$ (447,000) $ (66,000) $ (649,000) $ (30,000) $ (1,192,000)
====================================================================================


PROVISION FOR INCOME TAXES

The provision for income tax is primarily related to deferred Puerto Rico
income taxes on the Company's income and losses related to its interests in
Puerto Rico, without taking into account results of operations of Galapagos or
Equus-Comuneros. Due to accumulated losses, none of these foreign subsidiaries
require a provision for income taxes.


MINORITY INTEREST

The Company's minority interest is attributed to the income and losses
allocable to the minority partners of HDA, Galapagos and Equus-Comuneros. Since
the accumulated losses of Galapagos allocable to minority partners exceeded
their investment, for the nine months ended September 30, 2002, the Company did
not recognize minority interest in losses of Galapagos. If Galapagos generates
profits in 2002, no minority interest will be recognized by the Company in
profits up to $2,573,700.


34

LIQUIDITY AND CAPITAL RESOURCES

OVERVIEW

The Company is the owner of Housing Development Associates S.E. ("HDA") and
its consolidated subsidiary, El Comandante Management Company LLC ("ECMC"), as
well as the owner of Agency Betting Network, Inc. ("ABN"), Satellites Services
International, Inc. ("SSI") and foreign subsidiaries (Equus Comuneros S.A.,
Equus Entertainment de Panama, S.A. and Galapagos, S.A.). The principal source
of cash of Equus Gaming Company L.P. (the "Company" or, when referring to the
individual entity, "Equus") is related to its ownership interest in HDA, the
owner and operator (through its wholly owned subsidiary ECMC) of El Comandante
Race Track in Puerto Rico. Due to certain restrictions under HDA's indenture
for the issuance of its 11.75% First Mortgage Notes due 2003 (the "Indenture"),
cash held by HDA or its consolidated subsidiaries (including ECMC) is restricted
to ensure payment of interest and certain obligations on the First Mortgage
Notes.

The following is a discussion of the liquidity and capital resources of the
Company, including HDA and its subsidiary ECMC, as well as the Company's other
subsidiaries ABN and SSI. Net cash flow from foreign subsidiaries of the
Company (Equus Comuneros, S.A., and Galapagos, S.A) did not materially affect
the consolidated cash flow of the Company for the nine months ended September
30, 2002 and these activities are not discussed herein.


LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY (AND ITS CONSOLIDATED
SUBSIDIARIES)

The Company recognizes its current inability to generate sufficient cash to
support its operations.

To overcome its financial problems, the Company must look to additional
revenue including investment or cost savings from:

(i) Requesting license approval in Colombia and Dominican Republic for
casino and/or sports book operations that could generate an additional
$7 million in revenues annually.

(ii) Implementing cost reductions at all properties.

(iii) Requesting designation of the El Comandante facility as a tourist
zone to allow the addition of slot machines and authorization for low
interest bonds or notes.

(iv) Receive permission from the Government of Puerto Rico to allow video
lottery terminals at the OTB Agencies.

(v) Expanding simulcasting in Colombia and Dominican Republic as well as
expanding pool races.

(vi) Obtain new bank financing or financing by the Wilson family.

There can be no assurance that any of the above will be achieved, or if
achieved, the results will be sufficient to enable the Company to continue to
operate.

Cash and cash equivalents of the Company, HDA and its consolidated
subsidiaries decreased by approximately $272,000 for the nine months ended
September 30, 2002. The Company has historically met its liquidity needs from
cash flow generated by (i) the operations of El Comandante racetrack, (ii)
short-term loans and capital leases for acquisition of new equipment, and (iii)
investment by the Wilson family.


35

During 2002 principal uses of cash by the Company, HDA and its
consolidated subsidiaries for financing and investing activities were:

(i) Weekly payment of delinquent excise taxes pursuant to agreement.

(ii) Weekly payment of delinquent volume of business taxes pursuant to
agreement.

(iii) Principal payments on existing capital leases.

(iv) Capital expenditures, as needed and/or required for the various racing
operations.

For remainder 2002 projected principal uses of cash, other than for operating
activities at El Comandante, are:

(i) Weekly payment of delinquent excise taxes pursuant to agreement.

(ii) Weekly payment of delinquent volume of business taxes pursuant to
agreement.

(iii) Principal payments on existing capital leases.

(iv) Capital expenditures, as needed and/or required for the various racing
operations.

LONG-TERM COMMITMENTS. In addition to capital leases, long-term cash
commitments of the Company (excluding foreign subsidiaries) are a $2.5 million
unsecured note and the First Mortgage Notes.

Effective April 1, 2002, the Company and United Tote amended and restated
the prior promissory note dated August 11, 2000, for $2,500,000, due December
29, 2004, as follows:

1. The principal balance was revised to $3,431,956 which includes
all sums remaining due under the prior note, installation costs
incurred by United Tote and totalisator fees due from Comuneros.

2. Interest on the unpaid principal balance at the rate of "prime"
interest plus three (3) percent.

3. The note shall become due and payable on July 1, 2003.

4. If the Company obtains substantial financing for video gaming
activity at its racetrack in Puerto Rico, then the terms of the
note will be renegotiated to include an amortization schedule
mutually agreed upon by both parties.

HDA's First Mortgage Notes bear interest at 11.75%, payable semiannually on
June 15th and December 15th, and are secured by El Comandante assets. The First
Mortgage Notes are redeemable, at the option of HDA, in 2001 and thereafter at
100% of the principal amount, together with accrued and unpaid interest. The
maturity dates of First Mortgage Notes, reduced by prior redemptions and by the
Notes purchased by ECMC, are as follows (in thousands):


36

YEAR ENDING NET AMOUNT
DECEMBER 31, (FACE VALUE)
------------- ------------

2001 $ 3,454
2002 10,200
2003 40,800
-------------
54,454
=============

As of June 30, 2001, HDA had advanced to Equus approximately $3.7 million
against its allowable future distributions of profits, which is not in
conformity with the terms of the Indenture. Management repaid these advances
with the proceeds of a private placement offering of Equus Entertainment
preferred stock on July 13, 2001. See Note 6, "Related Party Transactions".

On December 15, 2001 and June 15, 2002 the ECG failed to pay interest of
$7.2 million and principal of $10.2 million on the first Mortgage Notes (See
Note 5). This constitutes a default under the Indenture. In addition, defaults
have occurred in the performance or breach, of covenants and/or warranties of
HDA and/or ECC. There have been discussions with representatives of the
Governmental Development Bank for Puerto Rico and other government officials to
explore ways to obtain funding to bring the interest and principal current on
the Notes.

It is not expected that the ECG will be able to meet the mandatory maturity
dates of the First Mortgage Notes set forth above without obtaining permission
from the Government to allow slot machines at the race track and video lottery
terminals (VLT's) at the OTB agencies.

Although EGC has had discussions with the Government regarding the slot
machines and VLT's, there have been no commitments or other forms of assurances
from the Government that the required approval is forth coming. Absent such
approvals, the EGC will not be able to meet its long-term commitments.

GOVERNMENT MATTERS. El Comandante's horse racing and pari-mutuel wagering
operations are subject to substantial government regulation. Pursuant to the
Puerto Rico Horse Racing Industry and Sport Act (the "Racing Act"), the Racing
Board and the Puerto Rico Racing Administrator (the "Racing Administrator")
exercises regulatory control over El Commandant's racing and wagering
operations. For example, the Racing Administrator determines the monthly racing
program for El Comandante and approves the number of annual race days in excess
of the statutory minimum of 180. The Racing Act also apportions payments of
monies wagered that would be available as commissions to ECMC. The Racing Board
consists of three persons appointed for four-year terms by the Governor of
Puerto Rico. The Governor also appoints the Racing Administrator for a
four-year term.

El Comandante is required to pay the Government of Puerto Rico various
taxes on wagering placed on thoroughbred horse races held at or simulcasted by
El Comandante (Puerto Rico). The taxes on the wagering are required to be
remitted to the Department of the Treasury of Puerto Rico within two (2) days of
the date wagers are placed. El Comandante failed to remit tax payments totaling
$9,949,182 from October 16, 2000 to February 7, 2001. Neither ECMC nor the
Company has the financial resources to pay the overdue taxes.


37

On May 24, 2001, ECMC executed a "Closing Agreement" (the Agreement") with
the Secretary of the Treasury of Puerto Rico (the "Secretary") whereby ECMC will
settle its assessed debt of unpaid excise taxes and commissions for the period
October, 2000 through February, 2001 in the amount of $11,172,450 (including
interest and late charges), plus an additional assessment of $60,141 (including
interest) for unpaid commissions for the period February 2, 2001 through
February 7, 2001, as follows:

1. Upon execution of the Agreement, ECMC delivered a check to the
Secretary for $60,141 in full payment of the February, 2001
assessment.

2. For a six-month period commencing June 1, 2001 and ending November
30,2001, ECMC shall pay $50,000 per week against the October, 2000
through January, 2001 assessment. After the six month period, the
Secretary will reevaluate the financial condition of ECMC and may,
upon reasonable grounds, continue, modify or revoke the Agreement.

3. ECMC is obligated to pay on a timely basis the current excise taxes
and commissions due under Puerto Rico law.

4. ECMC is obligated to provide and maintain a bond in favor of the
Secretary in the amount of $500,000.

5. In the event ECMC defaults during the term of this Agreement, the
Secretary may accelerate the balance due plus any additional amounts
due resulting from the default, including waived penalties of $167
thousand.

As of November 1, 2002, all terms and conditions of the Agreement have been
met by ECMC, including payment aggregating $3,500,000 through September 30,
2002.

On April 2, 2001, the House of Representatives of the Commonwealth of
Puerto Rico presented a resolution ordering an investigation of the operations
of ECMC with emphasis on the fiscal and financial administration of El
Comandante and its tax delinquency. As of October 22, 2001, all requested
information had been submitted by ECMC. The investigation has been completed,
but as of this date the House of Representatives has not issued their report or
otherwise disclosed their findings.

As of September 30, 2002, Equus Comuneros, S.A. owed the Colombian Tax and
National Customs Administration approximately $1,066,502, including interest,
for withholding at source tax. Management has recently met with the Government
to settle the amount outstanding. The plan proposed to the government is as
follows:

1. Five (5) year amortization of 10%, 15%, 20%, 25% and 30%,
respectively.

2. The Government is requesting a down payment, which is currently being
negotiated.


By means of Resolution 213 of October 31, 2001, of the Colombian
Superintendency of Societies, Equus Comuneros was accepted for government
supervised restructuring under the provisions of Colombian Law 550 of 1999.

Presently, negotiations with the Comuneros creditors are in process
and will result in one of the following two situations:

1. The creditors believe that Comuneros is a viable operation and will
settle all claims, or

2. The creditors believe that Comuneros is not viable causing an end to
claim negotiations and thereby forcing the government to commence
liquidation pursuant to Colombian law.


38

Equus Comuneros has not considered it necessary to make any adjustments to
the financial statements with respect to it not being able to continue
operating.



FORWARD-LOOKING STATEMENT

Certain matters discussed and statements made within this Form 10-Q are
forward-looking statements within the meaning of the Private Litigation Reform
Act of 1995 and as such may involve known and unknown risks, uncertainties, and
other factors that may cause the actual results, performance or achievements of
the Company to be different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Although the Company
believes the expectations reflected in such forward-looking statements are based
on reasonable assumptions, it can give no assurance that its expectations will
be attained. These risks are detailed from time to time in the Company's filing
within the Securities and Exchange Commission or other public statements.


PART II - OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS:

The Company had a case in arbitration at the American Arbitration
Association in defense of and against Autotote, involving all the racetracks in
which Equus has an ownership interest. Autotote filed a claim against El
Comandante for unpaid service fees of $186,415 plus interest. El Comandante
agreed to pay this amount but filed a counterclaim against Autotote.

On July 27, 2001 and November 21, 2001 American Arbitration Association
rendered its award decision. The following is a summary of the awards by
racetrack:

GALAPAGOS

1. Galapagos owes Autotote the principal amount of $230,578 as of April
23, 2001, together with interest of $120,308 through November 21,
2001, the date of the award.

2. For breach of good faith and fair dealings, Autotote owes Galapagos
$800,000, plus interest at the rate of seven (7) percent per annum
from November 21, 2001 to the date of payment.

3. The parties have no further obligations to one another with respect to
lottery operations in the Dominican Republic.

4. The parties shall bear equally the costs of arbitration which amount
to $44,903 each. Any excess funds on deposit shall be reimbursed to
the paying parties in equal amounts.

5. Autotote shall pay Galapagos $150,000 in reimbursement fees incurred
in the proceedings.

6. Awards will be offset and the net amount owed to Galapagos of
approximately $600,000 will accrue interest at seven (7) percent until
paid.


39

EL COMANDANTE, PUERTO RICO

1. El Comandante is to pay Autotote the principal amount of $355,496 in
unpaid service fees together with interest of $32,051, accrued through
April 1, 2001.

2. El Comandante shall reimburse Autotote for costs incurred of $132,500.

3. As of September 30, 2002, the outstanding principal balance was
$826,159 and accrued interest was $2,150.


EQUUS - COMUNEROS

1. Equus-Comuneros is to pay Autotote the principal amount of $584,262 in
unpaid service fees as of April 23, 2001, together with interest of
$218,059 accrued through September 30, 2001.

2. Equus-Comuneros shall reimburse Autotote costs incurred of $132,500.


As of May 1, 2002, a Settlement Agreement (the "Agreement") was executed
between Autotote Systems, Inc ("Autotote") and El Comandante Management Company
LLC ("ECMC") whereby the obligations for each party were settled as follows:

1. Galapagos assigned its rights to receive funds under the net award in
Galapagos' favor.

2. In consideration for ECMC extending their agreement with Autotote for
a ten (10) year period commencing May 1, 2002, and terminating June
30, 2021, Autotote will write off $55,100 each year or the net amount
due Autotote of $550,688.

If for any reason ECMC defaults under this Agreement, or Autotote does not
have the benefit of the license extension then the entire amount owed Autotote,
including interest, less the amounts credited above, shall be reinstated
retroactive to May 1, 2002.

Each entity involved in the arbitration sustains individually the
consequences of the arbiters' final award and there are no performance
guarantees by any other entity including Equus Gaming Company L.P., the parent
company.

Costs incurred by the Company in pursuing the Arbitration with Autotote to
date total $574,042 and have been allocated to each participating entity in the
same proportion that the arbiters awarded the costs incurred by Autotote to each
entity.

By means of Resolution 213 of October 31, 2001, of the Colombian
Superintendency of Societies, Equus Comuneros was accepted for government
supervised restructuring under the provisions of Colombian Law 550 of 1999.

Presently, negotiations with the Comuneros creditors are in process and
will resulting one of the following two situations:

1. The creditors believe that Comuneros is a viable operation and will
settle all claims, or

2. The creditors believe that Comuneros is not viable causing an end to
claim negotiations and thereby forcing the government to commence
liquidation pursuant to Colombian law.


40

Equus Comuneros has not considered it necessary to make any adjustments to
the financial statements with respect to it not being able to continue
operating.

On August 18, 2001, ECMC executed a Closing Agreement (the "Agreement")
with the Municipality of Canovanas whereby ECMC settled a longstanding dispute
over the payment of the Volume of Business Tax assessed by the municipality.

The following schedule lists the deficiencies by fiscal year with the
corresponding interest and surcharges:

FISCAL INTEREST
TAX TAX AND
YEAR DEFICIENCY SURCHARGES TOTAL
------- ----------- ----------- --------

93/94 $ 74,087 $ 67,913 $142,000
96/97 120,397 68,224 188,621
97/98 126,666 59,110 185,776
98/99 123,366 45,233 168,599
99/00 93,367 24,897 118,264
00/01 116,735 19,455 136,190
----------- ----------- --------

Totals $ 654,618 $ 284,832 $939,450
=========== =========== ========

Prior to settlement, the Company as of June 30, 2001 had accrued a total
liability of $838,396 due for municipal taxes and other charges. On June 30,
2001, the Company recorded additional penalties and interest of $101,054.

The terms of the Agreement are as follows:

1. For the period August 1, 2001 through January 31, 2003, ECMC will pay
the Municipality of Canovanas $5,000 per week.

2. At the end of this eighteen (18) month period, the Municipality can
request full payment of the remaining balance, $559,450, or
renegotiate a final twelve (12) month payoff of the balance.

3. Should ECMC default at any time on the agreed payment terms, the
Municipality may declare the entire remaining balance due.

4. To guarantee the timely payments of the amounts due, ECMC has provided
to the Municipality two (2) payments bonds in the amount of $503,732
and $94,886, respectively.

As of November 1, 2002, ECMC was in compliance with the provisions of the
agreement.

El Comandante is required to pay the Government of Puerto Rico various
taxes on the wagering placed on thoroughbred horse races held at or simulcasted
by El Comandante (Puerto Rico). The taxes on the wagering are required to be
remitted to the Department of the Treasury of Puerto Rico within two (2) days of
the wagers being placed. El Comandante failed to remit tax payments totaling
$9,949,182 from October 16, 2000 to February 7, 2001, to the Department of the
Treasury of Puerto Rico. Neither ECMC nor the Company has the financial
resources to currently pay the overdue taxes in full.


41

On May 24, 2001, ECMC executed a "Closing Agreement" (the "Agreement") with
the Secretary of the Treasury of Puerto Rico (the "Secretary"), whereby ECMC
will settle its assessed debt of unpaid excise taxes and commissions for the
period October, 2000 through February, 2001, in the amount of $11,172,450
(including interest and late charge), plus an additional assessment of $60,141
(including interest) for unpaid commissions for the period February 2, 2001
through February 7, 2001, as follows:

1. Upon execution of the Agreement, ECMC delivered a check to the
Secretary for $60,141 in full payment of the February, 2001
assessment.

2. For a six-month period commencing June 1, 2001 and ending November 30,
2001, ECMC is obligated to pay $50,000 per week against the October,
2000 through January, 2001 assessment. After the six-month period, the
Secretary will reevaluate the financial condition of ECMC and may,
upon reasonable grounds, continue, modify or revoke the Agreement.

3. ECMC is obligated to continue to pay on a timely basis the current
excise taxes and commissions due under Puerto Rico law.

4. ECMC is obligated to provide and maintain a bond to the Secretary in
the amount of $500,000.

5. In the event ECMC defaults during the term of this Agreement, the
Secretary may accelerate the balance due plus any additional amounts
due resulting from the default, including waived penalties of $167
thousand.

As of November 1, 2002 all terms and conditions of the Agreement have been
met by ECMC.

Certain of the Company's subsidiaries are presently named as defendants in
various lawsuits and might be subject to other claims arising out of their
normal business operations. Management, based in part upon advice from legal
counsel, believes that the results of such actions will not have a material
adverse impact on the Company's financial position or results of operations.



ITEMS 2-6 NONE


42

SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.


Equus Gaming Company L.P.
-----------------------------------
(Registrant)


By: Equus Management Company
Managing General Partner


November 14, 2002 /s/ Thomas B. Wilson
- ------------------- -----------------------------------
President, Chief Executive Officer,
Director and Acting Chief
Financial Officer


November 14, 2002 /s/ James J. Wilson
- ------------------- -----------------------------------
Co-Chairman


CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Equus Gaming Company L.P. (the
"Company") on Form 10Q for the quarter ending September 30, 2002, as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I
Thomas B. Wilson, the Chief Executive Officer and Acting Chief Financial
Officer of the Company, certify, pursuant to and for purposes of 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sabarnes-Oxley Act of
2002, that:

(1) The report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.



November 14, 2002 /s/ Thomas B. Wilson
---------------------------------
Thomas B. Wilson
Chief Executive Officer and
Acting Chief Financial Officer

Equus Gaming Company L.P. anticipates replacing Arthur Andersen LLP within the
next sixty (60) days.


43

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Equus Gaming Company L.P. (the
"Company") on Form 10Q for the quarter ending September 30, 2002, as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I
Thomas B. Wilson, the Chief Executive Officer and Acting Chief Financial
Officer of the Company, certify, pursuant to and for purposes of 18 U.S.C.
Section 1350, as adopted pursuant to Section 302 of the Sabarnes-Oxley Act of
2002, that:

- the report has been reviewed;

- based on my knowledge, the report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by the report;

- based on my knowledge, the financial statements and other
financial information included in the report fairly present in
all material respects the financial condition, results of
operations and cash flows of the company, as of and for the
period presented in the report;

- I am responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act rules) for
the company and I have designed such disclosure control and
procedures to ensure that material information relating to the
company, including its consolidated subsidiaries is made known to
me by others within those entities particularly during the period
in which the report is being prepared;

- I evaluated the effectiveness of the company's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of the report (the "Evaluation Date") and

- I presented in the report my conclusions about the effectiveness
of the disclosure controls and procedures based on my evaluation
as of the Evaluation Date;

- I have disclosed, based on my most recent evaluation to the
company's auditors and evaluation and audit committee all
significant deficiencies in the design or operation of internal
controls which could adversely affect the company's ability to
record, process summarize and report financial data, and have
identified for the company's auditors any material weakness in
internal control; and any fraud whether or not material, that
involves management or other employees who have a significant
role in the company's internal control, and

- I have indicated in the report whether there were significant
changes in internal control or in other factors that could
significantly affect internal controls subsequent to the date of
my most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

November 14, 2002 /s/ Thomas B. Wilson
---------------------------------
Thomas B. Wilson
Chief Executive Officer and
Acting Chief Financial Officer


44