DOVER DOWNS ENTERTAINMENT INC, S-3/A, 2000-03-03

DOVER DOWNS ENTERTAINMENT INC
S-3/A, 2000-03-03
AMUSEMENT & RECREATION SERVICES

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<PAGE>

As filed with the Securities and Exchange Commission on March 3, 2000

Registration No. 333-30060

----------------

Amendment No. 2
to
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

----------------
DOVER DOWNS ENTERTAINMENT, INC.
(Exact name of Registrant as specified in its charter)

Delaware 7993 51-0357525
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction Code Number) Identification No.)
of incorporation or
organization)

1131 North Dupont Highway
Dover, Delaware 19901
(302) 674-4600
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)

Klaus M. Belohoubek, Esq.
Vice President--General Counsel
Dover Downs Entertainment, Inc.
2200 Concord Pike
Wilmington, Delaware 19901
(302) 426-2806
(Name, address, including zip code, and telephone number,
including area code, of agent for service)

----------------
Copies of communications to:

Clifford E. Neimeth, Esq. Donn Beloff, Esq.
Maria Allen, Esq. Akerman, Senterfitt & Eidson, P.A.
Greenberg Traurig, LLP Las Olas Centre, Suite 1600
The MetLife Building 350 East Las Olas Boulevard
200 Park Avenue Fort Lauderdale, Florida 33301
New York, New York 10166 (954) 463-2700
(212) 801-9200

----------------
Approximate date of commencement of proposed sale to the public: From time
to time as described in the Prospectus after the effective date of this
Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

PROSPECTUS

2,000,000 Shares

[logo]
Dover Downs Entertainment, Inc.

Common Stock

----------------

We are offering 1,500,000 shares of common stock and 500,000 shares of
common stock are being offered by a selling stockholder, who is the Chairman
of our Board of Directors and our principal stockholder. We will not receive
any proceeds from the sale of common stock by the selling stockholder.

We have two classes of capital stock -- common stock and Class A common
stock. On January 31, 2000, there were 11,746,391 shares of common stock
outstanding and 24,166,210 shares of Class A common stock outstanding.

Our common stock is traded on the New York Stock Exchange under the symbol
"DVD." The closing price of our common stock on the NYSE on March 2, 2000 was
$13.75 per share. Our Class A common stock is not publicly traded.

You should consider the risks which we have described in "Risk Factors"
beginning on page 7 before deciding whether to invest in shares of our common
stock.

----------------

<TABLE>
<CAPTION>
Per Share Total
<S> <C> <C>
Public offering price.................................. $13.75 $27,500,000
Underwriting discount.................................. 0.68 1,360,000
Proceeds, before expenses, to us....................... 13.07 19,605,000
Proceeds to selling stockholder........................ 13.07 6,535,000
</TABLE>

----------------

The selling stockholder has granted the underwriters an option to purchase
up to 300,000 shares of common stock within 30 days after the date of this
prospectus to cover unfilled customer orders for our common stock.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.

Raymond James & Associates, Inc. and J.C. Bradford & Co., on behalf of the
underwriters, expect to deliver the shares to purchasers on or before March 9,
2000.

----------------

Raymond James & Associates, Inc. J.C. Bradford & Co.

The date of this prospectus is March 3, 2000
<PAGE>

Description of Artwork

Outside of gatefold of front cover of prospectus:
------------------------------------------------

Photographs of Dover Downs International Speedway.

Inside of front cover of prospectus:
-----------------------------------

Photographs of our five venues, Dover Downs Slots Casino and our logos.

Inside of back cover of prospectus:
----------------------------------

An artist's rendering of our proposed Dover Downs Hotel and our proposed
Nashville Superspeedway.

<PAGE>

ADDITIONAL INFORMATION

We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
any document we file at the following locations:

. At the Public Reference Room of the Commission, Room 1024-Judiciary
Plaza, 450 Fifth Street, N.W., Washington, DC 20549. You may obtain
information on the operation of the Public Reference Room by calling the
Commission at 1-800-SEC-0330;

. At the public reference facilities at the Commission's regional offices
at Seven World Trade Center, 13th Floor, New York, New York 10048 or
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661;

. By writing to the Commission, Public Reference Section, Judiciary Plaza,
450 Fifth Street, N.W., Washington, DC 20549;

. At the offices of the New York Stock Exchange, Inc., 20 Broad Street,
New York, New York 10005; or

. From the Commission's web site at http://www.sec.gov., which contains
reports, proxy and information statements, and other information
regarding issuers that file electronically.

Some of these locations may charge a prescribed or modest fee for copies.

We have filed with the Commission a registration statement on Form S-3 (No.
333-30060) under the Securities Act of 1933, as amended, with respect to the
shares of our common stock being offered hereby by us and by the selling
stockholder. As permitted by the Commission, this prospectus, which constitutes
a part of the registration statement, does not contain all the information
included in the registration statement. Such additional information may be
obtained from the locations described above. Statements contained in this
prospectus as to the contents of any contract or other document are not
necessarily complete. You should refer to the contract or other document for
all the details.

----------------

(i)
<PAGE>

PROSPECTUS SUMMARY

This summary is qualified by more detailed information appearing in other
sections of this prospectus. All of the information in this prospectus is very
important, so please read this entire prospectus carefully. Unless otherwise
indicated, "we," "us," "our" and similar terms, as well as references to "Dover
Downs," refer collectively to Dover Downs Entertainment, Inc. and its
subsidiaries.

Our Company

We are a diversified entertainment company with significant motorsports and
gaming operations.

We are a leading promoter of motorsports events in the United States. Our
motorsports venues are:

. Dover Downs International Speedway (Dover, Delaware)

. Gateway International Raceway (Madison, Illinois)

. Nashville Speedway USA (Nashville, Tennessee)

. Memphis Motorsports Park (Millington, Tennessee)

. Grand Prix of Long Beach (Long Beach, California)

We promote more than 150 motorsports events annually. Our major motorsports
events include:

. 2 National Association for Stock Car Auto Racing (NASCAR) Winston Cup
Series events

. 5 NASCAR Busch Grand National Series events

. 4 NASCAR Craftsman Truck Series events

. 2 Championship Auto Racing Team (CART) events

. 2 National Hot Rod Association (NHRA) events

These events attract spectators from 31 of the 50 largest television market
areas in the United States based on Burrelle's Media Directory 2000.

Our gaming operations are located at our flagship property in Dover,
Delaware. Our Dover facility is a multi-purpose gaming and entertainment
complex housing an 80,000 square foot Las Vegas style casino with approximately
1,650 video lottery (slot) machines managed by Caesars World Gaming Development
Corporation. Dover Downs Raceway, a 5/8 mile harness horse racetrack with a
state-of-the-art simulcasting parlor, is located adjacent to the casino.

Our Markets

Motorsports is one of the fastest growing and most popular spectator sports
in the United States. According to the 1998 Goodyear Racing Attendance Report,
1998 attendance at all United States motorsports events exceeded 17 million
people. According to Nielsen Media Research, more than 258 million people tuned
to NASCAR's televised events in 1998. We believe that the demographic profile
of this growing base of spectators and viewing audience has considerable appeal
to sponsors and advertisers, including leading consumer product and
manufacturing companies which have expanded their participation in the
motorsports industry. According to the IEG Sponsorship Report, in 1999
corporate sponsors spent approximately $1.23 billion on motorsports marketing
programs in the United States, and in the year 2000 are expected to spend
approximately $1.35 billion, or 23% of all sports sponsorship dollars, on
motorsports marketing programs in the United States.

Delaware law permits video lottery (slot) machine operations only at our
Dover Downs Raceway and at the two other racetrack facilities in the State of
Delaware. Based upon information published by the Delaware State Lottery
Commission, gaming revenues in Delaware have grown at an approximate 31.8%
compound annual growth rate since video lottery (slot) machines were introduced
in December 1995.

1
<PAGE>

Growth Strategy

We have experienced significant growth in both revenues and earnings in
recent years. Our total revenues increased from approximately $17.5 million for
our fiscal year ended June 30, 1995 to approximately $207.9 million for our
fiscal year ended June 30, 1999. Our net income increased over the same period
from approximately $4.3 million to approximately $26.9 million. Since 1997, we
have increased the percentage of total revenues derived from our motorsports
business from 20.2% for our fiscal year ended June 30, 1997 to 33.0% for our
fiscal year ended June 30, 1999. We intend to continue to increase our revenues
and profitability by:

Developing, Expanding and Improving our Motorsports Facilities

We continue to pursue a strategy to capitalize on the growth in the
motorsports industry by developing, expanding and improving our motorsports
facilities.

. We are constructing a 1.33 mile superspeedway and motorsports complex
near Nashville, Tennessee with an initial seating capacity of 50,000 and
design capacity for up to 150,000 seats. We expect the facility to open
in the spring of 2001.

. We have increased our seating capacity at Dover Downs International
Speedway for 15 consecutive years and plan to increase seating capacity
for the 2000 race season to 135,000 from our current seating capacity of
122,000. We will continue to increase our seating capacity at Dover
Downs as long as demand requires and have received the necessary
approvals to increase our number of seats to 170,000 by 2004. We also
recently expanded the seating capacity at Gateway International Raceway
and Memphis Motorsports Park and will continue to add seats and
hospitality facilities to meet demand.

. We continue to improve our motorsports facilities with enhancements and
upgrades to the design, presentation and quality of our promoted events,
facilities and spectator amenities.

Increasing the Number of Sanctioned Motorsports Events at our Motorsports
Facilities

We will seek to obtain additional sanctioned motorsports events at each of
our facilities.

. Our motorsports facilities are located in or near major population
centers across the United States, including Philadelphia, Washington,
D.C., Baltimore, Los Angeles, San Diego, St. Louis, Memphis and
Nashville. We believe broadcasters and sponsors of motorsports events
find the markets we reach very attractive which should assist us in
obtaining additional sanctioned events.

. We currently promote motorsports events sanctioned by three of the
principal sanctioning bodies--NASCAR, CART and the NHRA. We believe that
we can capitalize on our relationships with these and other sanctioning
bodies to obtain the right to promote additional sanctioned events.

Maximizing Broadcasting and Sponsorship Revenue

For the past several years, motorsports events have experienced increased
television ratings and individual events have experienced increased spectator
and sponsorship demand.

. We entered into a one-year television contract with The Nashville
Network (TNN) for the 2000 race season Winston Cup Series and Busch
Grand National Series races at Dover Downs International Speedway, which
approximately doubles the broadcast rights fees we received under our
1999 contract. Additionally, NASCAR recently negotiated a domestic
broadcast contract for the entire Winston Cup and Busch Grand National
Series schedules commencing with the 2001 race season, which will also
increase our broadcast rights fees over the life of the contract.

2
<PAGE>

. We expect to continue to increase our revenues from corporate sponsors.
Sponsorship opportunities include event-naming rights, official product
designations, billboards, signage, and facility-naming rights.
Additionally, we will continue to increase sales of skybox suites,
tickets and hospitality programs to our corporate customers.

Expanding our Gaming Business

Revenues from our gaming operations have increased from approximately $32.0
million for our fiscal year ended June 30, 1996 to approximately $139.2 million
for our fiscal year ended June 30, 1999. We have several strategies to continue
to increase our gaming revenues.

. We are developing a luxury hotel adjacent to our Dover gaming operations
to attract new patrons and lengthen the stay of current patrons. The
hotel, which is expected to open in the fall of 2001, will be
constructed in two phases of 260 rooms each. The first phase will
include a multi-purpose ballroom/concert hall and a fine dining
restaurant.

. We are increasing the number of video lottery (slot) machines at our
Dover facility to 2,000 during the next several months. We also intend
to add progressive slot machines which offer patrons a more exciting
gaming experience by increasing the overall jackpot size.

. We continue to increase the purse size for harness races at Dover Downs
Raceway which attracts a higher quality of racing product and events.
Improved racing product and events should enable us to increase the
number of facilities that receive our simulcast signal and the number of
patrons wagering on our races.

Acquiring Additional Motorsports, Gaming and Entertainment Venues

Since January 1998, we have acquired the following motorsports venues:

. Nashville Speedway USA, Nashville, Tennessee

. Gateway International Raceway, Madison, Illinois

. Memphis Motorsports Park, Millington, Tennessee

. Grand Prix of Long Beach, Long Beach, California

We intend to pursue additional acquisitions in motorsports and gaming if and
when attractive opportunities arise.

Recent Developments

NASCAR Television Contract

In February 1999, NASCAR announced that it would retain the television, audio
and other electronic media rights for Winston Cup and Busch Grand National
Series events beginning with the 2001 race season. In November 1999, NASCAR
completed negotiations on a new six-year television rights agreement with NBC
and Turner and an eight-year agreement with Fox and its FX cable network. The
packaging of media rights is expected to generate an increase in revenue for
all participating tracks and increase the exposure of NASCAR and the
participating tracks on television.

New Development Projects

Our most recent development projects include:

. January 2000 - we completed a 15,000 square foot expansion of our casino
in Dover, Delaware increasing its size to 80,000 square feet, and will
increase the number of video lottery (slot) machines at the casino to
2,000 during the next several months.

3
<PAGE>

. December 1999 - we commenced construction of an additional 15,000 seats
at our Dover Downs International Speedway in Dover, Delaware.

. December 1999 - we commenced construction of our luxury hotel in Dover,
Delaware.

. October 1999 - we added 6,000 seats and 13 skybox suites at Memphis
Motorsports Park near Memphis, Tennessee.

. August 1999 - we commenced construction of our Nashville superspeedway
and motorsports complex in Wilson County, Tennessee.

Increased Borrowing Capacity

In November 1999, we amended our bank loan agreement to increase the maximum
amount we can borrow from $50.0 million to $125.0 million. As of January 31,
2000, we had outstanding borrowings of $36.1 million under our loan agreement,
which we expect to reduce with the net proceeds from this offering.

Corporate Information

Dover Downs, Inc. was incorporated in Delaware in 1967 and, as a result of a
corporate reorganization completed in 1996, it became a 100% owned subsidiary
of Dover Downs Entertainment, Inc. Our main office is located at 1131 North
Dupont Highway, Dover, Delaware 19901, where our telephone number is 302-674-
4600.

4
<PAGE>

The Offering

We have two classes of authorized and outstanding common stock -- common
stock and Class A common stock. Only our common stock is being offered by this
prospectus.

Our Class A common stock is convertible at any time into our common stock on
a one-for-one basis at the option of the stockholder. No dividends can be paid
on our Class A common stock unless an equal amount, or in the board's
discretion a greater amount, of dividends are declared and paid on our common
stock. Holders of our Class A common stock have 10 votes per share and holders
of our common stock have only one vote per share on all matters voted on by our
stockholders, except to the extent that voting by separate class is required by
applicable law. Otherwise, the rights of holders of our common stock and our
Class A common stock are essentially the same.

<TABLE>
<C> <S>
Common Stock Offered By:
Dover Downs..................................... 1,500,000 shares
Selling Stockholder............................. 500,000 shares

Capital Stock to be Outstanding after the Offering:
Common stock.................................... 13,746,391 shares
Class A common stock............................ 23,666,210 shares
Common stock and Class A common stock........... 37,412,601 shares

Use of Proceeds.................................... We intend to use the $19.4
million estimated net
proceeds from this
offering to reduce
borrowings under our bank
loan agreement and for
general corporate
purposes.

We will not receive any of
the proceeds from the
shares sold by the selling
stockholder.

NYSE Symbol........................................ "DVD"
</TABLE>

The share numbers listed above are based on our shares of common stock and
Class A common stock outstanding at January 31, 2000. These share numbers do
not include 1,002,906 shares of our common stock issuable upon the exercise of
stock options granted under our 1996 Stock Option Plan; 19,710 shares of our
common stock issuable upon the exercise of outstanding warrants to purchase our
common stock; and 405,000 shares of our Class A common stock issuable upon the
exercise of options granted under our 1991 Stock Option Plan.

5
<PAGE>

SUMMARY CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
Six Months Ended
Year Ended June 30, December 31,
----------------------------------------- -----------------
1995 1996 1997 1998 1999 1998 1999
------- ------- ------- ------- ------- -------- --------
(in thousands, except per share data) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Earnings
Data:
Revenues:
Motorsports........... $16,282 $18,110 $20,516 $25,874 $68,683 $27,825 $33,652
Gaming (1)............ 1,250 31,980 81,162 115,071 139,249 64,480 82,192
------- ------- ------- ------- ------- -------- --------
Total revenues...... 17,532 50,090 101,678 140,945 207,932 92,305 115,844
Expenses:
Operating............. 7,397 30,699 68,559 96,875 142,498 63,969 81,192
Depreciation and
amortization......... 1,043 1,469 2,084 2,707 7,098 3,628 3,938
General and
administrative....... 1,705 2,073 3,065 4,410 11,213 5,591 6,229
------- ------- ------- ------- ------- -------- --------
Total expenses...... 10,145 34,241 73,708 103,992 160,809 73,188 91,359
Operating earnings...... 7,387 15,849 27,970 36,953 47,123 19,117 24,485
Interest expense
(income)............... 148 256 (269) (702) 1,352 744 844
------- ------- ------- ------- ------- -------- --------
Earnings before income
taxes.................. 7,239 15,593 28,239 37,655 45,771 18,373 23,641
Income taxes............ 2,955 6,397 11,767 15,742 18,880 7,582 9,870
------- ------- ------- ------- ------- -------- --------
Net earnings............ $4,284 $9,196 $16,472 $21,913 $26,891 $10,791 $13,771
======= ======= ======= ======= ======= ======== ========
Diluted earnings per
share (2).............. $0.15 $0.32 $0.54 $0.70 $0.74 $0.30 $0.38
======= ======= ======= ======= ======= ======== ========
</TABLE>

<TABLE>
<CAPTION>
December 31, 1999
-----------------------
Actual As Adjusted(3)
------- --------------
(unaudited)
<S> <C> <C>
Balance Sheet Data:
Working capital (deficit)............................... $(7,282) $(7,282)
Total assets............................................ 278,727 278,727
Long-term debt.......................................... 53,625 34,245
Total shareholders' equity.............................. 183,406 202,786
</TABLE>

<TABLE>
<CAPTION>
Six Months Ended
Year Ended June 30, December 31,
---------------------------------------- -----------------
1995 1996 1997 1998 1999 1998 1999
------ ------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Selected Operating Data:
Motorsports:
Number of seats (4)... 82,000 89,000 96,000 120,000 207,000 180,000 233,000
Gaming:
Total slots facility
attendance
(in thousands)....... -- 954 1,794 1,921 1,933 929 1,180
Average number of slot
machines............. -- 509 869 1,000 1,191 1,066 1,555
Casino revenues (in
thousands)........... -- $28,818 $76,418 $109,613 $133,051 $61,851 $79,802
Casino square
footage.............. -- 24,000 41,000 41,000 65,000 41,000 65,000
</TABLE>
- --------
(1) Our video lottery (slot) casino opened on December 29, 1995. Gaming
revenues prior to December 29, 1995 were solely related to horse racing
activities.
(2) Earnings per share amounts prior to 1999 have been adjusted to reflect the
effect of a two-for-one stock split paid in the form of a stock dividend
effective September 15, 1998.

(3) Adjusted to give effect to our sale of 1,500,000 shares of our common
stock at an assumed public offering price of $13.75 and the application of
$19.4 million estimated net proceeds from this offering as set forth in
"Use of Proceeds."
(4) Consists of oval seating at permanent speedway facilities at the end of
the period. Excludes Grand Prix of Long Beach.

6
<PAGE>

RISK FACTORS

You should carefully read this entire prospectus and the documents
incorporated by reference in this prospectus before deciding whether to invest
in our common stock. The risks and uncertainties described below are not the
only ones that exist. There are additional risks and uncertainties not
presently known to us or that we currently deem insignificant that may also
impair our business operations. If any of the following risks actually occur,
our business could be significantly and negatively affected, the price of our
common stock could decline, and you could lose all or part of your investment.

This prospectus includes "forward looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Although we believe that our
plans, intentions and expectations reflected in or suggested by these forward-
looking statements are reasonable, we cannot assure you that these plans,
intentions or expectations will be successfully implemented or achieved.
Important factors that could cause actual results to differ materially from the
forward looking statements we make in this prospectus are set forth below and
elsewhere in this prospectus. All forward-looking statements attributable to us
or persons acting on our behalf are expressly qualified in their entirety by
the cautionary statements in this paragraph.

Risks Related to Motorsports

Our relationship with motorsports event authorities is vital to our success
in motorsports.

Our success in motorsports depends on maintaining a good relationship with
the sanctioning bodies that authorize national motorsports racing events. These
include NASCAR, CART and the NHRA. Many events are sanctioned on an annual
basis. None of these authorities are required to continue to enter into, renew
or extend agreements with us to promote any motorsports event. Furthermore,
none of the sanctioning bodies are responsible for the financial or other
success of the events.

If the sanctions we currently hold to promote motorsports events are not
renewed, we could receive lower revenues from admissions, sponsorships,
hospitality facilities, concessions and merchandise which would decrease our
overall profitability.

Our growth strategy includes the possible acquisition of additional
motorsports facilities and the development of new motorsports facilities.
However, we cannot be certain that we will receive continued or new
authorization to promote motorsports events at these facilities.

We rely on sponsorship agreements to generate a large portion of our
revenues.

We receive a substantial portion of our annual revenues from sponsorship
agreements, including the sponsorship of our various events, "official product"
sponsorships, billboards and signage. Loss of our title sponsors or other major
sponsorships, or failure to obtain future sponsorship agreements, could
decrease our overall profitability.

Increased government regulation of our event sponsors and advertising
restrictions could substantially reduce our revenue.

The motorsports industry generates substantial revenue from promotional
arrangements and we receive a significant portion of our revenue from
sponsorship and advertising by various companies. Government regulation could
significantly limit our ability to receive promotional, sponsorship and
advertising revenue from our motorsports events. In particular, tobacco and
liquor companies which have traditionally sponsored motorsports events, are
generally subject to a higher degree of governmental regulation on advertising
than other sponsors of our events. In the past few years there have been
several governmental attempts to impose

7
<PAGE>

restrictions on the advertising and promotion of cigarettes and smokeless
tobacco, including restrictions related to the sponsorship of motorsports
activities. If tobacco or liquor companies are prohibited from sponsoring the
motorsports events we promote, our revenues could be significantly reduced.

Our competitors could adversely affect our operations.

Motorsports event promotion is very competitive. We compete with other
motorsports promotion companies, including International Speedway Corporation
and Speedway Motorsports, Inc. Our motorsports events also compete with other
spectator-oriented sporting events and other leisure, entertainment and
recreational activities, including professional football, basketball and
baseball. As a result, our revenues and operations are affected not only by our
ability to compete in the motorsports promotion market, but also by the
availability of alternative spectator sports events, forms of entertainment and
changing consumer preferences.

Our Grand Prix event is entirely dependent on our continued receipt of an
annual municipal permit.

Our subsidiary, Grand Prix Association of Long Beach, Inc., derives almost
all of its revenue from our Grand Prix event in Long Beach, California. Grand
Prix's ability to promote the Grand Prix event is dependent on Grand Prix
obtaining a permit from the City of Long Beach, California to hold the race on
city streets. If Grand Prix fails to receive the annual permit from the City of
Long Beach to hold the race, Grand Prix will have no significant source of
revenue, which could negatively affect our results of operations.

The ability of Grand Prix to pay its debt obligations depends on the ability
of Gateway International Raceway to generate revenue.

To finance the redevelopment of Gateway International Raceway, Grand Prix
borrowed $21.5 million from the Southwest Illinois Development Authority which,
in turn, funded the loan to Grand Prix by issuing municipal bonds in that
amount. Payment of these bonds is fully guaranteed by Grand Prix. Payments on
the Southwestern Illinois Development Authority loan are intended to be made
primarily from Gateway's operating revenues.

Earnings from Gateway's future operations may not be sufficient to meet Grand
Prix's payment obligations to the Southwestern Illinois Development Authority
or to the holders of the municipal bonds. Grand Prix's business and our
financial condition could be negatively impacted if Gateway's revenues are not
sufficient to repay the Southwestern Illinois Development Authority.

We could be responsible for the repayment of revenue bonds issued to fund the
development of our new Nashville superspeedway complex.

In September 1999, the Sports Authority of the County of Wilson, Tennessee
issued $25.9 million of bonds to finance local infrastructure improvements
which will benefit the operation of our new Nashville superspeedway complex.
After the Nashville superspeedway complex opens, the bonds will become payable
solely from revenue derived from taxes payable by the superspeedway complex. If
these taxes are insufficient to pay the bonds in full, we will be required to
pay the bonds, which could impair our financial condition and overall
profitability.

Our insurance may not be adequate to cover catastrophic motorsports
incidents.

Motorsports events can be very dangerous to participants and spectators. We
have insurance coverage that we believe to be sufficient to protect us from
potentially significant financial losses, but we cannot be certain that our
insurance coverage will be adequate at all times and in all circumstances or
that our insurance coverage will always be available to us. If we are held
responsible for damages beyond the scope of our insurance coverage, our
business, financial condition and overall profitability could be negatively
affected.

8
<PAGE>

Bad weather can significantly reduce the attendance of our outdoor motorsport
events.

We sponsor and promote outdoor motorsports events but we do not maintain
weather-related insurance. Although we sell many non-refundable tickets in
advance of our outdoor events, poor and unpredictable weather conditions could
adversely affect additional ticket sales, and sales of concessions and
souvenirs. This could negatively impact our financial condition and reduce our
overall profitability.

Our quarterly earnings could be affected by the seasonality of our
motorsports events.

Our business is seasonal because we rely on outdoor events scheduled
primarily in the spring and summer for a substantial portion of our revenues.
We derive a substantial portion of our motorsports revenues from admissions and
event-related revenue attributable to five NASCAR-sanctioned events at Dover,
Delaware, which are currently held in June and September. As a result, our
revenues and quarterly earnings may vary which could impact our overall
profitability and cause volatility in the market price of our common stock.

Risks Related to Gaming

The revocation, suspension or modification of our gaming licenses would
adversely affect our gaming business.

The Delaware State Lottery Office and the Delaware Harness Racing Commission
regulate our gaming operations. Our license from the Delaware Harness Racing
Commission must be renewed on an annual basis. To keep our license for video
lottery (slot) machine gaming, we must remain licensed for harness horse racing
by the Delaware Harness Racing Commission and conduct at least 80 live race
days each racing season, subject to the availability of harness race horses.
The Delaware Harness Racing Commission has broad discretion to reject any
application for a license or suspend or revoke a license once it is issued. The
Director of the Delaware State Lottery Office has broad discretion to revoke,
suspend or modifiy the terms of a license. Any modification or termination of
existing licensing regulations or any revocation, suspension or modification of
our licenses could adversely affect our business, financial condition and
overall profitability.

Our gaming and harness horse racing activities are subject to extensive
government regulation and any additional government regulation and taxation of
gaming and harness horse racing activities could substantially reduce our
revenue.

Video lottery (slot) machine gaming, harness horse racing and pari-mutuel
wagering are subject to extensive government regulation. Delaware law regulates
the percentage of commission we are entitled to receive from our gaming
revenues, which comprises a significant portion of our overall revenues. The
State of Delaware granted us a license to conduct video lottery (slot) machine
operations and a license to conduct harness horse races and pari-mutuel
wagering. The laws under which these licenses are granted could be modified or
repealed at any time and we could be required to terminate our gaming
operations. If we are required to terminate our gaming operations or if the
amount of the commission we receive from the State of Delaware for conducting
our gaming operations is decreased, our business operations and overall
profitability would be significantly impaired.

We do not own our video lottery (slot) machines and related technology.

We do not own or lease the video lottery (slot) machines or central computer
systems used in connection with our video lottery gaming operations. The
Director of the Delaware State Lottery Office enters into contracts directly
with the providers of the video lottery (slot) machines and computer systems.
The State of Delaware purchases or leases all equipment and the Director
licenses all technology providers. Our operations could be disrupted if a
licensed technology provider violates its agreement with the State or ceases to
be licensed for any reason. Such an event would be outside of our control and
could adversely affect our gaming revenues.

9
<PAGE>

Our gaming activities compete directly with other gaming facilities and other
sports events and entertainment businesses.

We compete in local and regional markets with horse tracks, off-track betting
parlors, state run lotteries, casinos and other gaming facilities. Many of our
competitors have resources that are greater than ours. We also compete locally
with other sports and entertainment businesses, many of which have greater
resources than ours. We cannot be certain that we will maintain our market
share or compete more effectively with our competitors. The legalization of
additional casino or other gaming venues in states close to Delaware,
particularly Maryland, Pennsylvania or New Jersey, could negatively impact our
gaming business. From time to time, legislation is proposed for adoption in
these states which, if enacted, would further expand state gambling and
wagering opportunities at racetracks, including video lottery (slot) machines.
Enactment of such legislation could increase our competition and could
adversely affect our business, financial condition and overall profitability.

Other Risks

Our new facilities face many uncertainties.

Our growth strategy includes the acquisition and development of new
facilities, including our proposed Nashville superspeedway complex and our new
hotel in Dover, Delaware. Our ability to execute our growth strategy will
depend on a number of factors, including:

. with respect to the Nashville superspeedway, our ability to obtain one
or more sanctioning agreements to promote Winston Cup Series, Busch
Grand National Series and other major events,

. the cooperation of local government officials,

. our capital resources,

. our ability to control our construction and operating costs, and

. our ability to hire and retain qualified personnel.

Our inability to implement our expansion plans for any reason could
negatively impact our business. In addition, expenses associated with
developing, constructing and opening a new facility could have a significant
negative effect on our financial condition and overall profitability. Moreover,
if we do not have sufficient cash available to fund our expansion plans, we
cannot be certain that we will be able to borrow funds on commercially
reasonable terms.

Control of Dover Downs.

Without giving effect to the underwriters' option to purchase shares from the
selling stockholder, upon the completion of this offering, John W. Rollins,
Sr., our Chairman of the Board, will own no shares of our outstanding common
stock, approximately 47.5% of our outstanding Class A common stock and
approximately 29.4% of our total outstanding capital stock. All of our current
officers and directors as a group, including John W. Rollins, Sr., will own
approximately 1.1% of our outstanding common stock, approximately 87.7% of our
outstanding Class A common stock and approximately 55.5% of our total
outstanding capital stock. Therefore, approximately 44.7% of the total voting
power in our company will be controlled by John W. Rollins, Sr. and
approximately 82.8% of the total voting power in our company will be controlled
by all of our officers and directors, as a group, including John W. Rollins,
Sr.

As a result, John W. Rollins, Sr. will continue to control the outcome of
most important matters submitted to our stockholders including the election of
directors. Collectively, our current officers and directors, including Mr.
Rollins, may be able to prevent or cause a change in control of our company,
even if the transaction would be deemed beneficial to our stockholders. You
will have no ability to meaningfully influence the outcome of any significant
matters affecting our company.

10
<PAGE>

Delaware State Law restricts the transferability of our shares of capital
stock.

Under Delaware law, a change of ownership of a licensed lottery agent
automatically terminates the agent's license 90 days after the change of
ownership occurs, unless the Director of the Delaware State Lottery Office
issues a new license to the new owners. Change of ownership may occur if any
new individual or entity acquires 10% or more of the licensed agent or if more
than 20% of the legal or beneficial interest in the licensed agent is
transferred. The Delaware State Lottery Commission may require extensive
background investigations of any new owner acquiring a 10% or greater voting
interest in a licensed agent, including criminal background checks.

Our By-Laws require that (a) any holders of our stock found to be
disqualified, unsuitable or not possessing the qualifications required by the
appropriate gaming authority, must dispose of their stock and (b) holders of
our capital stock intending to acquire 10% or more of our outstanding stock
must first obtain prior written approval from the Delaware State Lottery
Office. The provisions of Delaware law which are triggered by a change in
ownership of our capital stock and the provisions contained in our By-Laws
could severely limit the transferability of our capital stock. Such limited
transferability could diminish both supply and demand for our common stock and
negatively impact, or depress, the price of our common stock.

11
<PAGE>

USE OF PROCEEDS

The net proceeds from the sale of the 1,500,000 shares of common stock
offered by us are estimated to be approximately $19.4 million, assuming a
public offering price of $13.75 per share and after deducting estimated
underwriting fees and expenses of this offering set forth on the cover page of
this prospectus. We intend to use the net proceeds we receive from this
offering to reduce indebtedness that we have incurred under our existing bank
loan agreement and for general corporate purposes.

Our unsecured three-year bank loan agreement provides a $125.0 million bank
line of credit for seasonal funding needs, capital improvements and other
general corporate purposes. At January 31, 2000, $36.1 million of borrowings
were outstanding under the line of credit at an effective interest rate of 6.9%
per annum. The facility expires on November 1, 2002.

Pending the use of our net proceeds as described above, these funds will be
invested in short-term securities or deposited in short-term bank accounts at
prevailing market rates of interest.

We will not receive any proceeds from the sale of common stock by the selling
stockholder.

PRICE RANGE OF COMMON STOCK

Our common stock is traded on the New York Stock Exchange under the symbol
"DVD." The following table sets forth, for the periods indicated, the high and
low closing sale prices for our common stock as reported on the New York Stock
Exchange.

<TABLE>
<CAPTION>
High Low
------ ------
<S> <C> <C>
Year Ended June 30, 1998:
First Quarter.................................................. $10.56 $8.38
Second Quarter................................................. 11.75 9.69
Third Quarter.................................................. 15.00 10.69
Fourth Quarter................................................. 16.81 14.19
Year Ended June 30, 1999:
First Quarter.................................................. $16.56 $12.44
Second Quarter................................................. 13.88 10.19
Third Quarter.................................................. 15.50 12.25
Fourth Quarter................................................. 19.44 14.88
Year Ending June 30, 2000:
First Quarter.................................................. $17.94 $13.50
Second Quarter................................................. 20.00 13.63
</TABLE>

On March 2, 2000, the closing sale price per share of our common stock was
$13.75. As of January 31, 2000, there were 11,746,391 shares of common stock
outstanding, and approximately 1,082 stockholders of record. The above
information has been adjusted to reflect a two-for-one stock split paid as a
stock dividend effective September 15, 1998.

DIVIDEND POLICY

We have historically paid quarterly dividends on our common stock and our
Class A common stock. Future dividends, if any, will depend on our future
earnings, capital requirements and financial condition, as well as other
factors our Board of Directors may deem relevant. Accordingly, there can be no
assurance that future dividends will be declared. No dividends can be paid on
our Class A common stock unless an equal amount, or in the board's discretion a
greater amount, of dividends are declared and paid on our common stock.

12
<PAGE>

CAPITALIZATION

The following table sets forth our capitalization at December 31, 1999, and
as adjusted to give effect to the sale of the 1,500,000 shares of common stock
offered by us, the conversion by the selling stockholder of 500,000 of his
shares of our Class A common stock into 500,000 shares of our common stock, and
the application of our estimated net proceeds therefrom as described under "Use
of Proceeds."

<TABLE>
<CAPTION>
December 31, 1999
-----------------
As
Actual Adjusted
-------- --------
(in thousands)
<S> <C> <C>
Long-term debt............................................... $53,625 $34,245
Shareholders' equity:
Common Stock, $.10 par value; 75,000,000 shares authorized;
11,735,348 shares issued and outstanding; 13,735,348
shares as adjusted........................................ 1,173 1,373
Class A common stock, $.10 par value; 55,000,000 shares
authorized; 24,166,210 shares issued and outstanding;
23,666,210 shares as adjusted............................. 2,417 2,367
Additional paid-in capital................................. 99,865 119,095
Retained earnings.......................................... 79,951 79,951
-------- --------
Total shareholders' equity............................... 183,406 202,786
-------- --------
Total capitalization..................................... $237,031 $237,031
======== ========
</TABLE>

13
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected historical consolidated financial data for the five
fiscal years ended June 30, 1999 has been derived from our audited consolidated
financial statements. The financial statements for the fiscal year ended June
30, 1995 were audited by Siegfried Schieffer & Seitz, independent certified
public accountants. The financial statements for the four fiscal years ended
June 30, 1999 were audited by KPMG LLP, independent certified public
accountants. The consolidated balance sheets as of June 30, 1998 and 1999 and
the related statements of earnings and cash flows for each of the years in the
three-year period ended June 30, 1999 and related auditors' report are
contained elsewhere in this prospectus. The earnings data for the years ended
June 30, 1995 and 1996 and the balance sheet data as of June 30, 1995, 1996 and
1997 have been derived from audited consolidated financial statements not
included herein. The selected financial data for the six months ended December
31, 1998 and 1999 have been derived from our unaudited financial statements
which, in the opinion of management, include all adjustments necessary for a
fair presentation of the information set forth therein. The results of
operations for the six months ended December 31, 1999 are not necessarily
indicative of the results for the full fiscal year ending June 30, 2000. The
following selected consolidated financial data should be read in conjunction
with our Consolidated Financial Statements, including the notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
Six Months
Ended
Year Ended June 30, December 31,
--------------------------------------------- ----------------
1995 1996 1997 1998 1999 1998 1999
------- -------- ------- ------- -------- ------- -------
(in thousands, except per share amounts) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Earnings
Data:
Revenues:
Motorsports........... $16,282 $18,110 $20,516 $25,874 $68,683 $27,825 $33,652
Gaming(1)............. 1,250 31,980 81,162 115,071 139,249 64,480 82,192
------- -------- ------- ------- -------- ------- -------
Total revenues...... 17,532 50,090 101,678 140,945 207,932 92,305 115,844
Expenses:
Operating............. 7,397 30,699 68,559 96,875 142,498 63,969 81,192
Depreciation and
amortization......... 1,043 1,469 2,084 2,707 7,098 3,628 3,938
General and
administrative....... 1,705 2,073 3,065 4,410 11,213 5,591 6,229
------- -------- ------- ------- -------- ------- -------
Total expenses...... 10,145 34,241 73,708 103,992 160,809 73,188 91,359
Operating earnings...... 7,387 15,849 27,970 36,953 47,123 19,117 24,485
Interest expense
(income)............... 148 256 (269) (702) 1,352 744 844
------- -------- ------- ------- -------- ------- -------
Earnings before income
taxes.................. 7,239 15,593 28,239 37,655 45,771 18,373 23,641
Income taxes............ 2,955 6,397 11,767 15,742 18,880 7,582 9,870
------- -------- ------- ------- -------- ------- -------
Net earnings............ $4,284 $9,196 $16,472 $21,913 $26,891 $10,791 $13,771
======= ======== ======= ======= ======== ======= =======
Basic earnings per
share (2).............. $0.16 $0.34 $0.55 $0.72 $0.76 $0.30 $0.38
======= ======== ======= ======= ======== ======= =======
Diluted earnings per
share (2).............. $0.15 $0.32 $0.54 $0.70 $0.74 $0.30 $0.38
======= ======== ======= ======= ======== ======= =======
Dividends per
share (2).............. $-- $-- $0.08 $0.16 $0.175 $0.085 $0.09
Balance Sheet Data:
Working capital
(deficit).............. $(2,419) $(11,147) $4,805 $3,609 $(10,201) $(4,582) $(7,282)
Total assets............ 25,422 42,311 71,261 95,777 255,212 219,336 278,727
Long-term debt.......... 698 766 760 741 36,725 23,544 53,625
Total shareholders'
equity................. 14,225 23,715 54,300 71,365 172,658 159,562 183,406
</TABLE>
- --------
(1) Our video lottery (slot) casino opened on December 29, 1995. Gaming
revenues prior to December 29, 1995 solely related to horse racing
activities.
(2) Earnings and dividends per share amounts prior to 1999 have been adjusted
to reflect a two-for-one stock split paid in the form of a stock dividend
effective September 15, 1998.

14
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

As you read the following, you should also carefully review our consolidated
financial statements and related notes included elsewhere in this prospectus.

General

Our results of operations are grouped into two segments: motorsports and
gaming. Motorsports revenues include admissions, parking, concessions,
souvenirs, broadcast rights, sponsorships and other revenues associated with
our motorsports events. Gaming revenues include video lottery (slot) machine
revenues, pari-mutuel wagering revenues from live and simulcast horse races and
other revenues associated with our video lottery (slot) machine, horse racing
and simulcasting operations.

In our video lottery (slot) machine operations, the difference between the
amount wagered by bettors and the amount paid out to bettors is referred to as
the win. The win is included in the amount recorded in our financial statements
as gaming revenue. The Delaware State Lottery Office sweeps the winnings from
the video lottery (slot) machine operations, collects the State's share of the
winnings and the amount due to the providers of the video lottery machines and
associated computer systems, collects the amount allocable to purses for
harness horse racing, and remits the remainder to us as our commission for
acting as a licensed agent. Pari-mutuel wagering revenues refer to income
received from betting on live, on-site harness horse racing and from wagering
on simulcast races of thoroughbred and harness horse racing held across North
America. The wagering by the public on the horse races is referred to as the
handle. From the handle, a substantial portion is returned to the wagering
public, we retain the residual and it is recorded in our financial statements
as gaming revenues. Simulcasting is the transmission of live horse racing by
television, cable or satellite signal from one racetrack to another with pari-
mutuel wagering being conducted at the sending and receiving track and a
portion of the handle being shared by the sending and receiving tracks.

Results of Operations

Our Six Months Ended December 31, 1999 Compared With Our Six Months Ended
December 31, 1998

Our revenues increased by $23,539,000, or 25.5%, to $115,844,000 for the six
months ended December 31, 1999. Our gaming revenues increased by $17,712,000,
or 27.5%, as a result of having an average of 1,555 machines during the first
six months of fiscal 2000 compared with an average of 1,066 machines during the
first six months of fiscal 1999, and also from the results of expanded
marketing and promotional activities related to our video lottery casino. Our
motorsports revenues increased by $5,827,000, or 20.9%, to $33,652,000.
Approximately $1,280,000 of the increase resulted from increased attendance,
$573,000 from increased ticket prices, and $3,021,000 from increased
sponsorship, concession and broadcast revenues for our fall NASCAR weekend at
Dover Downs International Speedway. The remainder of our revenue increase was
due primarily to the addition of a Busch Grand National Series event at our
Memphis Motorsports Park and an increase in admissions revenues for the Busch
Grand National Series event at Gateway International Raceway. The increases in
our motorsports revenues were offset somewhat by a decrease in our revenues
related to the Indy Racing League event at Dover Downs International Speedway
in the first fiscal quarter.

Our operating expenses increased by $17,223,000 reflecting the higher
revenues. Amounts retained by the State of Delaware, fees to the manager who
operates the video lottery (slot) machine casino, and the amount collected by
the State of Delaware for payment to the vendors under contract with the State
of Delaware who provide the video lottery (slot) machines and associated
computer systems, increased by $7,226,000 in the first six months of fiscal
2000. Amounts allocated from the video lottery (slot) machine operation for
harness horse racing purses were $9,036,000 in the first six months of fiscal
2000 compared with $7,094,000 in the first six months of fiscal 1999.

15
<PAGE>

Our motorsports operating expenses increased primarily due to a $1,069,000
increase in the purse obligation expenses related to the fall NASCAR weekend at
Dover Downs International Speedway and the addition of a Busch Grand National
Series event at Memphis Motorsports Park in October 1999.

Our depreciation and amortization increased by $310,000 due to capital
expenditures related to our video lottery (slot) machine and motorsports
facilities expansion during the third and fourth quarters of fiscal 1999.

Our general and administrative expenses increased by $638,000 to $6,229,000
from $5,591,000 in the first six months of 1999 due to an increase in wages and
related employee benefits.

Our effective income tax rates for the six-month periods ended December 31,
1999 and 1998 were 41.8% and 41.3%.

Our net earnings increased by $2,980,000 as a result of increased play in the
casino, higher attendance and related revenues as well as an increase in the
broadcast rights fees for the fall NASCAR weekend race at Dover Downs
International Speedway, and the addition of a Busch Grand National Series event
at our Memphis Motorsports Park in the second quarter of fiscal 2000.

Our Fiscal Year 1999 Compared With Our Fiscal Year 1998

Our revenues increased by $66,987,000, or 47.5%, to $207,932,000 as a result
of growth in our historical business and our acquisition of Grand Prix
Association of Long Beach, Inc. on July 1, 1998.

Our gaming revenues increased by $24,178,000, or 21.0%, to $139,249,000, as a
result of having an average of 1,191 machines in fiscal 1999 compared with an
average of 1,000 machines in fiscal 1998, and expanded marketing and
promotional activities related to our video lottery (slot) machine casino.

Our motorsports revenues increased by $42,809,000, or 165.5%, to $68,683,000.
Approximately $2,432,000 of the revenue increase resulted from increased
attendance, $637,000 from increased ticket prices and $1,598,000 from adding an
IRL event at our Dover Downs International Speedway. Approximately $2,309,000
of the increase resulted from the inclusion of the operating results of
Nashville Speedway USA in our consolidated results for 12 months in fiscal 1999
compared to six months in fiscal 1998, and $32,837,000 from the acquisition of
Grand Prix Association of Long Beach. The remainder of the increase resulted
from increased sponsorship, concessions and marketing-related revenues at our
Dover Downs International Speedway.

Our operating expenses increased by $45,623,000 reflecting these higher
revenues. Amounts retained by the State of Delaware, including amounts
collected for payment to the vendors under contract with the State who provide
the video lottery (slot) machines and associated computer systems and fees to
the manager who operates our video lottery (slot) machine casino, increased by
$9,004,000 in fiscal 1999. Amounts allocated from the video lottery operation
for harness horse racing purses were $15,173,000 in fiscal 1999 compared with
$12,721,000 in fiscal 1998. Additional advertising, promotional and customer
complimentary costs of $2,557,000 were our other significant gaming-related
operating cost increases.

Our motorsports operating expenses increased due primarily to a $1,139,000
increase in purse and sanction fee expenses and $1,666,000 from adding an IRL
event at our Dover Downs International Speedway, and $1,533,000 from the
inclusion of the operating results of Nashville Speedway USA in our
consolidated results for 12 months in fiscal 1999 compared to six months in
fiscal 1998. The remainder of the increase is primarily the result of the
acquisition of Grand Prix Association of Long Beach.

Our depreciation and amortization increased by $4,391,000 due to capital
expenditures related to our motorsports facilities and casino expansion and the
depreciation of facilities and amortization of goodwill related to the
acquisition of Grand Prix Association of Long Beach.

16
<PAGE>

Our general and administrative expenses increased by $6,803,000 to
$11,213,000 from $4,410,000, of which $6,341,000 is the result of our
acquisition of Grand Prix Association of Long Beach.

Our interest expense was $1,352,000 in fiscal 1999 compared to $702,000 of
interest income in fiscal 1998. The interest expense resulted from increased
borrowings under our bank loan agreement and interest payments made relating to
the SWIDA loan.

Our effective income tax rates for the fiscal years ended June 30, 1999 and
1998 were 41.2% and 41.8%.

Our net earnings increased by $4,978,000 due to the expansion of our video
lottery (slot) machine operations, increased marketing efforts in our casino,
higher attendance and the growth in the number of motorsports events we
present, offset by increased interest and amortization expense from our Grand
Prix Association of Long Beach acquisition.

Liquidity and Capital Resources

General

Our cash flows from operations for the six months ended December 31, 1999 and
1998 were $8,442,000 and $154,000. This increase was due primarily to our
increased earnings before depreciation and amortization and the timing of
payments for harness horse racing purses, construction-related payables and
certain tax payments.

On November 1, 1999, we closed on a $125.0 million revolving bank credit
agreement. The terms of the new agreement are essentially the same as those
contained in the previous agreement. We had outstanding borrowings of $32.5
million under the credit facility at December 31, 1999. Interest on these
borrowings is, at our option, based upon either (i) LIBOR plus .75% or (ii) the
base rate (the greater of the prime rate or the federal funds rate, plus .5%)
minus 1%. During the first six months of fiscal 2000, we capitalized $699,000
of interest cost related to the construction of major facilities. The
capitalized interest is amortized over the estimated useful life of the asset
to which it relates.

In September 1999, the Sports Authority of the County of Wilson, Tennessee
issued its Variable Rate Tax Exempt Infrastructure Revenue Bonds, Series 1999,
in the amount of $25.9 million. The proceeds will be used to acquire, construct
and develop certain public infrastructure improvements in Wilson County,
Tennessee which will be beneficial to the operation of our superspeedway
complex we are developing through our 100% owned subsidiary, Nashville Speedway
USA. Interest only payments are required until September 1, 2002 and will be
made from a capitalized interest fund established from bond proceeds. After the
opening of our Nashville superspeedway complex, the bonds will be payable
solely from certain taxes generated from that facility. If the superspeedway
complex taxes are insufficient to cover the payment of principal and interest
on the bonds, payments will be made under a $26,326,000 letter of credit issued
by several banks. We have agreed to reimburse the banks for amounts paid by
them under the letter of credit.

We believe that cash flows from operations and our borrowing capacity under
our bank loan agreement will satisfy our cash requirements for the remainder of
fiscal 2000.

Capital Expenditures

Our capital expenditures for the six months ended December 31, 1999 were
$29,033,000. Approximately $11,342,000 of these expenditures related to the
expansion of and improvements to our auto racing facilities in Dover, Delaware,
Millington, Tennessee (near Memphis, Tennessee), and Madison, Illinois (near
St. Louis, Missouri); approximately $5,472,000 related to the expansion of our
casino facility and construction of our hotel in Dover, Delaware; and
approximately $11,493,000 related to the acquisition of land and other
construction costs for our new Nashville superspeedway complex.

17
<PAGE>

We expect to make approximately $48 million of capital expenditures for
approved projects during the remainder of the fiscal year ending June 30, 2000.
These expenditures will be made primarily to increase our grandstand seating
capacity at existing facilities and to fund construction of our hotel
development in Dover, Delaware and our new Nashville superspeedway complex.

Seasonality and Quarterly Results

We derive a substantial portion of our total revenues from admissions and
event-related revenue attributable to our major motorsports events which are
currently held from April through October. As a result, our business is highly
seasonal. The seasonality of our business is offset to some degree by our year-
round video lottery (slot) machine gaming operations and year-round
simulcasting.

The following table presents certain unaudited financial data for each of our
prior ten fiscal quarters (in thousands, except per share amounts):

<TABLE>
<CAPTION>
Fiscal Quarter Ended
--------------------------------------------------------------------------------------------
Sept. 30, Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31,
1997 1997 1998 1998 1998 1998 1999 1999 1999 1999
--------- -------- -------- -------- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Earnings
Data:
Revenues:
Motorsports........... $ 11,198 $ 47 $ 949 $ 13,680 $ 21,155 $ 6,670 $ 1,271 $ 39,587 $ 28,610 $ 5,042
Gaming................ 27,623 25,915 30,786 30,747 33,499 30,981 35,405 39,364 42,691 39,501
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total revenues........ $ 38,821 $ 25,962 $ 31,735 $ 44,427 $ 54,654 $ 37,651 $ 36,676 $ 78,951 $ 71,301 $ 44,543
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
Operating earnings..... $ 13,234 $ 4,242 $ 5,471 $ 14,006 $ 14,466 $ 4,651 $ 4,223 $ 23,783 $ 19,645 $ 4,840
Net earnings........... $ 7,833 $ 2,518 $ 3,295 $ 8,267 $ 8,278 $ 2,513 $ 2,207 $ 13,893 $ 11,244 $ 2,527
Basic earnings per
share................. $ 0.26 $ 0.08 $ 0.11 $ 0.27 $ 0.23 $ 0.07 $ 0.06 $ 0.40 $ 0.31 $ 0.07
Diluted earnings per
share................. $ 0.25 $ 0.08 $ 0.11 $ 0.26 $ 0.23 $ 0.07 $ 0.06 $ 0.38 $ 0.31 $ 0.07
</TABLE>

Inflation

We do not believe that our financial performance has been significantly
impacted by inflation.

Disclosures About Market Risk

Our exposure to market risk for changes in interest rates relates primarily
to the increase in the amount of interest expense we must pay with respect to
our bank loan agreement, which is tied to variable market rates.

Recent Accounting Pronouncements

We do not expect the adoption of recently issued accounting pronouncements to
have a significant impact on our results of operations, financial position or
cash flows.

Year 2000 Compliance

As of the date of this prospectus, our business operations have not been
materially impacted by Year 2000 matters.

18
<PAGE>

AN IMPORTANT NOTE ABOUT OUR FORWARD-LOOKING STATEMENTS

We make certain forward-looking statements in the prospectus and in documents
incorporated by reference in this prospectus within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, relating to our financial condition,
profitability, liquidity, resources, business outlook, proposed acquisitions,
market forces, corporate strategies, consumer preferences, contractual
commitments, capital requirements and other matters. The Private Securities
Litigation Reform Act of 1995 provides a safe harbor for forward-looking
statements. To comply with the terms of the safe harbor, we note that a variety
of factors could cause our actual results and experience to differ
substantially from the anticipated results or other expectations expressed in
our forward-looking statements. When words and expressions such as: "believes,"
"expects," "anticipates," "estimates," "plans," "intends," "objectives,"
"goals," "aims," "projects," "forecasts," "possible," "seeks," "may," "could,"
"should," "might," "likely," "enable" or similar words or expressions are used
in this prospectus, as well as statements containing phrases such as "in our
view," "there can be no assurance," "although no assurance can be given" or
"there is no way to anticipate with certainty," forward-looking statements are
being made in all of these instances. These forward-looking statements speak as
of the date of this prospectus.

Various risks and uncertainties may affect the operation, performance,
development and results of our business and could cause future outcomes to
differ materially from those set forth in our forward-looking statements,
including the following factors: our growth strategies; our development and
potential acquisition of new facilities; anticipated trends in the motorsports
and gaming industries; patron demographics; our ability to enter into
additional contracts with sponsors, broadcast media and race event sanctioning
bodies; our relationships with sponsors; general market and economic
conditions; our ability to finance our future business requirements; the
availability of adequate levels of insurance; the ability to successfully
integrate acquired companies and businesses; management retention and
development; changes in Federal, state, and local laws and regulations,
including environmental and gaming license regulations; the affect of weather
conditions on our outdoor event attendance; as well as the risks, uncertainties
and other factors described from time to time in our SEC filings and reports.

We undertake no obligation to publicly update or revise any forward-looking
statements as a result of future developments, events and conditions outside of
our control. New risk factors emerge from time to time and it is not possible
for us to predict all such risk factors, nor can we assess the impact of all
such risk factors on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ significantly from
those forecast in any forward-looking statements. Given these risks and
uncertainties, investors should not overly rely or attach undue weight to our
forward-looking statements as an indication of our actual future results.

19
<PAGE>

BUSINESS

We are a diversified entertainment company with significant motorsports and
gaming operations.

Motorsports

We are a leading promoter of motorsports events in the United States. We have
experienced a dramatic increase in motorsports revenue. In 1999, approximately
91% of our motorsports revenue at Dover Downs International Speedway was
derived from admissions, skybox rentals, sponsorships, concessions and novelty
sales and broadcast rights at NASCAR-sanctioned events. The following chart
sets forth our revenues derived from motorsports for the past four fiscal
years:

Motorsports Revenue
(in thousands)

Fiscal Year
1996 $18,110
1997 $20,516
1998 $25,874
1999 $68,683

Our Motorsports Venues

The following table sets forth certain information relating to each of our
motorsports venues at January 31, 2000:

<TABLE>
<CAPTION>
Approximate
Seating Track/Course
Venue Name Location Capacity Length
---------- -------------- ----------- ------------
<S> <C> <C> <C>
Dover Downs
International
Speedway............... Dover, DE 122,000 1.00 miles
Gateway International
Raceway................ Madison, IL 70,000 1.25 miles
Grand Prix of Long
Beach.................. Long Beach, CA 62,000 1.97 miles
Memphis Motorsports
Park................... Millington, TN 26,000 .75 miles
Nashville Speedway USA.. Nashville, TN 15,000 .60 miles
</TABLE>

Dover Downs International Speedway

We have presented NASCAR-sanctioned racing events for 31 consecutive years at
Dover Downs International Speedway and we currently conduct five major NASCAR-
sanctioned events annually at this venue. Two races are in the Winston Cup
Series, two races are in the Busch Grand National Series and one is in the
NASCAR Craftsman Truck Series.

Each of the Busch Grand National Series events at Dover Downs is conducted on
the day before a Winston Cup event. Dover Downs is one of only six speedways in
the country that presents two Winston Cup events and two Busch Grand National
Series events each year and one of only three with a combined Winston Cup,
Busch Grand National and Craftsman Truck Series weekend. The June and September
dates have historically allowed Dover Downs to hold the first and last Winston
Cup events in the Maryland to Maine region each year.

20
<PAGE>

The auto racing track is a high-banked, one-mile long, concrete superspeedway
with a current seating capacity of approximately 122,000. Construction is
underway to increase capacity to 135,000 for the 2000 racing season. Unlike
some superspeedways, substantially all grandstand and skybox seats offer an
unobstructed view of the entire track. The concrete racing surface makes the
auto racing track the only concrete superspeedway (one mile or greater in
length) that conducts NASCAR-sanctioned events.

Gateway International Raceway

Gateway International Raceway has conducted NASCAR-, CART- and NHRA-
sanctioned events since its opening in May 1997. The auto racing facility
includes a 1.25-mile oval track and road course with current seating capacity
of 70,000 and a national caliber drag strip capable of seating approximately
30,000 people. The facility, which was equipped with lights for nighttime
racing in 1999, is located on approximately 416 acres of land in Madison,
Illinois, five miles from the St. Louis Arch. We acquired Gateway International
Raceway in July 1998.

Grand Prix of Long Beach

For the past 25 years, the Grand Prix Association of Long Beach has
organized and promoted the CART-sanctioned Grand Prix of Long Beach, an annual
temporary circuit professional motorsports event run in the city streets of
Long Beach, California. The Grand Prix of Long Beach has the second highest
paid attendance of any open wheel Indy-style car race, second only to the
Indianapolis 500. The Grand Prix of Long Beach weekend has attracted in excess
of 200,000 spectators in each of the past six years, and is currently broadcast
to more than 125 countries throughout the world. We acquired Grand Prix
Association of Long Beach, Inc. in July 1998.

Memphis Motorsports Park

Memphis Motorsports Park has hosted NASCAR- and NHRA-sanctioned events since
its opening in June 1998. The tri-oval track was recently expanded to bring its
seating capacity to approximately 26,000 seats and luxury suites were added for
the inaugural Busch Grand National Series event held in October 1999. The drag
strip also hosts an NHRA national event and has a seating capacity in excess of
25,000. We acquired Memphis Motorsports Park in July 1998.

Nashville Speedway USA

Nashville Speedway USA hosted its first automotive race in 1904, making it
one of the oldest tracks in the country. The facility currently hosts events in
three of NASCAR's top national series--the Busch Grand National Series, the
Craftsman Truck Series and the Slim Jim All Pro Series. Based on attendance,
the track's Saturday night NASCAR Racing Series is regarded as one of the most
successful weekly programs in the country. We acquired Nashville Speedway USA
in January 1998. We expect the new Nashville superspeedway to open during the
2001 race season with a strong schedule of events, including the NASCAR
national events currently held at Nashville Speedway USA.

21
<PAGE>

Our Major Racing Events for 2000

<TABLE>
<CAPTION>
Venue Series Event Date
- ----- ------ ----- ----
<S> <C> <C> <C>
Nashville NASCAR Busch Grand National BellSouth 320 April 8
Speedway USA
Grand Prix of CART FedEx Championship Toyota Grand Prix of Long Beach April 16
Long Beach
Gateway NASCAR Craftsman Truck Missouri-Illinois Dodge Dealers May 7
International "Ram Tough" 200 presented by Pepsi
Raceway
Memphis NASCAR Craftsman Truck Memphis 200 May 13
Motorsports
Park
Dover Downs NASCAR Busch Grand National MBNA Platinum 200 June 3
International
Speedway
Dover Downs NASCAR Winston Cup MBNA Platinum 400 June 4
International
Speedway
Gateway NHRA NHRA Sears Craftsman Nationals June 24
International
Raceway
Gateway NASCAR Busch Grand National CARQUEST Auto Parts 250 July 29
International
Raceway
Nashville NASCAR Craftsman Truck Federated Auto Parts 250 August 12
Speedway USA
Gateway CART FedEx Championship Motorola 300 September 17
International
Raceway
Dover Downs NASCAR Craftsman Truck MBNA Palladian Travel 200 September 22
International
Speedway
Dover Downs NASCAR Busch Grand National MBNA.com 200 September 23
International
Speedway
Dover Downs NASCAR Winston Cup MBNA.com 400 September 24
International
Speedway
Memphis NHRA NHRA AutoZone Nationals October 8
Motorsports Presented by Pennzoil
Park
Memphis NASCAR Busch Grand National Sam's Town 250 October 29
Motorsports
Park
</TABLE>

Overview of Sanctioning Bodies

NASCAR. NASCAR is widely recognized as the premier official sanctioning body
of professional stock car racing in the United States. NASCAR regulates its
membership (including drivers, their crews, team owners and track operators),
the composition of race cars and the sanctioning of races. It sanctions events
with one-year agreements with track operators, each of which specifies the race
date, the sanctioning fee and the purse. NASCAR officials control qualifying
procedures, the line-up of the cars, the start of the race, the control of cars
throughout the race, the election to stop or delay a race, "pit" activity,
"flagging," the positioning of cars, the assessment of lap and time penalties
and the completion of the race. NASCAR also administers, monitors and promotes
the championship point systems for its Winston Cup Series, Busch Grand National
Series and Craftsman Truck Series events. These point systems were designed to
establish the championship drivers in each series.

CART. CART, an open wheel racing series formed by Indy team owners in 1978,
owns, operates and sanctions the CART Championship, which in 1999 consisted of
20 races staged in five countries. CART events are staged on superspeedways,
ovals, temporary street courses and permanent road courses.

NHRA. The National Hot Rod Association is the world's largest motorsports
sanctioning body, featuring national championship drag racing at 23 NHRA Series
events throughout the United States.

Economics of Motorsports

The primary participants in the business of motorsports are spectators,
sponsors, track operators, drivers, team members and team owners.

Spectators. According to the 1998 Goodyear Racing Attendance Report,
approximately 9 million spectators attended the 1998 Winston Cup Series, Busch
Grand National Series and Craftsman Truck Series events. Moreover, according to
Nielsen Market Research, approximately 123 million people tuned to televised
Winston Cup Series events in 1999. According to Nielsen Media Research,
approximately 39% of NASCAR spectators are women and 66% are between the ages
of 18 and 44. We believe that this demographic profile of

22
<PAGE>

the growing base of spectators has considerable appeal to track operators,
sponsors and advertisers. We believe that NASCAR spectators are loyal to both
the sport of motor racing and to the sponsors of the sport.

Sponsors. Sponsors are active in all phases of professional motorsports. In
addition to directly supporting racing teams through the funding of certain
costs of their operations, sponsors support track operators by paying fees
associated with specific name events such as the "Toyota Grand Prix of Long
Beach." In addition, premier racing events such as "MBNA Platinum 400" at Dover
frequently have multiple "official corporate sponsors." In return, sponsors
receive advertising exposure through television and radio coverage, newspapers,
race programs, brochures and advertising at the track on race day.

Track Operators. Track operators like us market and promote events at their
facilities. Their principal revenue sources generally include admissions;
television and radio broadcast fees; sponsorship fees; the sale of merchandise
such as souvenirs, collectibles and apparel; food and beverage concessions;
hospitality fees paid for catering receptions and private parties; luxury suite
and hospitality village rentals; parking; and advertising on track signage and
in souvenir racing programs. Sanction agreements require race track operators
to pay fees to the relevant sanctioning body for each sanctioned event
conducted, including sanction fees and prize money.

Drivers and Team Members. Although a majority of drivers contract
independently with team owners, certain drivers own their own teams. Drivers
receive income from contracts with team owners, sponsorship fees and prize
money. Successful drivers may also receive income from personal endorsement
fees and souvenir sales. The success and personality of a driver can be an
important marketing advantage for team owners because it can help attract
corporate sponsorships and generate sales for officially licensed merchandise.
The efforts of each driver are supported by a number of other team members, all
of whom are supervised by a crew chief.

Team Owners. In most instances, team owners bear the financial risk of
placing their teams in competition. Team owners contract with drivers, acquire
racing vehicles and support equipment, hire pit crews and mechanics, and
syndicate sponsorship of their teams.

Gaming

Our gaming operations are located at our flagship property in Dover,
Delaware. Our Dover facility is a multi-purpose gaming and entertainment
complex housing an 80,000 square foot Las Vegas style casino with approximately
1,650 video lottery (slot) machines, managed by Caesars World Gaming
Development Corporation. Dover Downs Raceway, a 5/8 mile harness horse
racetrack with a state-of-the-art simulcasting parlor, is located adjacent to
the casino.

We have experienced dramatic increases in gaming revenue. In 1999,
approximately 96% of our gaming revenue was attributable to our video lottery
(slot) machine casino. The following chart sets forth our revenues derived from
gaming for the past four fiscal years:

Gaming Revenue

Fiscal Year
1996 $31,980
1997 $81,162
1998 $115,071
1999 $139,249

23
<PAGE>

Dover Downs Slots

Our video lottery (slot) machine casino opened its doors in December 1995
with 500 video lottery (slot) machines. Due to its popularity, the video
lottery (slot) machine casino has expanded several times and the number of
machines has steadily increased to its current level of approximately 1,650.

The most recent expansion of our gaming operations is expected to be
completed by April 2000. The Las Vegas style casino has been expanded to 80,000
square feet and will have 2,000 video lottery (slot) machines when complete.
The video lottery (slot) machines range from the increasingly popular nickel
machines to $20 machines in the newly created Premium Slots area. Additional
amenities include the Garden Cafe, which becomes a lounge with live
entertainment every evening, and the all-you-can-eat buffet in the Winners
Circle Dining Room.

The Delaware State Lottery Office administers and controls our video lottery
(slot) machine operations. We are a licensed agent authorized to conduct video
lottery operations under the Delaware State Lottery Code. We are one of only
three locations permitted to do so in the State of Delaware. We are permitted
by law to set our payout to customers between 87% and 95%. Prior approval from
the Director of the Delaware State Lottery Office would be required for any
deviation from these payout rates. Since the introduction of our video lottery
(slot) machine operations, we have maintained an average payout of
approximately 91%.

We have a long-term management agreement with Caesars World Gaming
Development Corporation. Under the agreement, Caesars is our exclusive agent to
supervise, manage and operate our video lottery (slot) machine casino. Caesars
has been licensed by the Delaware State Lottery Office.

We are also developing a luxury hotel facility adjacent to our Dover gaming
operations to attract new patrons and lengthen the stay of current patrons.

Dover Downs Raceway

Dover Downs Raceway has presented pari-mutuel harness racing events for 31
consecutive years. The harness horse racing track is a five-eighth mile track
and is lighted for nighttime operations. The track is located inside the one-
mile auto racing superspeedway. Live harness races conducted at Dover Downs are
simulcast to tracks and other off-track betting locations across North America
on each of our 120 live race dates. During 1999, our races were transmitted to
more than 400 tracks and off-track betting locations.

Dover Downs Raceway has facilities for pari-mutuel wagering on both live
harness horse racing and on simulcast thoroughbred and harness horse racing
received from numerous tracks across North America. Within the main grandstand
is the simulcast parlor where patrons can wager on harness and thoroughbred
races received by satellite into Dover Downs year round. Television monitors
throughout the parlor area provide views of all races simultaneously and the
parlor's betting windows are connected to a central computer allowing bets to
be received on all races from all tracks.

Harness racing in the State of Delaware is governed by the Delaware Harness
Racing Commission. We hold a license from the Commission authorizing us to hold
harness race meetings on our premises and to offer pari-mutuel wagering on live
and simulcast horse races.

Competition

Motorsports

Our racing events compete with other racing events sanctioned by various
racing bodies and with other sports and recreational events scheduled on the
same dates. Racing events sanctioned by different organizations are often held
on the same dates at separate tracks. The quality of the competition, type of
racing event, caliber of the event, sight lines, ticket pricing, location, and
customer conveniences, among other things, distinguish the motorsports
facilities.

24
<PAGE>

The two speedways closest to Dover Downs International Speedway that
currently sponsor Winston Cup races are in Richmond, Virginia (approximately
four hours to the South) and Pocono International Raceway in Long Pond,
Pennsylvania (approximately three and a half hours to the North). Nazareth
Speedway in Nazareth, Pennsylvania (approximately two hours to the North)
currently conducts a Busch Grand National Series, Craftsman Truck Series and
CART series race.

For the past 25 years, the Grand Prix Association of Long Beach, Inc. has
been organizing and promoting the Grand Prix of Long Beach, an annual temporary
circuit professional motorsports event in Long Beach, California. The closest
events to the Grand Prix event are CART- and NASCAR-sanctioned events at the
California Speedway in Fontana, California, approximately 60 miles from Long
Beach.

The speedway closest to Gateway International Raceway is Indianapolis Motor
Speedway (approximately four hours to the east), which currently conducts one
Winston Cup race and one Indy Racing League (IRL) race, as well as a recently
added Formula One event.

The speedways closest to our current Nashville Speedway are the Atlanta Motor
Speedway (approximately three hours to the southeast) and Talladega
Superspeedway (approximately three and one-half hours to the south). Atlanta
Motor Speedway currently hosts two Winston Cup races, one Busch Grand National
Series race and one IRL race. Talladega Superspeedway currently hosts two
Winston Cup races and one Busch Grand National Series race.

The speedway closest to Memphis Motorsports Park is Talladega Superspeedway
(approximately five and one-half hours to the southeast).

Based on historical data, we do not believe that any of the competing
facilities significantly impact our operations, although they may impact our
ability to secure additional events in the future.

Our motorsports events also compete with other spectator-oriented sporting
events and other leisure, entertainment and recreational activities, including
professional football, basketball and baseball.

Gaming

The legalization of additional casino and other gaming venues in states close
to Delaware, particularly Maryland, Pennsylvania or New Jersey, may have a
significant impact on our business. From time to time, legislation has been
introduced in these states that would further expand gambling opportunities,
including video lottery (slot) machines at horse-tracks.

At present, video lottery (slot) machines are only permitted at two other
locations in Delaware: Delaware Park and Harrington Raceway. The neighboring
states of Pennsylvania and Maryland do not presently permit video lottery
(slot) machine operations. Pennsylvania, Maryland and New Jersey all have
state-run lotteries. Atlantic City, New Jersey is located approximately 100
miles from Dover Downs and offers a full range of gaming products.

Competition in horse racing is varied since racetracks in the surrounding
area differ in many respects. Some tracks only offer thoroughbred or harness
horse racing; others have both. Tracks have live racing seasons that may or may
not overlap with neighboring tracks. Depending on the purse structure, tracks
that are farther apart may compete with each other more for quality horses than
for patrons.

Live harness racing also competes with simulcasts of thoroughbred and harness
racing. All racetracks in the region are involved with simulcasting. In
addition, a number of off-track betting parlors compete with track simulcasting
activities. With respect to the simulcasting of our live harness races to
tracks and other locations, our simulcast signals are in direct competition
with live races at the receiving track and other races being simulcast to the
receiving location.

25
<PAGE>

Within the State of Delaware, Dover Downs faces little direct live
competition from the State's other two tracks. Harrington Raceway, a south
central Delaware fairgrounds track, conducts harness horse racing periodically
between May and November. There is no overlap presently with Dover Downs' live
race season. Delaware Park, a northern Delaware track, conducts thoroughbred
horse racing from April through mid-November. Its race season only overlaps
with our season for approximately five to six weeks each year.

The neighboring states of Pennsylvania, Maryland and New Jersey all have
harness and thoroughbred racing and simulcasting. Dover Downs competes with
Rosecroft Raceway in Maryland, Philadelphia Park in Pennsylvania, Garden State
Park and The Meadowlands in New Jersey and a number of other racetracks in the
surrounding area. We also receive simulcast harness and thoroughbred races from
approximately 30 racetracks, including the tracks noted above.

In addition, our gaming activities compete with other leisure, entertainment
and recreational activities.

Employees

On January 31, 2000, we had approximately 608 full-time employees and
approximately 212 part-time employees. Our employees include corporate
executive, marketing, administrative, clerical, pari-mutuel tellers, gaming
operations, security, admissions, maintenance and parking personnel. We hire
temporary employees to assist during periods of peak attendance at our auto
racing and harness horse racing events. Some of our employees at Gateway
International Raceway are represented by a labor union. Owners, drivers and
trainers of horses participating in harness race meetings are represented by a
horsemen's association. We believe that we enjoy a good relationship with our
employees including employees represented by a union. We may also engage
consultants from time to time to provide us with advisory services.

Insurance

We maintain insurance against the risks that are customarily associated with
our businesses. Our policies are in amounts and have deductibles that are
customary in our business. Our policies currently provide business and
commercial coverages, including workers' compensation, third party liability,
property damage, boiler and machinery, and business interruption. We comply
with insurance and bonding requirements as required by regulatory authorities
and our agreements, such as our agreements with NASCAR, Caesars, or various
sponsors.

Patents and Trademarks

We have various trademark rights related to our motorsports events and gaming
activities, including rights in names or logos of all of our motorsports venues
and our gaming attractions in Dover, Delaware. Our policy is to protect our
intellectual property rights vigorously, through litigation if necessary.

Litigation

A group made up of Wilson County and Rutherford County, Tennessee residents
has filed a complaint in the Chancery Court for Wilson County, Tennessee
contesting the rezoning of the land upon which the new Nashville superspeedway
complex will be situated. This litigation, if successful, would prevent, or at
least significantly postpone, the development of the facility. We believe the
rezoning was done properly. We are vigorously contesting the litigation and,
based on the advice of counsel, believe that the litigation is unlikely to
succeed on its merits. We are also a party to ordinary routine litigation
incidental to our business. We do not believe that the resolution of any of
these matters is likely to have a serious negative effect on our financial
condition or profitability.

26
<PAGE>

MANAGEMENT

Directors and Executive Officers

The following table sets forth certain information with respect to our
directors and executive officers as of January 31, 2000.

<TABLE>
<CAPTION>
Name Age Position
---- --- ---------------------------------------------------
<S> <C> <C>
John W. Rollins, Sr..... 83 Chairman of the Board
Henry B. Tippie......... 73 Vice Chairman of the Board
Denis McGlynn........... 54 President and Chief Executive Officer and Director
Edward J. Sutor......... 50 Executive Vice President
Timothy R. Horne........ 33 Vice President--Finance and Chief Financial Officer
Robert M. Comollo....... 52 Treasurer
Klaus M. Belohoubek..... 40 Vice President--General Counsel and Secretary
Eugene W. Weaver........ 67 Director
John W. Rollins, Jr..... 57 Director
R. Randall Rollins...... 68 Director
Patrick J. Bagley....... 52 Director
Melvin L. Joseph........ 78 Director
Jeffrey W. Rollins...... 35 Director
Christopher R. Pook..... 58 Director
</TABLE>

Set forth below are descriptions of the backgrounds of our directors and
executive officers. Except, as otherwise indicated, the directors and executive
officers have held the following positions for more than five years.

John W. Rollins, Sr. has served as a director since 1967 and as Chairman of
the Board since 1996. Mr. Rollins is also Chairman of the Board of Rollins
Truck Leasing Corp., a company engaged in the business of truck leasing, and a
director of Matlack Systems, Inc., a transportation services company. Mr.
Rollins also serves on the Board of Directors of Rollins, Inc., a consumer
services company engaged in residential and commercial termite and pest
control, Safety-Kleen Corp., an industrial waste disposal company, and RPC,
Inc., a company engaged in oil and gas field services and boat manufacturing.

Henry B. Tippie has served as our Vice Chairman of the Board since 1996. Mr.
Tippie also serves as the Vice Chairman of the Board of Rollins Truck Leasing
Corp. and as a director of Matlack Systems, Inc. He is also the Chief Executive
Officer of Tippie Services, Inc., a management services company. Mr. Tippie
also serves on the Board of Directors of Rollins, Inc., Safety-Kleen Corp. and
RPC, Inc.

Denis McGlynn has served as our Chief Executive Officer since 1996. He has
been an employee since 1972. Since 1979, Mr. McGlynn has been our President and
a member of our Board of Directors.

Edward J. Sutor became our Executive Vice President in March of 1999. From
1983 until 1999, Mr. Sutor served as Senior Vice President of Finance of
Caesars World, Inc. in Atlantic City.

Timothy R. Horne became our Vice President--Finance in November of 1996. From
1988 until 1996, Mr. Horne was employed by KPMG LLP, where he most recently
served as an assurance senior manager.

Robert M. Comollo has served as our Treasurer for 18 years.

Klaus M. Belohoubek has been our Vice President--General Counsel and
Secretary since 1999 and has represented us in various capacities since 1990,
most recently as our Assistant General Counsel. Mr. Belohoubek also serves as
Vice President--General Counsel and Secretary to Rollins Truck Leasing Corp.
and to Matlack Systems, Inc.

Eugene W. Weaver has served as a member of our Board of Directors since 1971,
and has held various financial positions with Dover Downs from 1970 through
1999. Mr. Weaver also serves on the Board of Directors of WSFS Financial Corp.,
a financial institution.

27
<PAGE>

John W. Rollins, Jr. has served as a member of our Board of Directors since
1996. Mr. Rollins is also President, Chief Executive Officer and director of
Rollins Truck Leasing Corp. and he is the Chairman of the Board of Matlack
Systems, Inc. Mr. Rollins also serves on the Board of Directors of Safety-Kleen
Corp.

R. Randall Rollins has served as a member of our Board of Directors since
1996. Mr. Rollins is also the Chairman of the Board and Chief Executive Officer
of Rollins, Inc., and also serves as Chairman of the Board and Chief Executive
Officer of RPC, Inc. Mr. Rollins also serves on the Board of Directors of
SunTrust Banks Inc. and SunTrust Banks of Georgia, both financial institutions.

Patrick J. Bagley has served as a member of our Board of Directors since
1996. Mr. Bagley is also Vice President--Finance, Treasurer and a director of
Rollins Truck Leasing Corp. and Matlack Systems, Inc.

Melvin L. Joseph has served as a member of our Board of Directors since 1969.
Mr. Joseph is also the Vice President and Director of Auto Racing of Dover
Downs International Speedway, Inc., one of our subsidiaries. He is also the
President of Melvin Joseph Construction Company, a construction company.

Jeffrey W. Rollins has served as a member of our Board of Directors since
1993. Mr. Rollins has been the Vice President--Development of Brandywine Center
Management, LLC, a management company, since 1997. Previously, he was Vice
President of the Eastern Region of Rollins Environmental, Inc., now a
subsidiary of Safety-Kleen Corp.

Christopher R. Pook has served as a member of our Board of Directors since
1998. He is also the President and Chief Executive Officer of Grand Prix
Association of Long Beach, Inc., our subsidiary.

28
<PAGE>

SELLING STOCKHOLDER

The table below sets forth, with respect to John W. Rollins, Sr., the selling
stockholder, certain information with respect to his beneficial ownership of
our common stock as of January 31, 2000, assuming the conversion of all shares
of Class A common stock owned by Mr. Rollins into shares of common stock, and
as adjusted to reflect the sale by Mr. Rollins of the shares of common stock he
is offering for sale. The number of shares of common stock owned after the
offering by Mr. Rollins set forth in the table below assumes the conversion by
Mr. Rollins of all of his shares of Class A Common Stock into common stock. We
believe that he has sole voting and investment power of his shares, except as
otherwise stated below.

<TABLE>
<CAPTION>
Shares of
Shares of Common Shares of
Common Stock Owned Stock Common Stock Owned
Prior to the Offering Offered After the Offering
---------------------- --------- ----------------------
Percent of Percent of
Outstanding Outstanding
Number Shares Number Shares
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
John W. Rollins, Sr..... 11,811,960 50.1% 500,000 11,311,960 45.1%
</TABLE>

John W. Rollins, Sr. has been the Chairman of our Board of Directors since
1996, and a director and principal stockholder since 1967. Mr. Rollins is also
Chairman of the Board of Rollins Truck Leasing Corp. and a director of Matlack
Systems, Inc. He has held these positions for more than 10 years.

Mr. Rollins will convert his shares of our Class A common stock into shares
of our common stock as needed for him to sell his shares of our common stock in
this offering. The number of shares owned by Mr. Rollins does not include
107,250 shares of Class A common stock owned by Mr. Rollins' wife, as to which
he disclaims any beneficial interest, and does not include 26,000 shares of
common stock held by Mr. Rollins' wife as custodian for his minor children, as
to which Mr. Rollins disclaims any beneficial interest.

Of the 500,000 shares of our common stock to be sold in this offering, Mr.
Rollins owns 350,000 shares directly and 150,000 shares are owned by a
corporation that is 100% owned by Mr. Rollins. These 150,000 shares are the
only shares of our capital stock owned by that corporation. Accordingly, it
will own no shares of our capital stock after this offering. The 500,000 shares
listed in the above table do not include up to 300,000 shares of common stock
that Mr. Rollins would own upon conversion of the additional shares of Class A
common stock that would be converted to satisfy the option he has granted to
the underwriters to cover unfilled customer orders in this offering.

29
<PAGE>

UNDERWRITING

Subject to the terms and conditions of an underwriting agreement dated March
3, 2000, the underwriters named below, through the representatives, Raymond
James & Associates, Inc., and J.C. Bradford & Co., have severally agreed to
purchase from us the respective number of shares of common stock set forth
opposite their names below:

<TABLE>
<CAPTION>
Underwriter Number of Shares
- ----------- ----------------
<S> <C>
Raymond James & Associates, Inc................................ 1,014,000
J.C. Bradford & Co............................................. 546,000
Banc of America Securities LLC................................. 40,000
CIBC Oppenheimer Corp. ........................................ 40,000
A.G. Edwards & Sons, Inc. ..................................... 40,000
First Union Securities, Inc ................................... 40,000
Lazard Freres & Co. LLC........................................ 40,000
Lehman Brothers Inc. .......................................... 40,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated............. 40,000
SG Cowen Securities Corporation................................ 40,000
Gerard Klauer Mattison & Co., LLC.............................. 40,000
William Blair & Co., L.L.C. ................................... 20,000
J.J.B. Hilliard, W.L. Lyons, Inc. ............................. 20,000
Morgan Keegan & Company, Inc. ................................. 20,000
Ryan, Beck & Co., Inc. ........................................ 20,000
---------
Total........................................................ 2,000,000
=========
</TABLE>

The underwriting agreement provides that the obligations of the underwriters
are subject to certain conditions precedent, including the absence of any
significant negative change in our business and the receipt of certain
certificates, opinions and letters from us and our attorneys and independent
accountants. The nature of the underwriters' obligation is such that they are
committed to purchase all shares of common stock offered hereby if any of the
shares are purchased.

The selling stockholder in this offering has granted an option to the
underwriters, exercisable for 30 days after the date of this prospectus, to
purchase up to an aggregate of 300,000 shares of our common stock at the public
offering price, less the underwriting discounts and commissions set forth on
the cover page of this prospectus. The underwriters may exercise this option
solely to cover unfilled customer orders, if any, in connection with the sale
of our common stock. If the underwriters exercise this option, each underwriter
will be obligated, subject to certain conditions, to purchase a number of
additional shares of our common stock proportionate to the underwriter's
initial amount set forth in the table above.

The following table summarizes the underwriting discounts and commissions to
be paid by us to the underwriters for each share of our common stock and in
total. This information is presented assuming either no exercise or full
exercise of the underwriters' option to purchase additional shares of our
common stock.

<TABLE>
<CAPTION>
Without With
Per Share Option Option
--------- ---------- ----------
<S> <C> <C> <C>
Underwriting Discounts and Commissions payable
by us........................................ $0.68 $1,360,000 $1,564,000
</TABLE>

We have been advised by the representatives that the underwriters propose to
offer the shares of common stock to the public at the public offering price set
forth on the cover page of this prospectus and to certain dealers at that price
less a concession not in excess of $0.68 per share. The underwriters may allow,
and such dealers may reallow, a concession not in excess of $0.10 per share to
certain other dealers. The offering of the shares of common stock is made for
delivery when, as and if accepted by the underwriters and subject to prior sale
and to withdrawal, cancellation or modification of this offering without
notice. The underwriters reserve the right to reject an order for the purchase
of shares in whole or in part.

30
<PAGE>

We and our most senior executive officers and directors have agreed that for
a period of 90 days after the date of this prospectus, that we and they will
not, without the prior written consent of Raymond James & Associates, Inc. and
J.C. Bradford & Co., directly or indirectly:

. offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant for the sale of or otherwise dispose of or transfer any
shares of our common stock or securities convertible into or
exchangeable or exercisable for shares of our common stock, whether now
owned or acquired after the date of this prospectus by any such person
or with respect to which any such person acquires after the date of this
prospectus the

power of disposition, or file any registration statement under the
Securities Act with respect to any of the foregoing; or

. enter into any swap or other agreement or any other agreement that
transfers, in whole or in part, directly or indirectly, the economic
consequence of ownership of shares of our common stock whether any such
swap or transaction is to be settled by delivery of our common stock or
other securities, in cash or otherwise.

The foregoing restrictions, however, do not apply to:

. the shares of our common stock being offered by us in the offering;

. any grant of options by us for our common stock under our stock option
plans;

. any shares of our common stock issued by us pursuant to the exercise of
stock options currently outstanding or granted under our stock option
plans; or

. transfers of our common stock to charitable organizations and sales of
our common stock, in each case constituting not more than 2% of the
shares of our common stock owned by our most senior officers and
directors.

Until the offering of the shares of common stock is completed, applicable
rules of the Securities and Exchange Commission may limit the ability of the
underwriters and certain selling group members to bid for and purchase the
common stock. As an exception to these rules, the underwriters may engage in
certain transactions that stabilize the price of the common stock. These
transactions may include short sales, stabilizing transactions and purchases
to cover positions created by short sales. Short sales involve the sale by the
underwriters of a greater number of shares of common stock than they are
required to purchase in the offering. Stabilizing transactions consist of
certain bids or purchases made for the purpose of preventing or retarding a
decline in the market price of the common stock while the offering is in
progress.

The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the
underwriting discount received by it because the representatives have
repurchased shares sold by or for the account of such underwriter in
stabilizing or short covering transactions.

These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the
open market. If these activities are commenced, they may be discontinued by
the underwriters without notice at any time. These transactions may be
effected on the New York Stock Exchange, or otherwise.

We have agreed to indemnify the several underwriters against certain
liabilities, including liabilities under the Securities Act, and to contribute
to payments which the underwriters may be required to make in respect thereof.

DESCRIPTION OF CAPITAL STOCK

General

We are authorized to issue 131,000,000 shares of capital stock consisting of
75,000,000 shares of common stock, $.10 par value; 55,000,000 shares of Class
A common stock, $.10 par value; and 1,000,000 shares of preferred stock, $.10
par value.

31
<PAGE>

Common Stock

At January 31, 2000, there were 11,746,391 shares of our common stock
outstanding which were held of record by 1,082 stockholders. At January 31,
2000, there were 24,166,210 shares of our Class A common stock outstanding
which were held of record by 21 stockholders. No shares of our preferred stock
have been issued and we have no shares of treasury stock.

The holders of our common stock are entitled to one vote per share on all
matters to be voted upon by our stockholders. The holders of our Class A common
stock are entitled to 10 votes per share on all matters to be voted upon by our
stockholders, except to the extent that voting as a separate class is required
by applicable law. Our shares of Class A common stock are convertible at any
time into our shares of common stock on a one-for-one basis at the option of
the stockholder. Subject to rights of any preferred stockholder, holders of our
common stock are entitled to receive on a pro rata basis such dividends, if
any, as may be declared from time to time by the Board of Directors out of
funds legally available for that purpose. In the event of our liquidation,
dissolution or winding up, the holders of our common stock are entitled to
share on a pro rata basis in all assets remaining after payment of our
liabilities, subject to prior distribution rights of the shares of our
preferred stock, then outstanding. Holders of our common stock have no
preemptive or conversion rights or other subscription rights. All outstanding
shares of our common stock to be issued upon completion of this offering will
be fully paid and nonassessable.

The transfer agent and registrar for our common stock and our Class A common
stock is ChaseMellon Shareholder Services, 450 West 33rd Street, New York, NY
10001. Their telephone number is 212-273-8039.

Preferred Stock

Our Board of Directors has the authority, without action by our stockholders,
to designate and issue preferred stock in one or more series and to designate
the relative participating, optional and other special rights, preferences and
privileges of each series, any or all of which may be superior to and have
priority over the rights of our common stock. It is not possible to state the
actual effect of the issuance of any shares of preferred stock upon the rights
of holders of our common stock until our Board of Directors determines the
specific rights of the holders of our preferred stock. However, the effects
might include, among other things, restricting dividends on our common stock,
diminishing the voting power of our common stock, impairing the liquidation
rights of our common stock and delaying or preventing a change in control of
Dover Downs without further action by our stockholders. As of the date of this
prospectus, no shares of preferred stock are outstanding and we have no present
plans to issue any shares of preferred stock.

Anti-Takeover Effects of Certain Provisions of Delaware Law and Other
Provisions of our Certificate of Incorporation

We are subject to certain anti-takeover provisions under Delaware law which
are designed to regulate and govern unsolicited attempts to acquire control of
our stock, and our Board of Directors and including the "affiliated
transactions" and "control-share acquisition" provisions of the Delaware
General Corporation Law. In addition to the provisions of Delaware law, our
Certificate of Incorporation generally requires, that transactions between us
and an individual or entity that beneficially owns 20% or more of our
outstanding capital stock must be approved by the holders of at least 75% of
our outstanding capital stock. In addition, certain provisions of our
Certificate of Incorporation and our By-Laws summarized in the following
paragraphs may be deemed to have an anti-takeover effect and may delay, deter
or prevent a tender offer or takeover attempt that a stockholder might consider
in his, her or its best interest, including attempts that could result in
payment in a premium over the market price for the shares held by our
stockholders.

Restrictions on Transferability of our Shares. Under Delaware law, a change
of ownership of a licensed lottery agent automatically terminates the agent's
license 90 days after the change of ownership occurs, unless the Director of
the Delaware State Lottery Office issues a new license to the new owners. A
change of ownership could occur if any new individual or entity acquires 10% or
more of the licensed agent or if more than 20% of the legal or beneficial
interests in the licensed agent is transferred. The Delaware State Lottery
Commission may require extensive background investigations of any new owner
acquiring a 10% or greater voting interest in a licensed agent, including
criminal background checks.

32
<PAGE>

Our By-Laws require that (a) any holders of our stock found to be
disqualified or unsuitable, or not possessing the qualifications required by
the appropriate gaming authority, must dispose of their stock and (b) holders
of our capital stock intending to acquire more than 10% of our outstanding
stock must first obtain prior written approval from the Delaware State Lottery
Office. These provisions of Delaware law which would apply to a change in
ownership of our capital stock and the provisions contained in our By-Laws
could severely limit the transferability of our capital stock and could
negatively impact the price of and demand for our common stock.

Class A Common Stock Transfer Restrictions. Our By-Laws restrict the sale,
transfer or disposition of Class A common stock stockholders and members of
their families. This restriction may be amended only by stockholders owning 75%
or more of the outstanding shares of Class A common stock. All Class A common
stock stockholders retain the ability to convert Class A common stock to common
stock. Our common stock is not subject to this transfer restriction.

Classified Board of Directors. Our Certificate of Incorporation provides that
our Board of Directors must be divided into three classes of directors serving
staggered three-year terms. Our Certificate of Incorporation also provides that
our directors may only be removed for cause and only at a meeting of our
stockholders called for that purpose by the affirmative vote of the holders of
75% or more of our stock entitled to vote at an election of directors. These
provisions, when coupled with the provision of the Certificate of Incorporation
which provides that only our Board of Directors can increase the size of our
Board of Directors, are designed to prevent a stockholder from removing
incumbent directors and simultaneously gaining control of the Board of
Directors by filling the vacancies created by such removal with its own
nominees.

Authorized But Unissued Shares. The authorized but unissued shares of our
common stock and preferred stock are available for future issuance without
stockholder approval. These additional shares may be utilized for a variety of
corporate purposes, including future public offerings to raise additional
equity capital, corporate acquisitions and to provide stock for issuance under
employee benefit plans. The existence of authorized but unissued and unreserved
common stock and preferred stock may enable the board of directors to issue
shares to persons with plans and strategies for us aligned with or similar to
those of current management which could make more difficult or deter an attempt
to obtain control of us by means of a proxy contest, tender offer, merger or
otherwise, and thereby protect the continuity of our management.

Stockholder Meetings. Our Certificate of Incorporation provides that special
meetings of our stockholders can only be called by the Chairman of our Board of
Directors, Vice Chairman of our Board of Directors, the President or the
Chairman of the Executive Committee of our Board of Directors. This provision
may prevent our stockholders from authorizing a change in our Board of
Directors. This provision of our Certificate of Incorporation can only be
amended by the affirmative vote of the holders of 75% of our outstanding
capital stock.

Stockholder Rights Plan (Poison Pill).

We adopted a stockholder rights plan in 1996 and amended the plan in 1998.
The rights are attached to and trade in tandem with our common stock. The
rights, unless earlier redeemed by our Board of Directors, will detach and
trade separately from our common stock upon the occurrence of certain events
such as the unsolicited acquisition by a third party of beneficial ownership of
10% or more of our outstanding combined common stock and Class A common stock
or the announcement by a third party of the intent to commence a tender or
exchange offer for 10% or more of our outstanding combined common stock and
Class A common stock. After the rights have detached, the holders of such
rights would generally have the ability to purchase such number of either
shares of our common stock or stock of an acquiror of our company having a
market value equal to twice the exercise price of the right being exercised,
thereby causing substantial dilution to a person or group of persons attempting
to acquire control of our company. The rights may serve as a significant
deterrent to unsolicited attempts to acquire control of us, including
transactions involving a premium to the market price of our stock. The rights
expire on June 13, 2006, unless earlier redeemed.

33
<PAGE>

LEGAL MATTERS

The validity of the shares of common stock to be issued by us in this
offering and certain additional legal matters relating to this offering will be
passed upon for us by Greenberg Traurig, LLP (New York, New York). The validity
of the shares of common stock to be sold by the selling stockholder and certain
additional matters relating to this offering will be passed upon by Klaus M.
Belohoubek, Esq., our Vice President-General Counsel. Certain legal matters
relating to this offering will be passed upon for the underwriters by Akerman,
Senterfitt & Eidson, P.A. (Ft. Lauderdale, Florida). Mr. Belohoubek owns
beneficially 4,500 shares of our common stock and owns directly options to
purchase 25,500 shares of that stock.

EXPERTS

The consolidated financial statements of Dover Downs Entertainment, Inc. as
of June 30, 1998 and 1999, and for each of the years in the three-year period
ended June 30, 1999, have been included herein and in the registration
statement in reliance upon the report of KPMG LLP, independent certified public
accountants, appearing elsewhere herein and upon the authority of said firm as
experts in accounting and auditing.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The Securities and Exchange Commission allows us to "incorporate by
reference" the information we file with them, which means that we can disclose
important information to you by referring to these documents. The information
incorporated by reference is considered to be part of this prospectus, and
later information that we file with the Commission will automatically update
and supercede this information. We incorporate by reference the documents
listed below and any future filings made with the Commission under Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until we sell
all of the common stock.

. Our Annual Report on Form 10-K for the fiscal year ended June 30, 1999;

. Our Quarterly Reports on Form 10-Q for the periods ended September 30,
1999 and December 31, 1999;

. Our Current Report on Form 8-K, filed on August 2, 1999;

. Our definitive proxy statement on Schedule 14A, filed on September 24,
1999; and

. The description of our common stock and the description of common stock
purchase rights with respect to our common stock contained in our
Registration Statements on Form 8-A filed on September 19, 1996 pursuant
to Section 12 of the Exchange Act and all amendments thereto and reports
filed for the purpose of updating such description.

You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address: 1131 North DuPont Highway, Dover,
Delaware 19901, Attention: Timothy R. Horne, Vice President--Finance,
Telephone: (302) 857-3292.

Any statement contained in a document incorporated or deemed to be
incorporated by reference in this prospectus shall be deemed modified,
superseded or replaced for purposes of this prospectus to the extent that a
statement contained in this prospectus or in any subsequently filed document
that also is or is deemed to be incorporated by reference in this prospectus
modifies, supersedes or replaces such statement. Any statement so modified,
superseded or replaced shall not be deemed, except as so modified, superseded
or replaced, to constitute a part of this prospectus.

34
<PAGE>

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Page(s)
---------
<S> <C>
UNAUDITED FINANCIAL STATEMENTS:
Consolidated Statement of Earnings for the three months and six
months ended December 31, 1998 and December 31, 1999.............. F-2

Consolidated Balance Sheet as of June 30, 1999 and December 31,
1999.............................................................. F-3

Consolidated Statement of Cash Flows for the six months ended
December 31, 1998 and December 31, 1999........................... F-4

Notes to the Consolidated Financial Statements..................... F-5-F-6

AUDITED FINANCIAL STATEMENTS:
Independent Auditors' Report on Consolidated Financial Statements.. F-7

Consolidated Statement of Earnings for the years ended June 30,
1997, 1998 and 1999............................................... F-8

Consolidated Balance Sheet as of June 30, 1998 and 1999............ F-9

Consolidated Statement of Cash Flows for the years ended June 30,
1997, 1998 and 1999............................................... F-10

Notes to the Consolidated Financial Statements..................... F-11-F-19
</TABLE>

F-1
<PAGE>

DOVER DOWNS ENTERTAINMENT, INC.

CONSOLIDATED STATEMENT OF EARNINGS

(Unaudited)

<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
----------------------- ------------------------
1998 1999 1998 1999
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues:
Motorsports................ $ 6,670,000 $ 5,042,000 $27,825,000 $ 33,652,000
Gaming..................... 30,981,000 39,501,000 64,480,000 82,192,000
----------- ----------- ----------- ------------
37,651,000 44,543,000 92,305,000 115,844,000
----------- ----------- ----------- ------------
Expenses:
Operating.................. 28,631,000 34,824,000 63,969,000 81,192,000
Depreciation and
amortization.............. 1,832,000 1,973,000 3,628,000 3,938,000
General and
administrative............ 2,537,000 2,906,000 5,591,000 6,229,000
----------- ----------- ----------- ------------
33,000,000 39,703,000 73,188,000 91,359,000
----------- ----------- ----------- ------------
Operating earnings........... 4,651,000 4,840,000 19,117,000 24,485,000
Interest expense, net........ 355,000 418,000 744,000 844,000
----------- ----------- ----------- ------------
Earnings before income
taxes....................... 4,296,000 4,422,000 18,373,000 23,641,000
Income taxes................. 1,783,000 1,895,000 7,582,000 9,870,000
----------- ----------- ----------- ------------
Net earnings................. $ 2,513,000 $ 2,527,000 $10,791,000 $ 13,771,000
=========== =========== =========== ============
Earnings per common share
--Basic.................... $ .07 $ .07 $ .30 $ .38
=========== =========== =========== ============
--Diluted.................. $ .07 $ .07 $ .30 $ .38
=========== =========== =========== ============
Average shares outstanding
--Basic.................... 35,553,000 35,902,000 35,544,000 35,852,000
--Diluted.................. 36,510,000 36,730,000 36,564,000 36,713,000
Dividends paid per common
share....................... $ .045 $ .045 $ .085 $ .09
</TABLE>

The Notes to the Consolidated Financial Statements are an integral part of
these statements.

F-2
<PAGE>

DOVER DOWNS ENTERTAINMENT, INC.

CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
June 30, 1999 December 31, 1999
------------- -----------------
(audited) (unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................... $ 10,847,000 $ 4,100,000
Accounts receivable.......................... 6,706,000 7,267,000
Due from State of Delaware................... 2,932,000 6,841,000
Inventories.................................. 581,000 492,000
Prepaid income taxes......................... -- 1,397,000
Prepaid expenses and other................... 4,456,000 3,710,000
Deferred income taxes........................ 327,000 327,000
------------ ------------
Total current assets....................... 25,849,000 24,134,000
Property, plant and equipment, net............. 173,913,000 199,794,000
Other assets, net.............................. 1,453,000 1,401,000
Goodwill, net.................................. 53,997,000 53,398,000
------------ ------------
Total assets............................... $255,212,000 $278,727,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable............................. $ 4,629,000 $ 3,796,000
Purses due horsemen.......................... 3,147,000 7,776,000
Accrued liabilities.......................... 9,407,000 7,650,000
Income taxes payable......................... 2,726,000 --
Current portion of long-term debt............ 235,000 335,000
Deferred revenue............................. 15,906,000 11,859,000
------------ ------------
Total current liabilities.................. 36,050,000 31,416,000
Long-term debt................................. 36,725,000 53,625,000
Other liabilities.............................. 172,000 174,000
Deferred income taxes.......................... 9,607,000 10,106,000
Shareholders' Equity:
Preferred stock, $.10 par value; 1,000,000
shares authorized; issued and outstanding:
none
Common stock, $.10 par value; 75,000,000
shares authorized; issued and outstanding:
June--11,403,684; December--11,735,348 ..... 1,140,000 1,173,000
Class A common stock, $.10 par value;
55,000,000 shares authorized; issued and
outstanding: June--24,262,510; December--
24,166,210.................................. 2,426,000 2,417,000
Additional paid-in capital................... 99,683,000 99,865,000
Retained earnings............................ 69,409,000 79,951,000
------------ ------------
Total shareholders' equity................. 172,658,000 183,406,000
------------ ------------
Total liabilities and shareholders'
equity.................................... $255,212,000 $278,727,000
============ ============
</TABLE>

The Notes to the Consolidated Financial Statements are an integral part of
these statements.

F-3
<PAGE>

DOVER DOWNS ENTERTAINMENT, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

<TABLE>
<CAPTION>
Six Months Ended
December 31,
--------------------------
1998 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings...................................... $ 10,791,000 $ 13,771,000
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization................... 3,628,000 3,938,000
(Increase) decrease in assets:
Accounts receivable........................... 777,000 (561,000)
Due from State of Delaware.................... (4,149,000) (3,909,000)
Inventories................................... 124,000 89,000
Prepaid expenses and other.................... 658,000 746,000
Increase (decrease) in liabilities:
Accounts payable.............................. (2,895,000) (833,000)
Purses due horsemen........................... 3,044,000 4,629,000
Accrued liabilities........................... (3,174,000) (1,757,000)
Current and deferred income taxes............. (5,292,000) (3,624,000)
Deferred revenue.............................. (3,358,000) (4,047,000)
------------ ------------
Net cash provided by operating activities... 154,000 8,442,000
------------ ------------
Cash flows from investing activities:
Capital expenditures.............................. (14,034,000) (29,033,000)
Other............................................. -- (125,000)
Cash acquired in business acquisition............. 1,490,000 --
------------ ------------
Net cash used in investing activities....... (12,544,000) (29,158,000)
------------ ------------
Cash flows from financing activities:
Dividends paid.................................... (3,013,000) (3,229,000)
Borrowings on revolving debt, net................. 6,000,000 17,000,000
Repayment of long-term debt....................... (1,081,000) --
Loan repayments................................... 165,000 --
Proceeds of stock options exercised and other..... 11,000 198,000
------------ ------------
Net cash provided by financing activities... 2,082,000 13,969,000
------------ ------------
Net decrease in cash and cash equivalents......... (10,308,000) (6,747,000)
Cash and cash equivalents, beginning of period.... 18,694,000 10,847,000
------------ ------------
Cash and cash equivalents, end of period.......... $ 8,386,000 $ 4,100,000
============ ============
Supplemental information:
Interest paid................................... $ 24,000 $ 409,000
Income taxes paid............................... $ 13,818,000 $ 13,494,000
Non-cash investing activities:
Stock issued for business acquisition........... $ 80,241,000 --
</TABLE>

The Notes to the Consolidated Financial Statements are an integral part of
these statements.

F-4
<PAGE>

DOVER DOWNS ENTERTAINMENT, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Basis of Presentation

The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles, but do
not include all of the information and footnotes required for complete
financial statements. The statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the latest
annual report on Form 10-K for Dover Downs Entertainment, Inc. and its wholly
owned subsidiaries. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation of
results of operations, financial position and cash flows have been included.
Operating results for the three months and six months ended December 31, 1999
are not necessarily indicative of the results that may be expected for the
fiscal year ending June 30, 2000.

Revenue Recognition

For the video lottery operations, the difference between the amount wagered
by bettors and the amount paid out to bettors is referred to as the win. The
win is included in the amount recorded in the Company's financial statements as
gaming revenue. The Delaware State Lottery Office sweeps the winnings from the
video lottery operations, collects the State's share of the winnings and the
amount due to the vendors under contract with the State who provide the video
lottery machines and associated computer systems, collects the amount allocable
to purses for harness horse racing and remits the remainder to the Company as
its commission for acting as a Licensed Agent. Operating expenses include the
amounts collected by the State (i) for the State's share of the winnings, (ii)
for remittance to the providers of the video lottery machines and associated
computer systems, and (iii) for harness horse racing purses.

Earnings Per Share

Pursuant to the provisions of Statement of Financial Accounting Standards No.
128, "Earnings Per Share," the number of weighted average shares used in
computing basic and diluted earnings per share (EPS) are as follows:

<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
--------------------- ---------------------
1998 1999 1998 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Basic EPS........................... 35,553,000 35,902,000 35,544,000 35,852,000
Effect of Options................... 957,000 828,000 1,020,000 861,000
---------- ---------- ---------- ----------
Diluted EPS......................... 36,510,000 36,730,000 36,564,000 36,713,000
========== ========== ========== ==========
</TABLE>

No adjustments to net income available to common shareholders were required
during the periods presented.

F-5
<PAGE>

DOVER DOWNS ENTERTAINMENT, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited)

Business Segment Information

The Company has two reportable segments, motorsports and gaming. The business
is operated and defined based on the products and services provided by these
segments. Certain operations within the motorsports segment have been
aggregated for purposes of the following disclosures:

<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
------------------------ ------------------------
1998 1999 1998 1999
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues:
Motorsports............... $ 6,670,000 $ 5,042,000 $27,825,000 $ 33,652,000
Gaming.................... 30,981,000 39,501,000 64,480,000 82,192,000
----------- ----------- ----------- ------------
Consolidated Revenues... $37,651,000 $44,543,000 $92,305,000 $115,844,000
=========== =========== =========== ============
Operating Earnings (Loss):
Motorsports............... $(1,950,000) $(3,478,000) $ 5,278,000 $ 6,861,000
Gaming.................... 6,601,000 8,318,000 13,839,000 17,624,000
----------- ----------- ----------- ------------
Consolidated Operating
Earnings............... $ 4,651,000 $ 4,840,000 $19,117,000 $ 24,485,000
=========== =========== =========== ============
</TABLE>

<TABLE>
<CAPTION>
June 30, 1999 December 31, 1999
------------- -----------------
<S> <C> <C>
Identifiable Assets:
Motorsports................................... $209,540,000 $227,184,000
Gaming........................................ 45,672,000 51,543,000
------------ ------------
Consolidated Assets......................... $255,212,000 $278,727,000
============ ============
</TABLE>

F-6
<PAGE>

Independent Auditors' Report

The Shareholders and Board of Directors,
Dover Downs Entertainment, Inc.:

We have audited the accompanying consolidated balance sheets of Dover Downs
Entertainment, Inc. and subsidiaries as of June 30, 1998 and 1999, and the
related consolidated statements of earnings and cash flows for each of the
years in the three-year period ended June 30, 1999. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Dover Downs
Entertainment, Inc. and subsidiaries as of June 30, 1998 and 1999, and the
results of their operations and their cash flows for each of the years in the
three-year period ended June 30, 1999, in conformity with generally accepted
accounting principles.

KPMG LLP

Philadelphia, Pennsylvania
July 23, 1999

F-7
<PAGE>

CONSOLIDATED STATEMENT OF EARNINGS

<TABLE>
<CAPTION>
Year ended June 30,
----------------------------------------
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Motorsports......................... $ 20,516,000 $ 25,874,000 $ 68,683,000
Gaming.............................. 81,162,000 115,071,000 139,249,000
------------ ------------ ------------
101,678,000 140,945,000 207,932,000
------------ ------------ ------------
Expenses:
Operating........................... 68,559,000 96,875,000 142,498,000
Depreciation and amortization....... 2,084,000 2,707,000 7,098,000
General and administrative.......... 3,065,000 4,410,000 11,213,000
------------ ------------ ------------
73,708,000 103,992,000 160,809,000
------------ ------------ ------------
Operating earnings.................... 27,970,000 36,953,000 47,123,000
Interest expense (income)............. (269,000) (702,000) 1,352,000
------------ ------------ ------------
Earnings before income taxes.......... 28,239,000 37,655,000 45,771,000
Income taxes.......................... 11,767,000 15,742,000 18,880,000
------------ ------------ ------------
Net earnings.......................... $ 16,472,000 $ 21,913,000 $ 26,891,000
============ ============ ============
Earnings per common share:
Basic............................... $ .55 $ .72 $ .76
============ ============ ============
Diluted............................. $ .54 $ .70 $ .74
============ ============ ============
Average shares outstanding:
Basic............................... 29,712,000 30,492,000 35,566,000
Diluted............................. 30,550,000 31,206,000 36,585,000
</TABLE>

The Notes to the Consolidated Financial Statements are an integral part of
these statements.

F-8
<PAGE>

CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
June 30,
-------------------------
1998 1999
----------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................... $18,694,000 $ 10,847,000
Accounts receivable............................... 2,818,000 6,706,000
Due from State of Delaware........................ 2,099,000 2,932,000
Inventories....................................... 310,000 581,000
Prepaid expenses and other........................ 2,319,000 4,456,000
Deferred income taxes............................. 328,000 327,000
----------- ------------
Total current assets............................ 26,568,000 25,849,000
Property, plant and equipment, at cost:
Land.............................................. 10,563,000 29,519,000
Casino facility................................... 11,548,000 22,921,000
Racing facilities................................. 44,877,000 113,202,000
Furniture, fixtures and equipment................. 6,444,000 24,390,000
Construction in progress.......................... 799,000 7,902,000
----------- ------------
74,231,000 197,934,000
Less accumulated depreciation................... (18,456,000) (24,021,000)
----------- ------------
55,775,000 173,913,000
----------- ------------
Other assets, net................................... 10,540,000 1,453,000
Goodwill, net....................................... 2,894,000 53,997,000
----------- ------------
Total assets.................................... $95,777,000 $255,212,000
=========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................. $ 2,343,000 $ 4,629,000
Purses due horsemen............................... 1,885,000 3,147,000
Accrued liabilities............................... 5,006,000 9,407,000
Income taxes payable.............................. 3,951,000 2,726,000
Current portion of long-term debt................. 19,000 235,000
Deferred revenue.................................. 9,755,000 15,906,000
----------- ------------
Total current liabilities....................... 22,959,000 36,050,000
Long-term debt...................................... 741,000 36,725,000
Other liabilities................................... -- 172,000
Deferred income taxes............................... 712,000 9,607,000
Commitments (see Notes to the Consolidated Financial
Statements)
Shareholders' equity:
Preferred stock, $.10 par value; 1,000,000 shares
authorized; issued and outstanding: none
Common stock, $.10 par value; 75,000,000 shares
authorized; issued and outstanding: 1998-
5,997,900; 1999-11,403,684 ...................... 300,000 1,140,000
Class A common stock, $.10 par value; 55,000,000
shares authorized; issued and outstanding: 1998-
24,498,760 shares; 1999-24,262,510 shares; ...... 1,225,000 2,426,000
Additional paid-in capital........................ 21,109,000 99,683,000
Retained earnings................................. 48,731,000 69,409,000
----------- ------------
Total shareholders' equity...................... 71,365,000 172,658,000
----------- ------------
Total liabilities and shareholders' equity...... $95,777,000 $255,212,000
=========== ============
</TABLE>

The Notes to the Consolidated Financial Statements are an integral part of
these statements.

F-9
<PAGE>

CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
Year ended June 30,
-------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings........................... $16,472,000 $21,913,000 $26,891,000
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization.......... 2,084,000 2,707,000 7,098,000
Loss on disposition of property........ -- 3,000 --
(Increase) decrease in assets, net of
effect of acquisition:
Accounts receivable.................. (392,000) (1,180,000) (1,645,000)
Due from State of Delaware........... (1,082,000) (116,000) (833,000)
Inventories.......................... (46,000) 92,000 (22,000)
Prepaid expenses and other........... (242,000) (1,539,000) (2,044,000)
Other assets......................... -- -- (155,000)
Increase (decrease) in liabilities, net
of effect of acquisition:
Accounts payable..................... 671,000 335,000 (450,000)
Purses due horsemen.................. (49,000) 498,000 1,262,000
Accrued liabilities.................. (88,000) 2,719,000 464,000
Current and deferred income taxes.... (267,000) 1,346,000 1,387,000
Deferred revenue..................... 1,539,000 2,213,000 2,855,000
----------- ----------- -----------
Net cash provided by operating
activities........................... 18,600,000 28,991,000 34,808,000
----------- ----------- -----------
Cash flows from investing activities:
Investment in Grand Prix Association of
Long Beach............................ -- (10,540,000) --
Acquisition of business, net of cash
acquired.............................. -- (2,889,000) --
Capital expenditures................... (16,841,000) (7,504,000) (50,707,000)
Cash acquired in business acquisition.. -- -- 1,490,000
----------- ----------- -----------
Net cash used in investing
activities........................... (16,841,000) (20,933,000) (49,217,000)
----------- ----------- -----------
Cash flows from financing activities:
Borrowings (repayments) on revolving
debt.................................. (3,500,000) -- 13,161,000
Repayment of long-term debt............ (9,000) (19,000) (760,000)
Loan repayments........................ -- -- 207,000
Net proceeds from initial public
offering.............................. 16,360,000 -- --
Dividends paid......................... (2,429,000) (4,878,000) (6,213,000)
Proceeds from stock options exercised,
including related tax benefit......... 182,000 30,000 167,000
----------- ----------- -----------
Net cash provided by (used in)
financing activities................. 10,604,000 (4,867,000) 6,562,000
----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents............................ 12,363,000 3,191,000 (7,847,000)
Cash and cash equivalents, beginning of
year................................... 3,140,000 15,503,000 18,694,000
----------- ----------- -----------
Cash and cash equivalents, end of year.. $15,503,000 $18,694,000 $10,847,000
=========== =========== ===========
Supplemental information:
Interest paid.......................... $ 168,000 $ 61,000 $ 2,474,000
----------- ----------- -----------
Income taxes paid...................... $12,034,000 $14,395,000 $18,231,000
----------- ----------- -----------
Non-cash investing and financing
activities:
Land acquired.......................... $ -- $ -- $ 4,707,000
Cash paid.............................. -- -- (3,054,000)
----------- ----------- -----------
Land traded............................ $ -- $ -- $ 1,653,000
=========== =========== ===========
Stock issued in connection with
acquisition........................... $ -- $ -- $80,241,000
=========== =========== ===========
</TABLE>

The Notes to the Consolidated Financial Statements are an integral part of
these statements.

F-10
<PAGE>

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1--Business Operations

Dover Downs Entertainment, Inc. (Dover Downs or the Company) is a leading
promoter of motorsports events in the United States. The Company operates five
motorsports tracks (four permanent facilities and one temporary circuit) in
four states, promoting 15 major events annually in the four premier sanctioning
bodies in motorsports--the National Association for Stock Car Auto Racing
(NASCAR), Championship Auto Racing Teams (CART), the Indy Racing League (IRL)
and the National Hot Rod Association (NHRA).

Dover Downs also owns and operates the Dover Downs Raceway harness racing
track and a 65,000 square foot video lottery (slot) casino at a multi-purpose
gaming and entertainment complex in Dover, Delaware. The facility is located in
close proximity to the major metropolitan areas of Philadelphia, Baltimore and
Washington, D.C.

Dover Downs, Inc. is authorized to conduct video lottery operations as a
"Licensed Agent" under the Delaware State Lottery Code. Pursuant to Delaware's
Horse Racing Redevelopment Act, enacted in 1994, the Delaware State Lottery
Office administers and controls the operation of the video lottery.

The Company's license from the Delaware Harness Racing Commission must be
renewed on an annual basis. In order to maintain its license to conduct video
lottery operations, the Company is required to maintain its harness horse
racing license.

Due to the nature of the Company's business activities, it is subject to
various federal, state and local regulations.

NOTE 2--Acquisition

On July 1, 1998, the Company completed its acquisition of Grand Prix
Association of Long Beach (Grand Prix) through the merger of a wholly owned
subsidiary of the Company with and into Grand Prix with Grand Prix surviving as
a wholly owned subsidiary of the Company. Grand Prix developed and operates the
Grand Prix of Long Beach, an annual temporary circuit event which has been run
in the streets of Long Beach, California for 25 years, and owns permanent
motorsports facilities in Madison, Illinois (near St. Louis, Missouri) and in
Millington, Tennessee (near Memphis, Tennessee). The purchase price was
comprised of the conversion of the outstanding Grand Prix common stock into
2,518,229 shares (5,036,458 shares after the stock split) of the Company's
stock and assumption by the Company of the outstanding stock options of Grand
Prix. On March 27, 1998, the Company acquired 680,000 shares of Grand Prix
common stock at $15.50 per share in cash pursuant to two separate stock
purchase agreements, at which time the Company owned approximately 14.6% of the
outstanding Grand Prix common stock. The cost of these purchases was recorded
as a long-term investment at June 30, 1998. The acquisition qualified as a tax
free exchange and was accounted for using the purchase method of accounting for
business combinations. The excess of the purchase price over fair market value
of the underlying assets of $52,551,000 is being amortized on a straight-line
basis over 40 years.

The following summarized unaudited pro-forma statement of earnings
information gives effect to the Grand Prix transaction as though it had
occurred on July 1, 1997, after giving effect to certain adjustments, primarily
the amortization of goodwill and additional depreciation expense. The pro-forma
financial information, which is for informational purposes only, is based upon
certain assumptions and estimates and does not necessarily reflect the results
that would have occurred had the transaction taken place at the beginning of
the period presented, nor are they necessarily indicative of future
consolidated results.

<TABLE>
<CAPTION>
For the year ended
June 30, 1998
------------------
<S> <C>
Revenues.............. $170,972,000
Net earnings.......... $ 19,974,000
Earnings per diluted
share................ $ .55
</TABLE>

F-11
<PAGE>

NOTE 3--Summary of Significant Accounting Policies

Consolidation-The consolidated financial statements include the accounts of
all subsidiaries. Intercompany transactions and balances among these
subsidiaries have been eliminated.

Revenue and expense recognition-Tickets to motorsports races are sold and
certain expenses are incurred in advance of the race date. Such advance sales
and corresponding expenses are recorded as deferred revenue and prepaid
expenses, respectively, until the race is held. Gaming revenues represent the
net win from video lottery (slot) machine wins and losses, commissions from
pari-mutuel wagering and other miscellaneous gaming-related income. Payments to
the State of Delaware pursuant to the lottery legislation are reported in
operating expenses.

For the video lottery operations, the difference between the amount wagered
by bettors and the amount paid out to bettors is referred to as the win. The
win is included in the amount recorded in the Company's financial statements as
gaming revenue. The Delaware State Lottery Office sweeps the winnings from the
video lottery operations, collects the State's share of the winnings and the
amount due to the vendors under contract with the State who provide the video
lottery machines and associated computer systems, collects the amount allocable
to purses for harness horse racing, and remits the remainder to the Company as
its commission for acting as a Licensed Agent. Operating expenses include the
amounts collected by the State for (i) the State's share of the winnings, (ii)
remittance to the providers of the video lottery machines and associated
computer systems, and (iii) harness horse racing purses.

Advertising costs-The costs of advertising, promotion and marketing programs
are charged to operations as incurred.

Earnings per share-The number of weighted average shares used in computing
basic and diluted earnings per share (EPS) are as follows:

<TABLE>
<CAPTION>
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C>
Basic EPS....... 29,712,000 30,492,000 35,566,000
Effect of
options........ 838,000 714,000 1,019,000
---------- ---------- ----------
Diluted EPS..... 30,550,000 31,206,000 36,585,000
========== ========== ==========
</TABLE>

Cash and cash equivalents-The Company considers as cash equivalents all
highly liquid investments with an original maturity of three months or less.

Inventories-Inventories, primarily food, beverage and novelty items, are
stated at the lower of cost or market with cost being determined on the first-
in, first-out (FIFO) basis.

Property, plant and equipment-Property, plant and equipment is stated at
cost. Depreciation is computed on a straight-line basis over the following
estimated useful lives:

<TABLE>
<S> <C>
Racing and casino
facilities 10--40 years
Furniture, fixtures and
equipment 5--10 years
</TABLE>

Interest is capitalized in connection with the construction of major
facilities. The capitalized interest is amortized over the estimated useful
life of the asset to which it relates. In 1999, $682,000 of interest cost was
capitalized. No interest was capitalized in 1997 or 1998.

Goodwill-Goodwill represents the excess of the purchase price over the fair
value of net assets acquired and is being amortized using the straight-line
method over a period of 40 years.

Income taxes-Deferred income taxes are provided in accordance with the
provisions of Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes" on all differences between the tax bases of
assets and liabilities and their reported amounts in the financial statements
based upon enacted statutory tax rates in effect at the balance sheet date.

F-12
<PAGE>

Use of estimates-The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities 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.

Fair value of financial instruments-The carrying amount reported in the
balance sheet for current assets and current liabilities approximates their
fair value because of the short maturity of these instruments. The carrying
value of long-term debt at June 30, 1999 approximates its fair value based on
interest rates available on similar borrowings.

Accounting for stock options-The Company adopted the provisions of SFAS No.
123, "Accounting for Stock-Based Compensation", on July 1, 1996. SFAS No. 123
defines a fair-value based method of accounting for stock-based compensation
plans, however, it allows the continued use of the intrinsic value method under
Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued
to Employees". The Company has elected to continue to use the intrinsic value
method.

Recent accounting pronouncements-The Company does not expect the adoption of
recently issued accounting pronouncements to have a significant impact on its
results of operations, financial position or cash flows.

NOTE 4--Indebtedness

Long-term debt is as follows:

<TABLE>
<CAPTION>
June 30,
---------------------
1998 1999
-------- -----------
<S> <C> <C>
Note payable to bank..................................... $ -- $15,500,000
SWIDA loan for Gateway redevelopment..................... -- 21,460,000
Note payable............................................. 760,000 --
-------- -----------
760,000 36,960,000
Less: current portion.................................... (19,000) (235,000)
-------- -----------
$741,000 $36,725,000
======== ===========
</TABLE>

On March 31, 1999, the Company entered into a $50,000,000 long-term,
unsecured, revolving credit agreement with certain financial institutions.
Interest is based, at the Company's option, upon (i) LIBOR plus .75% or (ii)
the base rate (the greater of the prime rate or the federal funds rate plus
.5%) minus 1%. The agreement, which expires in March 2002, is for seasonal
funding needs, capital improvements and other general corporate purposes. The
agreement contains certain restrictive covenants and requires the Company to
maintain certain financial ratios. At June 30, 1999, $15,500,000 was
outstanding under this line of credit at a weighted average interest rate of
6.05%.

A subsidiary of the Company entered into an agreement (the "SWIDA loan") with
Southwestern Illinois Development Authority ("SWIDA") to receive the proceeds
from the "Taxable Sports Facility Revenue Bonds, Series 1996 (Gateway
International Motorsports Corporation Project)", a Municipal Bond Offering, in
the aggregate principal amount of $21,500,000. The offering of the bonds closed
on June 21, 1996. The repayment terms and debt service reserve requirements of
the bonds issued in the Municipal Bond Offering correspond to the terms of the
SWIDA loan. SWIDA loaned all of the proceeds from the Municipal Bond Offering
to the Company's subsidiary for the purpose of the redevelopment, construction
and expansion of Gateway International Raceway, and the proceeds of the SWIDA
loan were irrevocably committed to complete construction of Gateway
International Raceway, to fund interest, to create a debt service reserve fund
and to pay for the cost of issuance of the bonds. The Company has established
certain restricted cash funds to meet

F-13
<PAGE>

debt service as required by the SWIDA loan, which are held by the trustee (BNY
Trust Company of Missouri). At June 30, 1999, $548,000 of the Company's cash
balance is restricted by the SWIDA loan. A standby letter of credit for
$2,502,000 also was obtained to secure debt service. The SWIDA loan is secured
by a first mortgage lien on all the real property owned and a security interest
in all property leased by the Company's subsidiary at Gateway International
Raceway. The SWIDA loan bears interest at varying rates ranging from 8.35% to
9.25% with an effective rate of approximately 9.1%. The structure of the bonds
permits amortization from February 1997 through February 2017 with debt service
beginning in 2000 following interest only payments from February 1997 through
August 1999. In addition, a portion of the property taxes to be paid by the
Company (if any) to the City of Madison Tax Incremental Fund have been pledged
to the annual retirement of debt.

The scheduled maturities of long-term debt outstanding at June 30, 1999 are
as follows: 2000-$235,000; 2001-$685,000; 2002-$16,135,000; 2003-$685,000;
2004-$745,000; and thereafter-$18,475,000.

NOTE 5--Income Taxes

The current and deferred income tax provisions (benefit) are as follows:

<TABLE>
<CAPTION>
Years ended June 30,
------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Current:
Federal.................................. $ 9,207,000 $12,544,000 $13,277,000
State.................................... 2,498,000 3,296,000 3,929,000
----------- ----------- -----------
11,705,000 15,840,000 17,206,000
Deferred:
Federal.................................. 49,000 (78,000) 1,599,000
State.................................... 13,000 (20,000) 75,000
----------- ----------- -----------
62,000 (98,000) 1,674,000
----------- ----------- -----------
Total income taxes......................... $11,767,000 $15,742,000 $18,880,000
=========== =========== ===========
</TABLE>

Deferred income taxes relate to the temporary differences between financial
accounting income and taxable income and are primarily attributable to
differences between the book and tax basis of property, plant and equipment and
net operating loss carryforwards. The Company believes that it is more likely
than not that the deferred tax assets will be realized based upon reversals of
existing taxable temporary differences and future income.

A reconciliation of the effective income tax rate with the applicable
statutory federal income tax rate is as follows:

<TABLE>
<CAPTION>
Years ended June 30,
----------------------
1997 1998 1999
------ ------ ------
<S> <C> <C> <C>
Federal tax at statutory rate........................... 35.0% 35.0% 35.0%
State taxes, net of federal benefit..................... 5.7% 5.7% 5.7%
Other................................................... 1.0% 1.1% .5%
------ ------ ------
Effective income tax rate............................. 41.7% 41.8% 41.2%
====== ====== ======
</TABLE>

NOTE 6--Pension Plan

Benefits provided by the Dover Downs Entertainment, Inc. Pension Plan are
based on years of service and employees' remuneration over their employment
with the Company. Pension costs are funded in accordance with the provisions of
the Internal Revenue Code.

F-14
<PAGE>

The following table sets forth the plan's funded status and amounts
recognized in the Company's consolidated balance sheet:

<TABLE>
<CAPTION>
June 30,
-------------------
1998 1999
-------- ---------
<S> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year.................... $531,000 $ 925,000
Service cost............................................... 132,000 306,000
Interest cost.............................................. 53,000 79,000
Amendments................................................. -- 122,000
Actuarial loss............................................. 211,000 26,000
Benefits paid.............................................. (2,000) (33,000)
-------- ---------
Benefit obligation at end of year.......................... 925,000 1,425,000
Change in plan assets:
Fair value of plan assets at beginning of year............. 464,000 688,000
Actual return on plan assets............................... 104,000 273,000
Employer contribution...................................... 122,000 386,000
Benefits paid.............................................. (2,000) (33,000)
-------- ---------
Fair value of plan assets at end of year................... 688,000 1,314,000
Funded status.............................................. (237,000) (111,000)
Unrecognized net loss/(gain)............................... 111,000 (74,000)
Unrecognized prior service cost............................ 173,000 277,000
-------- ---------
Prepaid pension cost....................................... $ 47,000 $ 92,000
======== =========
</TABLE>

At June 30, 1999, the assets of the plan were invested 68% in equity funds,
24% in intermediate bond funds and the balance in other short-term interest-
bearing accounts. The discount rate in 1998 and 1999 was 7.5% and 8.0%,
respectively. The assumed rate of compensation increase was 5% in both years.
The expected long-term rate of return on assets was 9% for 1998 and 1999.

The components of net periodic pension cost are as follows:

<TABLE>
<CAPTION>
Years ended June 30,
----------------------------
1997 1998 1999
------- -------- ---------
<S> <C> <C> <C>
Service cost...................................... $61,000 $132,000 $ 306,000
Interest cost..................................... 32,000 53,000 79,000
Return on plan assets............................. (68,000) (104,000) (273,000)
Net amortization.................................. 16,000 32,000 13,000
Deferral of net gain.............................. 36,000 63,000 201,000
------- -------- ---------
$77,000 $176,000 $ 326,000
======= ======== =========
</TABLE>

The Company also maintains a nonqualified, noncontributory defined benefit
pension plan for certain employees to restore pension benefits reduced by
federal income tax regulations. The cost associated with the plan is determined
using the same actuarial methods and assumptions as those used for the
Company's qualified pension plan.

The Company also maintains a defined contribution 401(k) plan which permits
participation by substantially all employees.

F-15
<PAGE>

NOTE 7--Shareholders' Equity

Changes in the components of shareholder's equity are as follows:

<TABLE>
<CAPTION>
$.10 Par
$.10 Par Value
Value Class A Additional
Common Common Paid-in Retained
Stock Stock Capital Earnings
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at June 30, 1996..... $ -- $1,393,000 $ 4,669,000 $17,653,000
Net earnings................. -- -- -- 16,472,000
Issuance of common stock,
net......................... 288,000 (180,000) 16,252,000 --
Dividends on common stock,
$.08 per share.............. -- -- -- (2,429,000)
Exercise of stock options.... -- 22,000 160,000 --
Conversion of Class A
shares...................... 6,000 (6,000) -- --
---------- ---------- ----------- -----------
Balance at June 30, 1997..... 294,000 1,229,000 21,081,000 31,696,000
Net earnings................. -- -- -- 21,913,000
Dividends on common stock,
$.16 per share.............. -- -- -- (4,878,000)
Exercise of stock options.... -- 2,000 28,000 --
Conversion of Class A
shares...................... 6,000 (6,000) -- --
---------- ---------- ----------- -----------
Balance at June 30, 1998..... 300,000 1,225,000 21,109,000 48,731,000
Net earnings................. -- -- -- 26,891,000
Dividends on common stock,
$.18 per share.............. -- -- -- (6,213,000)
Exercise of stock options.... 4,000 8,000 155,000 --
Grand Prix acquisition....... 252,000 -- 80,196,000 --
Two-for-one split............ 556,000 1,221,000 (1,777,000) --
Conversion of Class A
shares...................... 28,000 (28,000) -- --
---------- ---------- ----------- -----------
Balance at June 30, 1999..... $1,140,000 $2,426,000 $99,683,000 $69,409,000
========== ========== =========== ===========
</TABLE>

Holders of Common Stock have one vote per share and holders of Class A Common
Stock have ten votes per share. Shares of Class A Common Stock are convertible
at any time into shares of Common Stock on a share for share basis at the
option of the holder thereof. Dividends on Class A Common Stock cannot exceed
dividends on Common Stock on a per share basis. Dividends on Common Stock may
be paid at a higher rate than dividends on Class A Common Stock. The terms and
conditions of each issue of Preferred Stock are determined by the Board of
Directors. No Preferred shares have been issued.

The Company has adopted Rights Plans with respect to its Common Stock and
Class A Common Stock which include the distribution of Rights to holders of
such stock. The Rights entitle the holder, upon the occurrence of certain
events, to purchase additional stock of the Company. The Rights are exercisable
if a person, company or group acquires 10% or more of the outstanding combined
equity of Common Stock and Class A Common Stock or engages in a tender offer.
The Company is entitled to redeem each Right for one cent.

On July 31, 1998, the Board of Directors authorized a two-for-one stock split
to be distributed September 15, 1998. All share and per share information
included in the accompanying consolidated financial statements and notes
thereto have been adjusted to give retroactive effect to this stock split.

On October 3, 1996, the Company completed its initial public offering. The
Company issued 1,075,000 shares (2,150,000 shares after the stock split) of the
Company's Common Stock and received proceeds of approximately $16,360,000, net
of issuance costs of approximately $1,913,000.

The Company has two stock option plans pursuant to which the Company's Board
of Directors may grant stock options to officers and key employees at not less
than 100% of the fair market value at the date of the grant. Options granted
under the 1991 Stock Option Plan are exercisable for Class A Common Stock while

F-16
<PAGE>

options granted under the 1996 Stock Option Plan are exercisable for Common
Stock. The 1991 Stock Option Plan has been amended so that no additional
options may be granted thereunder. The 1991 and 1996 stock options have 7 and 8
year terms, respectively, and generally vest equally over a period of 5 and 6
years from the date of grant, respectively. In all other material respects, the
1991 Stock Option Plan is structured the same as the 1996 Stock Option Plan.
The Company applies APB Opinion No. 25 and related interpretations in
accounting for its stock option plans. Accordingly, no compensation cost has
been recognized for its stock option plans. For disclosure purposes, the
Company determined compensation cost for its stock options based upon the fair
value at the grant date using the Black Scholes option-pricing model with the
following assumptions: expected dividend yield--1.02%, risk-free interest
rate--6%, an expected life of six and one-half years and volatility of 25%. Had
compensation cost been recognized in accordance with SFAS No. 123, the
Company's diluted earnings per share disclosed in the accompanying financial
statements would be reduced by less than $.01 per share in 1998 and 1999.

Option activity was as follows:

<TABLE>
<CAPTION>
June 30,
-------------------------------
1997 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
Number of options:
Outstanding at beginning of year............... 1,170,000 945,528 1,035,528
Granted........................................ 225,528 135,000 734,562
Exercised...................................... (450,000) (45,000) (127,684)
--------- --------- ---------
Outstanding at June 30......................... 945,528 1,035,528 1,642,406
========= ========= =========
At June 30:
Options available for grant.................... 1,274,472 1,139,472 404,910
Options exercisable............................ 45,000 262,000 932,545
Weighted Average Exercise Price:
Options granted............................... $ 8.57 $ 11.58 $ 4.66
Options exercised............................. $ .41 $ .67 $ 1.32
Options outstanding........................... $ 2.55 $ 3.38 $ 4.38
Options exercisable........................... $ .67 $ 1.78 $ 1.59
</TABLE>

Included in the 734,562 options and the weighted average exercise price for
options granted in 1999 are 512,062 options relating to the Grand Prix
Association of Long Beach acquisition. The Grand Prix options were converted
into Dover Downs options at an exercise price of $.87 per share.

NOTE 8--Related Party Transactions

During the years ended June 30, 1997, 1998 and 1999, the Company purchased
certain paving, site work and construction services involving total payments of
$584,000, $375,000 and $432,000 from a company wholly-owned by an
employee/director. The Company purchased administrative services from Rollins
Truck Leasing Corp. and affiliated companies in 1997, 1998 and 1999. The total
cost of these services, which have been included in general and administrative
expenses in the Consolidated Statement of Earnings, was $178,000, $283,000 and
$380,000 in 1997, 1998 and 1999, respectively.

In connection with the development of a new racing facility in Wilson County,
Tennessee, a subsidiary of the Company purchased options to acquire certain
properties being considered as possible locations for the facility. During
1999, a development site was chosen and it was determined that some of the
properties under option would not be needed. Prior to the options expiring, an
officer/director of the Company expressed an interest in purchasing several of
the properties that were not needed for development. The Company assigned its
options to the officer/director who subsequently purchased the property. At
June 30, 1999, $219,000 was due from this officer/director to reimburse the
Company for the cost of the options and certain surveying, engineering and
legal costs incurred by the Company. This amount was repaid in July 1999.

F-17
<PAGE>

At the date of the acquisition of Grand Prix Association of Long Beach,
$299,000 was due to Grand Prix from certain shareholders/officers for
outstanding loans made for the purpose of purchasing Grand Prix common stock.
As of June 30, 1999, $92,000 was outstanding and is due December 1, 1999 from a
current director of the Company.

In the opinion of management of the Company, the foregoing transactions were
effected at rates which approximate those which the Company would have realized
or incurred had such transactions been effected with independent third parties.

NOTE 9--Business Segment Information

<TABLE>
<CAPTION>
Motorsports Gaming Consolidated
------------ ------------- -------------
<S> <C> <C> <C>
Year ended June 30, 1997
Revenue............................... $ 20,516,000 $ 81,162,000 $ 101,678,000
Operating earnings.................... 11,079,000 16,891,000 27,970,000
Identifiable assets at year-end....... 34,801,000 36,460,000 71,261,000
Capital expenditures.................. 9,496,000 7,345,000 16,841,000
Depreciation and amortization......... $ 981,000 $ 1,103,000 $ 2,084,000
------------ ------------- -------------
Year ended June 30, 1998
Revenue............................... $ 25,874,000 $ 115,071,000 $ 140,945,000
Operating earnings.................... 12,506,000 24,447,000 36,953,000
Identifiable assets at year-end....... 57,739,000 38,038,000 95,777,000
Capital expenditures.................. 6,085,000 1,419,000 7,504,000
Depreciation and amortization......... $ 1,237,000 $ 1,470,000 $ 2,707,000
------------ ------------- -------------
Year ended June 30, 1999
Revenue............................... $ 68,683,000 $ 139,249,000 $ 207,932,000
Operating earnings.................... 17,197,000 29,926,000 47,123,000
Identifiable assets at year-end....... 209,540,000 45,672,000 255,212,000
Capital expenditures.................. 36,209,000 14,498,000 50,707,000
Depreciation and amortization......... 5,829,000 1,269,000 7,098,000
Interest expense...................... $ 1,267,000 $ 85,000 $ 1,352,000
------------ ------------- -------------
</TABLE>

NOTE 10--Commitments

The Company leases the racetrack at the Tennessee State Fairgrounds pursuant
to a lease expiring in 2008. Total rental expense charged to the Company is a
function of the profitability of the Nashville operation and was $66,000 for
the six months ended June 30, 1998 and $210,000 for the year ended June 30,
1999.

The Company leases certain property at the Madison, Illinois facility with
leases expiring at various dates through 2070. The leases are subject to annual
adjustments based on increases in the consumer price index. Total rental
payments charged to operations for these leases amounted to $222,000 for the
year ended June 30, 1999. The minimum lease payments due under these leases are
as follows:

<TABLE>
<S> <C>
2000................................... $ 237,000
2001................................... 227,000
2002................................... 214,000
2003................................... 214,000
2004................................... 214,000
Thereafter............................. 4,510,000
</TABLE>

F-18
<PAGE>

In May 1995, Dover Downs, Inc., a subsidiary of the Company, entered into a
long-term management agreement with Caesars World Gaming Development
Corporation (Caesars). The initial term of the agreement expired in December
1998 and Caesars exercised the first of two additional three-year renewal
options which Dover Downs may void if certain financial results are not
achieved. Caesars acts as the exclusive agent to supervise, market, manage and
operate the Company's video lottery operations. Caesars has been properly
licensed by the Delaware State Lottery Office to perform these functions.
Caesars' performance-based fees for such services were $5,185,000 in fiscal
1997, $7,094,000 in fiscal 1998 and $6,983,000 in fiscal 1999. Amounts owed to
Caesars at June 30, 1998 and 1999 totaled $1,246,000 and $1,147,000,
respectively and are included in accrued liabilities. The Company also has
expensed and accrued additional amounts which Caesars claims are due as a
result of the recent casino expansions, but which the Company does not believe
are owed to Caesars.

The Company has entered into several sanctioning agreements to conduct
various motorsports events at Dover Downs International Speedway and the
Nashville Speedway, as well as at newly acquired venues in Long Beach,
California; Madison, Illinois and Millington, Tennessee. The Company has held
NASCAR-sanctioned events for 31 consecutive years and its subsidiary, Grand
Prix Association of Long Beach, has operated the Grand Prix of Long Beach for
25 consecutive years. Nonrenewal of a NASCAR event license or the CART
agreement for the Long Beach event would have a material adverse effect on the
Company's financial condition and results of operations.

NOTE 11--Quarterly Results--in thousands, except per share data (unaudited)

<TABLE>
<CAPTION>
September 30 December 31 March 31 June 30
------------ ----------- -------- -------
<S> <C> <C> <C> <C>
1998
Revenues............................ $38,821 $25,962 $31,735 $44,427
Gross profit........................ 14,301 5,236 6,649 15,177
Net earnings........................ 7,833 2,518 3,295 8,267
Earnings per common share
(diluted).......................... $ .25 $ .08 $ .11 $ .26
1999
Revenues............................ $54,654 $37,651 $36,676 $78,951
Gross profit........................ 17,520 7,188 6,851 26,777
Net earnings........................ 8,278 2,513 2,207 13,893
Earnings per common share
(diluted).......................... $ .23 $ .07 $ .06 $ .38
</TABLE>

F-19
<PAGE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

You should rely only on the information contained in this prospectus. We
have not and the underwriters have not authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not and the
underwriters are not making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate as of the date on the
front cover of this prospectus only. Our business, financial condition,
results of operations and prospects may have changed since that date.

----------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Additional Information................................................... i
Prospectus Summary....................................................... 1
Risk Factors............................................................. 7
Use of Proceeds.......................................................... 12
Price Range of Common Stock.............................................. 12
Dividend Policy.......................................................... 12
Capitalization........................................................... 13
Selected Consolidated Financial Data..................................... 14
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 15
An Important Note About Our Forward-Looking Statements................... 19
Business................................................................. 20
Management............................................................... 27
Selling Stockholder...................................................... 29
Underwriting............................................................. 30
Description of Capital Stock............................................. 31
Legal Matters............................................................ 34
Experts.................................................................. 34
Incorporation of Certain Documents by Reference.......................... 34
Index to Consolidated Financial Statements............................... F-1
</TABLE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

2,000,000 Shares

[Logo]
DOVER DOWNS
ENTERTAINMENT, INC.

Common Stock

----------------

PROSPECTUS

----------------

Raymond James &
Associates, Inc.

J.C. Bradford & Co.

March 3, 2000

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 14. Other Expenses of Issuance and Distribution

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by us in connection with the
sale of common stock being registered. All amounts are estimates except the SEC
registration fee, NASD filing fee and NYSE additional listing fee.

<TABLE>
<S> <C>
SEC registration fee............................................... $ 12,369.80
NASD filing fee.................................................... 5,185.53
NYSE additional listing fee........................................ 7,000.00
Printing and engraving costs....................................... 100,000.00
Legal fees and expenses............................................ 50,000.00
Accounting fees and expenses....................................... 25,000.00
Transfer agent and registrar fees.................................. 2,000.00
Miscellaneous expenses............................................. 50,000.00
-----------
Total............................................................ $251,555.33
===========
</TABLE>

Item 15. Indemnification of Directors and Officers

Section 145(a) of the General Corporation Law of the State of Delaware
provides that a Delaware corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation)
by reason of the fact that he or she is or was a director, officer, employee or
agent of the corporation or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or enterprise,
against expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or her in connection with such action, suit or
proceeding if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
cause to believe his or her conduct was unlawful.

Section 145(b) of the General Corporation Law provides that a Delaware
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the corporation to procure a judgment in its favor by reason of
the fact that such person acted in any of the capacities set forth above,
against expenses actually and reasonably incurred by him or her in connection
with the defense or settlement of such action or suit if he or she acted under
similar standards as set forth above, except that no indemnification may be
made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the
extent that the court in which such action or suit was brought shall determine
that despite the adjudication of liability, but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to be
indemnified for such expenses which the court shall deem proper.

Section 145 of the General Corporation Law further provides that to the
extent a director or officer of a corporation has been successful on the merits
or otherwise in the defense of any action, suit or proceeding referred to in
subsections (a) and (b) or in the defense of any claim, issue or matter
therein, he or she shall be indemnified against expenses actually and
reasonably incurred by him or her in connection therewith; that indemnification
provided for by Section 145 shall not be deemed exclusive of any other rights
to which the indemnified party may be entitled; and that the corporation may
purchase and maintain insurance on behalf of such person against any liability
asserted against him or her or incurred by him or her in any such capacity or
arising out of his or her status as such, whether or not the corporation would
have the power to indemnify him or her against such liabilities under such
Section 145.

II-1
<PAGE>

Section 102(b)(7) of the General Corporation Law provides that a corporation
in its original certificate of incorporation or an amendment thereto validly
approved by stockholders may eliminate or limit personal liability of members
of its board of directors or governing body for monetary damages for breach of
a director's fiduciary duty. However, no such provision may eliminate or limit
the liability of a director for breaching his or her duty of loyalty, failing
to act in good faith, engaging in intentional misconduct or knowingly violating
a law, paying a dividend or approving a stock repurchase or redemption which
was illegal, or obtaining an improper personal benefit. A provision of this
type has no effect on the availability of equitable remedies, such as
injunction or rescission, for breach of fiduciary duty.

Article TENTH of the Company's Certificate of Incorporation eliminates the
personal liability of directors and/or officers to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director;
provided that such elimination of the personal liability of a director and/or
officer of the Company does not apply to (i) any breach of such person's duty
of loyalty to the Company or its stockholders, (ii) acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) actions prohibited under Section 174 of the General Corporation Law
(i.e., liabilities imposed upon directors who vote for or assent to the
unlawful payment of dividends, unlawful repurchases or redemption of stock,
unlawful distribution of assets of the Company to the stockholders without the
prior payment or discharge of the Company's debts or obligations, or unlawful
making or guaranteeing of loans to directors and/or officers), or (iv) any
transaction from which the director derived an improper personal benefit. In
addition, Article VII of the Company's By-Laws provide that the Company shall
indemnify its corporate personnel, directors and officers to the fullest extent
permitted by the General Corporation Law, as amended from time to time.

The Company has in force insurance policies under which its directors and
officers are insured (with limits of $15 million per occurrence and $15 million
in the aggregate) against certain liabilities resulting from actions, suits or
proceedings to which they are parties by reason of being or having been
directors or officers of the Company.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the registrant
as disclosed above, the registrant has been informed that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.

Item 16. Exhibits and Financial Statement Schedules

(a) Exhibits:

<TABLE>
<CAPTION>
Exhibit Number Description
-------------- -----------
<C> <S>
1.1 Form of Underwriting Agreement.
3.1 Certificate of Incorporation, as amended.(1)
3.2 Amendment to Certificate of Incorporation, dated June 30,
1998.(2)
3.3 Amended and Restated By-Laws.
4.1 Specimen Form of Common Stock Certificate.(1)
4.2 Rights Agreement dated as of June 14, 1996 between Dover Downs
Entertainment, Inc. and ChaseMellon Shareholder Services
L.L.C.(1)
4.3 Amendment No. 1 to Rights Agreement.(3)
5.1 Opinion of Greenberg Traurig, LLP.
5.2 Opinion of Klaus M. Belohoubek, Esq., Vice President-General
Counsel and Secretary.
*23.1 Consent of KPMG LLP.
23.2 Consent of Greenberg Traurig, LLP (contained in Exhibit 5.1).
23.3 Consent of Klaus M. Belohoubek, Esq., Vice President-General
Counsel and Secretary (contained in Exhibit 5.2).
25.1 Power of Attorney.
27.1 Financial Data Schedule.
</TABLE>

II-2
<PAGE>

- --------
* Filed herewith electronically.
(1) Incorporated herein by reference. Filed with the Commission as an exhibit
to our Registration Statement on Form S-1 (Registration No. 333-08147) on
July 15, 1996.
(2) Incorporated herein by reference. Filed with the Commission as an exhibit
to our Annual Report on Form 10-K for the fiscal year ended June 30, 1998
on September 1, 1998.
(3) Incorporated herein by reference. Filed with the Commission as an exhibit
to our Quarterly Report on Form 10-Q for the quarter ended March 31, 1998
on April 28, 1998.

(b) Financial Statement Schedules:

Schedules not listed above have been omitted because the information required
to be set forth therein is not applicable or is shown in the consolidated
financial statements or notes thereto.

Item 17. Undertakings

1. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each fling of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in this registration statement shall be deemed to be
a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.

2. The undersigned registrant hereby undertakes that:

(a) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497 (h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(b) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

3. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer, or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered hereunder, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

II-3
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Amendment No. 2 to this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in Dover, Delaware on the 2nd day
of March, 2000.

Dover Downs Entertainment, Inc.

/s/Denis McGlynn
By: _________________________________
Denis McGlynn
President and Chief Executive
Officer

Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----

<S> <C> <C>
* Chairman of the Board March 2, 2000
______________________________________
John W. Rollins, Sr.

* Vice Chairman of the Board March 2, 2000
______________________________________
Henry B. Tippie

* President, Chief Executive March 2, 2000
______________________________________ Officer and Director
Denis McGlynn (principal executive
officer)

* Vice President--Finance March 2, 2000
______________________________________ and Chief Financial
Timothy R. Horne Officer (principal
financial officer and
principal accounting
officer)

* Director March 2, 2000
______________________________________
Eugene W. Weaver

* Director March 2, 2000
______________________________________
John W. Rollins, Jr.
</TABLE>

II-4
<PAGE>

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----

<S> <C> <C>
* Director March 2, 2000
______________________________________
R. Randall Rollins

* Director March 2, 2000
______________________________________
Patrick J. Bagley

* Director March 2, 2000
______________________________________
Melvin L. Joseph

* Director March 2, 2000
______________________________________
Jeffrey W. Rollins

* Director March 2, 2000
______________________________________
Christopher R. Pook

*By /s/ Klaus M. Belohoubek
______________________________________
Klaus M. Belohoubek
Attorney-in-Fact
</TABLE>

II-5
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement
3.1 Certificate of Incorporation, as amended.(1)
3.2 Amendment to Certificate of Incorporation, dated June 30, 1998.(2)
3.3 Amended and Restated By-Laws.
4.1 Specimen Form of Common Stock Certificate.(1)
4.2 Rights Agreement dated as of June 14, 1996 between Dover Downs
Entertainment, Inc. and Chase Mellon Shareholder Services L.L.C.(1)
4.3 Amendment No. 1 to Rights Agreement.(3)
5.1 Opinion of Greenberg Traurig, LLP.
5.2 Opinion of Klaus M. Belohoubek, Esq., Vice President-General Counsel
and Secretary.
23.1 Consent of KPMG LLP.*
23.2 Consent of Greenberg Traurig, LLP (contained in Exhibit 5.1).
23.2 Consent of Klaus M. Belohoubek, Esq. (contained in Exhibit 5.2).
25.1 Power of Attorney.
27.1 Financial Data Schedule.
</TABLE>
- --------
* Filed herewith electronically.
(1) Incorporated herein by reference. Filed with the Commission as an exhibit
to our Registration Statement on Form S-1 (Registration No. 333-08147) on
July 15, 1996.
(2) Incorporated herein by reference. Filed with the Commission as an exhibit
to our Annual Report on Form 10-K for the fiscal year ended June 30, 1998
on September 1, 1998.
(3) Incorporated herein by reference. Filed with the Commission as an exhibit
to our Quarterly Report on Form 10-Q for the quarter ended March 31, 1998
on April 28, 1998.

II-6

<PAGE>

Exhibit 23.1
------------
Consent

The Board of Directors
Dover Downs Entertainment, Inc.:

We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" and under the heading "Selected Consolidated
Financial Data" in the prospectus.

/s/ KPMG LLP

Philadelphia, Pennsylvania
MARCH 3, 2000