##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number 333-123179
 BLACK GAMING, LLC
  Nevada
(State or Other Jurisdiction 
of Incorporation or Organization)
    
    20-8160036
(I.R.S. Employer
Identification Number)10777 West Twain Avenue, Las Vegas, NV
(Address of Principal Executive Offices)
    
    89135
(Zip Code)
 (702) 318-6888
 þ o
  Large Accelerated Filer o
    
    Accelerated Filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(do not check if smaller reporting company)
 o þ




---



##### 



PART I  FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTSCondensed Consolidated Balance Sheets-June 30, 2008 (unaudited) and December 31, 2007
    
    
    3Condensed Consolidated Statements of Operations (unaudited) for the Three and Six
Months Ended June 30, 2008 and 2007
    
    
    4Condensed Consolidated Statements of Cash Flows (unaudited) for the Three and Six
Months Ended June 30, 2008 and 2007
    
    
    5Notes to Condensed Consolidated Financial Statements (unaudited)
    
    
    7ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
    
    
    21ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    28ITEM 4. CONTROLS AND PROCEDURES
    
    
    29PART II  OTHER INFORMATIONITEM 1. LEGAL PROCEEDINGS
    
    
    30ITEM 1A. RISK FACTORS
    
    
    30ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    31ITEM 3. DEFAULTS UPON SENIOR SECURITIES
    
    
    31ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    31ITEM 5. OTHER INFORMATION
    
    
    31ITEM 6. EXHIBITS
    
    
    31SIGNATURES
    
    
    32Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 Black Gaming, LLC and Subsidiaries
 
 Condensed Consolidated Balance Sheets
(in thousands)
 June 30, 2008
    
    
    December 31, 2007(unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    8,143
    
    
    $
    9,503Accounts receivable, net
    
    
    1,897
    
    
    
    1,986Related party receivables
    
    
    286
    
    
    
    327Inventories
    
    
    1,812
    
    
    
    1,800Property held for vacation interval sales
    
    
    321
    
    
    
    336Prepaid expenses
    
    
    3,565
    
    
    
    4,180Current portion of notes receivable
    
    
    247
    
    
    
    150Total current assets
    
    
    16,271
    
    
    
    18,282Property and equipment, net
    
    
    121,757
    
    
    
    131,480Notes receivable, less current portion
    
    
    253
    
    
    
    537Goodwill and other intangible assets, net
    
    
    21,599
    
    
    
    35,828Deferred financing fees
    
    
    5,608
    
    
    
    6,259Other assets
    
    
    1,842
    
    
    
    1,898Total assets
    
    $
    167,330
    
    
    $
    194,284Liabilities and Members DeficitCurrent liabilities:Bank overdraft
    
    $
    1,270
    
    
    $
    821Current portion of gaming equipment financing
    
    
    535
    
    
    
    1,025Current portion of long-term debt
    
    
    
    
    
    
    9,500Accounts payable
    
    
    2,415
    
    
    
    2,950Accrued liabilities
    
    
    15,335
    
    
    
    17,605Total current liabilities
    
    
    19,555
    
    
    
    31,901Gaming equipment financing, less current portion
    
    
    
    
    
    
    15Long term debt
    
    
    192,747
    
    
    
    183,047Total liabilities
    
    
    212,302
    
    
    
    214,963Commitments and contingencies (Note 10)Members deficit
    
    
    (44,972
    )
    
    
    (20,679
    )Total liabilities and members deficit
    
    $
    167,330
    
    
    $
    194,284
   3




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##### Table of Contents



Black Gaming, LLC and Subsidiaries
 
 Condensed Consolidated Statements of Operations (unaudited)
(in thousands)
 Three Months Ended
    
    
    Six Months EndedJune 30, 2008
    
    
    June 30, 2007
    
    
    June 30, 2008
    
    
    June 30, 2007Revenues:Casino
    
    $
    21,249
    
    
    $
    27,181
    
    
    $
    45,582
    
    
    $
    56,733Food and beverage
    
    
    8,621
    
    
    
    10,737
    
    
    
    18,007
    
    
    
    21,751Hotel
    
    
    7,939
    
    
    
    9,453
    
    
    
    16,044
    
    
    
    19,802Other
    
    
    4,682
    
    
    
    5,466
    
    
    
    10,259
    
    
    
    11,240Total revenues
    
    
    42,491
    
    
    
    52,837
    
    
    
    89,892
    
    
    
    109,526Lesspromotional allowances
    
    
    (6,509
    )
    
    
    (9,887
    )
    
    
    (15,356
    )
    
    
    (21,204
    )Net revenues
    
    
    35,982
    
    
    
    42,950
    
    
    
    74,536
    
    
    
    88,322Operating expenses:Casino
    
    
    10,314
    
    
    
    13,144
    
    
    
    22,025
    
    
    
    26,983Food and beverage
    
    
    6,184
    
    
    
    5,857
    
    
    
    11,674
    
    
    
    11,821Hotel
    
    
    2,178
    
    
    
    1,687
    
    
    
    3,855
    
    
    
    3,199Other
    
    
    2,559
    
    
    
    3,355
    
    
    
    5,010
    
    
    
    6,791General and administrative
    
    
    10,278
    
    
    
    12,103
    
    
    
    20,725
    
    
    
    25,039Depreciation and amortization
    
    
    4,142
    
    
    
    4,203
    
    
    
    8,423
    
    
    
    8,359Loss on sale and disposal of
assets
    
    
    41
    
    
    
    116
    
    
    
    204
    
    
    
    98Impairment of long lived assets
    
    
    2,860
    
    
    
    
    
    
    
    3,833
    
    
    
    Goodwill impairment
    
    
    12,497
    
    
    
    
    
    
    
    12,497
    
    
    
    Total operating expenses
    
    
    51,053
    
    
    
    40,465
    
    
    
    88,246
    
    
    
    82,290Operating (loss) income
    
    
    (15,071
    )
    
    
    2,485
    
    
    
    (13,710
    )
    
    
    6,032Other expense:Interest expense, net
    
    
    5,238
    
    
    
    5,070
    
    
    
    10,583
    
    
    
    10,216Net loss
    
    $
    (20,309
    )
    
    $
    (2,585
    )
    
    $
    (24,293
    )
    
    $
    (4,184
    )
   4




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##### Table of Contents



Black Gaming, LLC and Subsidiaries
 
 Condensed Consolidated Statements of Cash Flows (unaudited)
(in thousands)
 Six Months EndedJune 30, 2008
    
    
    June 30, 2007Cash flows from operating activities:Net loss
    
    $
    (24,293
    )
    
    $
    (4,184
    )Depreciation and amortization
    
    
    8,423
    
    
    
    8,359Loss on sale and disposal of assets
    
    
    204
    
    
    
    98Impairment of long lived assets
    
    
    3,833
    
    
    
    Goodwill impairment
    
    
    12,497Amortization of deferred financing fees
    
    
    801
    
    
    
    800Accretion of senior subordinated notes
    
    
    3,700
    
    
    
    3,270Interest expense on gaming equipment financing
    
    
    4
    
    
    
    1Cost of vacation interval sales
    
    
    15
    
    
    
    134Change in operating assets and liabilities:Accounts and related party receivables, net
    
    
    130
    
    
    
    217Inventories
    
    
    (12
    )
    
    
    (259
    )Prepaid expenses
    
    
    615
    
    
    
    531Notes receivable
    
    
    187
    
    
    
    315Change in other assets
    
    
    (64
    )
    
    
    (577
    )Accounts payable and accrued liabilities
    
    
    (2,505
    )
    
    
    (982
    )Net cash provided by operating activities
    
    
    3,535
    
    
    
    7,723Cash flows from investing activities:Proceeds received from sale of assets
    
    
    306
    
    
    
    324Capital expenditures
    
    
    (675
    )
    
    
    (7,698
    )Net cash used in investing activities
    
    
    (369
    )
    
    
    (7,374
    )Cash flows from financing activities:Proceeds from issuance of long term debt
    
    
    5,000
    
    
    
    9,500Payment of gaming equipment financing
    
    
    (1,325
    )
    
    
    (2,408
    )Payment of long term debt
    
    
    (8,500
    )
    
    
    (6,000
    )Payment of financing costs
    
    
    (150
    )
    
    
    Increase (decrease) in bank overdraft
    
    
    449
    
    
    
    (953
    )Net cash (used in) provided by financing activities
    
    
    (4,526
    )
    
    
    139Net (decrease) increase in cash and cash equivalents
    
    
    (1,360
    )
    
    
    488Cash and cash equivalents at beginning of period
    
    
    9,503
    
    
    
    11,118Cash and cash equivalents at end of period
    
    $
    8,143
    
    
    $
    11,606
   5




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##### Table of Contents



Black Gaming, LLC and Subsidiaries
 Condensed
Consolidated Statements of Cash Flows (unaudited) (continued)
(in thousands)
 Six months endedJune 30, 2008
    
    
    June 30, 2007Supplemental cash flow disclosure:Cash paid for interest
    
    $
    6,136
    
    
    $
    817Noncash investing and financing activities:Acquisition of gaming assets with seller financing
    
    $
    817
    
    
    $
    109
   6




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##### Table of Contents



Black Gaming, LLC and Subsidiaries
 
 Notes to Condensed Consolidated Financial Statements (unaudited)
 1. Basis of Presentation and Background
    
    
    VRCC received 100 shares of R. Black, Inc. (RBI) from the Black
Trust. The Black Trust owns 100% of the outstanding shares of VRCC.
The 100 shares of RBI representing 100% of the outstanding capital
stock of RBI, was exchanged for 3.68 shares of VRCC held by the Black
Trust, representing 3.68% of the outstanding capital stock of VRCC.
RBI does not have any material operations, liabilities or assets other
than a 5.47% ownership in RBG. The transfer of shares of RBI to VRCC
was accounted for at the historical cost of RBG as RBI and VRCC were
under common control.
    
    VRCC received a 3.8% membership interest in RBG from the Black Trust
in exchange for 2.57 shares of VRCC held by the Black Trust,
representing 2.57% of the outstanding capital stock of VRCC. The
transfer of membership interests of RBG to VRCC was accounted for at
historical cost as the Black Trust and VRCC were under common control.
    
    VRCC received a 1.92% membership interest in RBG from Glenn Teixeira
in exchange for 1.29 shares of VRCC held by the Black Trust,
representing 1.29% of the outstanding capital stock of VRCC. The
acquisition of the membership interests from RBG from Glenn Teixeira
was accounted for at fair value as it was considered an acquisition of
a minority interest of a subsidiary. Based upon an internal analysis
the fair value of Glenn Teixeiras interest approximated book value.
    7




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##### Table of Contents



Black Gaming, LLC and Subsidiaries
 Notes to Condensed Consolidated Financial Statements (unaudited) (continued)
 1. Basis of Presentation and Background (continued)
 Interim Financial Statements
  Reclassifications
 Recently Issued Accounting Standards
   8




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##### Table of Contents



Black Gaming, LLC and Subsidiaries
 Notes to Condensed Consolidated Financial Statements (unaudited) (continued)
 1. Basis of Presentation and Background (continued)
    2. Discontinued Operations
   For the three
    
    
    For the sixmonths ended
    
    
    months endedJune 30, 2007
    
    
    June 30, 2007Operating revenues
    
    $
    842
    
    
    $
    1,973Operating expenses
    
    
    728
    
    
    
    1,589Depreciation
    
    
    45
    
    
    
    90Income from discontinued operations
    
    $
    69
    
    
    $
    294
  9




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##### Table of Contents



Black Gaming, LLC and Subsidiaries
 Notes to Condensed Consolidated Financial Statements (unaudited) (continued)
 3. Property and Equipment
  June 30, 2008
    
    
    December 31, 2007Land
    
    $
    32,812
    
    
    $
    32,812Building
    
    
    77,916
    
    
    
    77,897Land and leasehold improvements
    
    
    18,106
    
    
    
    17,940Furniture and fixtures
    
    
    84,190
    
    
    
    83,922Construction in progress
    
    
    1,316
    
    
    
    5,325214,340
    
    
    
    217,896Less: accumulated depreciation
    
    
    (92,583
    )
    
    
    (86,416
    )Property and equipment, net
    
    $
    121,757
    
    
    $
    131,480
 4. Notes Receivable
  June 30, 2008
    
    
    December 31, 2007Vacation interval notes receivable
    
    $
    644
    
    
    $
    912Allowance for possible credit losses
    
    
    (144
    )
    
    
    (225
    )Total notes receivable
    
    
    500
    
    
    
    687Less: current portion
    
    
    (247
    )
    
    
    (150
    )Non-current notes receivable
    
    $
    253
    
    
    $
    537
    10




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##### Table of Contents



Black Gaming, LLC and Subsidiaries
 Notes to Condensed Consolidated Financial Statements (unaudited) (continued)
 5. Accrued Liabilities
  June 30, 2008
    
    
    December 31, 2007Accrued management fees
    
    $
    426
    
    
    $
    863Accrued taxes
    
    
    502
    
    
    
    1,072Accrued insurance
    
    
    1,452
    
    
    
    1,212Accrued slot program
    
    
    4,214
    
    
    
    4,299Accrued wages, benefits and other personnel costs
    
    
    2,411
    
    
    
    2,043Accrued interest on Senior Notes
    
    
    5,292
    
    
    
    5,343Accrued other
    
    
    1,038
    
    
    
    2,773Total accrued liabilities
    
    $
    15,335
    
    
    $
    17,605
  11




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##### Table of Contents



Black Gaming, LLC and Subsidiaries
 Notes to Condensed Consolidated Financial Statements (unaudited) (continued)
 6. Gaming Equipment Financing
  June 30, 2008
    
    
    December 31, 2007Gaming equipment financing to purchase 478
games, no payments for one year and monthly
payments of $251 for 24 months beginning
February 2006
    
    $
    
    
    
    $
    248Gaming equipment financing to purchase 68
games, no payments for one year and monthly
payments of $43 for 24 months beginning
January 2006
    
    
    
    
    
    
    43Gaming equipment financing to purchase 70
games, no payments for one year and monthly
payments of $39 for 24 months beginning
March 2006
    
    
    
    
    
    
    38Gaming equipment financing to purchase 80
games, monthly payments of $27 for 36 months
beginning April 2005
    
    
    
    
    
    
    165Gaming equipment financing to purchase 64
games, no payments for one year and monthly
payments of $26 for 24 months beginning
February 2006
    
    
    
    
    
    
    52Gaming equipment financing to purchase 38
games, monthly payments of $13 for 36 months
beginning April 2005
    
    
    
    
    
    
    37Gaming equipment financing to purchase 55
games, no payments for one year and monthly
payments of $16 for 24 months beginning
January 2006
    
    
    
    
    
    
    282Gaming equipment financing, monthly payments
of $3 for 36 months beginning January 2005
    
    
    
    
    
    
    1Gaming equipment financing to purchase 4
games, monthly payments of $1 for 36 months
beginning April 2005
    
    
    
    
    
    
    8Gaming equipment financing to purchase 6
games, no payments for one year and monthly
payments of $6 for 24 months beginning
February 2007
    
    
    20
    
    
    
    36Gaming equipment financing, monthly payments
of $1 for 36 months beginning July 2006
    
    
    12
    
    
    
    18Gaming equipment financing, no payments for
18 months and monthly payments of $1 for 36
months beginning July 2006
    
    
    6
    
    
    
    104Gaming equipment financing, monthly payments
of $1 for 36 months and beginning on July
2006
    
    
    5
    
    
    
    8Gaming equipment financing, monthly payments
of $27 for 9 months and beginning April 2008
    
    
    159
    
    
    
    Gaming equipment financing, monthly payments
of $12 for 11 months and beginning February
2008
    
    
    69
    
    
    
    Gaming equipment financing, monthly payments
of $38 for 11 months and beginning February
2008
    
    
    221
    
    
    
    Gaming equipment financing, monthly payments
of $7 for 9 months beginning April 2008
    
    
    43
    
    
    
    535
    
    
    
    1,040Less: current portion
    
    
    (535
    )
    
    
    (1,025
    )Gaming equipment financing, long-term portion
    
    $
    
    
    
    $
    15
  12




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##### Table of Contents



Black Gaming, LLC and Subsidiaries
 Notes to Condensed Consolidated Financial Statements (unaudited) (continued)
 7. Long-term Debt
  June 30, 2008
    
    
    December 31, 2007Revolving credit facility totaling
$15 million with Wells Fargo
Foothill at a margin above prime or
LIBOR, as defined; collateralized by
substantially all assets of the
Company as defined
    
    $
    6,000
    
    
    $
    9,5009% senior secured notes, interest
payable semiannually, principal due
January 15, 2012, callable January
15, 2009
    
    
    125,000
    
    
    
    125,00012 3/4 % senior subordinated notes,
non-cash interest will accrue at an
annual rate of 123/4 % in the form of
increased accreted value until
January 15, 2009. Beginning July 15,
2009, interest payable semiannually,
principal due January 15, 2013,
callable January 15, 2009
    
    
    61,747
    
    
    
    58,047192,747
    
    
    
    192,547Less: current portion
    
    
    
    
    
    
    (9,500
    )Total long-term debt
    
    $
    192,747
    
    
    $
    183,047
 Revolving Facility
    Senior Secured and Senior Subordinated Notes
 3 4
   13




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##### Table of Contents



Black Gaming, LLC and Subsidiaries
 Notes to Condensed Consolidated Financial Statements (unaudited) (continued)
 7. Long-term Debt (continued)
     8. Related Party Transactions
        14




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##### Table of Contents



Black Gaming, LLC and Subsidiaries
 Notes to Condensed Consolidated Financial Statements (unaudited) (continued)
 9. Impairment of Long Lived Assets
   Goodwill and Other
Intangible Assets
    10. Commitment and Contingencies
   15




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##### Table of Contents



Black Gaming, LLC and Subsidiaries
 Notes to Condensed Consolidated Financial Statements (unaudited) (continued)
 11. Supplemental Guarantor Condensed Consolidating Financial Statements
  Non-Guarantor
    
    
    GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedAs of June 30, 2008BALANCE SHEET (unaudited)Current Assets, including intercompany accounts
    
    $
    4,106
    
    
    $
    63,649
    
    
    $
    
    
    
    $
    (51,484
    )
    
    $
    16,271Property and equipment, net
    
    
    238
    
    
    
    121,519
    
    
    
    
    
    
    
    
    
    
    
    121,757Other Intangibles
    
    
    
    
    
    
    21,599
    
    
    
    
    
    
    
    
    
    
    
    21,599Other assets excluding intercompany accounts
    
    
    
    
    
    
    110,821
    
    
    
    
    
    
    
    (103,118
    )
    
    
    7,703Total Assets
    
    $
    4,344
    
    
    $
    317,588
    
    
    $
    
    
    
    $
    (154,602
    )
    
    $
    167,330Current Liabilities, including intercompany
accounts
    
    $
    7,700
    
    
    $
    63,339
    
    
    $
    
    
    
    $
    (51,484
    )
    
    $
    19,555Long-term debt, less current portion
    
    
    
    
    
    
    192,747
    
    
    
    
    
    
    
    
    
    
    
    192,747Members (Deficit) Equity
    
    
    (3,356
    )
    
    
    61,502
    
    
    
    
    
    
    
    (103,118
    )
    
    
    (44,972
    )Total Liabilities & Members (Deficit) Equity
    
    $
    4,344
    
    
    $
    317,588
    
    
    $
    
    
    
    $
    (154,602
    )
    
    $
    167,330
 Non-Guarantor
    
    
    GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedAs of December 31, 2007BALANCE SHEETCurrent Assets, including intercompany accounts
    
    $
    5,257
    
    
    $
    43,001
    
    
    $
    
    
    
    $
    (29,976
    )
    
    $
    18,282Property and equipment, net
    
    
    420
    
    
    
    131,060
    
    
    
    
    
    
    
    
    
    
    
    131,480Goodwill and Other Intangibles
    
    
    
    
    
    
    35,828
    
    
    
    
    
    
    
    
    
    
    
    35,828Other assets excluding intercompany accounts
    
    
    
    
    
    
    111,812
    
    
    
    
    
    
    
    (103,118
    )
    
    
    8,694Total Assets
    
    $
    5,677
    
    
    $
    321,701
    
    
    $
    
    
    
    $
    (133,094
    )
    
    $
    194,284Current Liabilities, including intercompany
accounts
    
    $
    8,077
    
    
    $
    53,800
    
    
    $
    
    
    
    $
    (29,976
    )
    
    $
    31,901Long-term debt, less current portion
    
    
    
    
    
    
    183,047
    
    
    
    
    
    
    
    
    
    
    
    183,047Gaming equipment financing, less current portion
    
    
    
    
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    15Members (Deficit) Equity
    
    
    (2,400
    )
    
    
    84,839
    
    
    
    
    
    
    
    (103,118
    )
    
    
    (20,679
    )Total
Liabilities & Members (Deficit) Equity
    
    $
    5,677
    
    
    $
    321,701
    
    
    $
    
    
    
    $
    (133,094
    )
    
    $
    194,284
  16




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##### Table of Contents



Black Gaming, LLC and Subsidiaries
 Notes to Condensed Consolidated Financial Statements (unaudited)
 11.
Supplemental Guarantor Condensed Consolidating Financial Statements (continued)
 Non-Guarantor
    
    
    GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedFor the three months ending June 30, 2008STATEMENT OF OPERATIONS (unaudited)Net Revenues
    
    $
    
    
    
    $
    37,557
    
    
    $
    
    
    
    $
    (1,575
    )
    
    $
    35,982Operating Expenses:Casino
    
    
    
    
    
    
    10,314
    
    
    
    
    
    
    
    
    
    
    
    10,314Food and beverage
    
    
    
    
    
    
    6,184
    
    
    
    
    
    
    
    
    
    
    
    6,184Hotel
    
    
    
    
    
    
    2,178
    
    
    
    
    
    
    
    
    
    
    
    2,178Other
    
    
    
    
    
    
    2,559
    
    
    
    
    
    
    
    
    
    
    
    2,559General and administrative
    
    
    458
    
    
    
    11,395
    
    
    
    
    
    
    
    (1,575
    )
    
    
    10,278Depreciation and amortization
    
    
    12
    
    
    
    4,130
    
    
    
    
    
    
    
    
    
    
    
    4,142Loss on disposal of assets
    
    
    
    
    
    
    41
    
    
    
    
    
    
    
    
    
    
    
    41Impairment of long lived assets
    
    
    
    
    
    
    2,860
    
    
    
    
    
    
    
    
    
    
    
    2,860Goodwill impairment
    
    
    
    
    
    
    12,497
    
    
    
    
    
    
    
    
    
    
    
    12,497Operating loss
    
    
    (470
    )
    
    
    (14,601
    )
    
    
    
    
    
    
    
    
    
    
    (15,071
    )Other Expense:Interest expense, net
    
    
    2
    
    
    
    5,236
    
    
    
    
    
    
    
    
    
    
    
    5,238Net loss
    
    $
    (472
    )
    
    $
    (19,837
    )
    
    $
    
    
    
    $
    
    
    
    $
    (20,309
    )STATEMENT OF CASH FLOWSNet cash (used in) provided by operating activities
    
    $
    (22
    )
    
    $
    339
    
    
    $
    
    
    
    $
    
    
    
    $
    317Net cash provided by (used in) investing activities
    
    
    22
    
    
    
    (192
    )
    
    
    
    
    
    
    
    
    
    
    (170
    )Net cash used in financing activities
    
    
    
    
    
    
    (1,801
    )
    
    
    
    
    
    
    
    
    
    
    (1,801
    )
  17




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##### Table of Contents



Black Gaming, LLC and Subsidiaries
 Notes to Condensed Consolidated Financial Statements (unaudited) (continued)
 11. Supplemental Guarantor Condensed Consolidating Financial Statements (continued)
 Non-Guarantor
    
    
    GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedFor the six months ending June 30, 2008STATEMENT OF OPERATIONS (unaudited)Net Revenues
    
    $
    
    
    
    $
    77,686
    
    
    $
    
    
    
    $
    (3,150
    )
    
    $
    74,536Operating Expenses:Casino
    
    
    
    
    
    
    22,025
    
    
    
    
    
    
    
    
    
    
    
    22,025Food and beverage
    
    
    
    
    
    
    11,674
    
    
    
    
    
    
    
    
    
    
    
    11,674Hotel
    
    
    
    
    
    
    3,855
    
    
    
    
    
    
    
    
    
    
    
    3,855Other
    
    
    
    
    
    
    5,010
    
    
    
    
    
    
    
    
    
    
    
    5,010General and administrative
    
    
    929
    
    
    
    22,946
    
    
    
    
    
    
    
    (3,150
    )
    
    
    20,725Depreciation and amortization
    
    
    25
    
    
    
    8,398
    
    
    
    
    
    
    
    
    
    
    
    8,423Loss on disposal of assets
    
    
    
    
    
    
    204
    
    
    
    
    
    
    
    
    
    
    
    204Impairment of long lived assets
    
    
    
    
    
    
    3,833
    
    
    
    
    
    
    
    
    
    
    
    3,833Goodwill impairment
    
    
    
    
    
    
    12,497
    
    
    
    
    
    
    
    
    
    
    
    12,497Operating loss
    
    
    (954
    )
    
    
    (12,756
    )
    
    
    
    
    
    
    
    
    
    
    (13,710
    )Other Expense:Interest expense, net
    
    
    2
    
    
    
    10,581
    
    
    
    
    
    
    
    
    
    
    
    10,583Net loss
    
    $
    (956
    )
    
    $
    (23,337
    )
    
    $
    
    
    
    $
    
    
    
    $
    (24,293
    )STATEMENT OF CASH FLOWSNet cash provided by operating activities
    
    $
    12
    
    
    $
    3,523
    
    
    $
    
    
    
    $
    
    
    
    $
    3,535Net cash used in investing activities
    
    
    (12
    )
    
    
    (357
    )
    
    
    
    
    
    
    
    
    
    
    (369
    )Net cash used in financing activities
    
    
    
    
    
    
    (4,526
    )
    
    
    
    
    
    
    
    
    
    
    (4,526
    )
  18




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##### Table of Contents



Black Gaming, LLC and Subsidiaries
 Notes to Condensed Consolidated Financial Statements (unaudited) (continued)
 11. Supplemental Guarantor Condensed Consolidating Financial Statements (continued)
 Non-Guarantor
    
    
    GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedFor the three months ending June 30, 2007STATEMENT OF OPERATIONS (unaudited)Net Revenues
    
    $
    
    
    
    $
    44,525
    
    
    $
    
    
    
    $
    (1,575
    )
    
    $
    42,950Operating Expenses:Casino
    
    
    
    
    
    
    13,144
    
    
    
    
    
    
    
    
    
    
    
    13,144Food and beverage
    
    
    
    
    
    
    5,857
    
    
    
    
    
    
    
    
    
    
    
    5,857Hotel
    
    
    
    
    
    
    1,687
    
    
    
    
    
    
    
    
    
    
    
    1,687Other
    
    
    
    
    
    
    3,355
    
    
    
    
    
    
    
    
    
    
    
    3,355General and administrative
    
    
    711
    
    
    
    12,967
    
    
    
    
    
    
    
    (1,575
    )
    
    
    12,103Depreciation and amortization
    
    
    5
    
    
    
    4,198
    
    
    
    
    
    
    
    
    
    
    
    4,203Loss on disposal of assets
    
    
    
    
    
    
    116
    
    
    
    
    
    
    
    
    
    
    
    116Operating (loss) income
    
    
    (716
    )
    
    
    3,201
    
    
    
    
    
    
    
    
    
    
    
    2,485Other Expense:Interest expense, net
    
    
    
    
    
    
    5,070
    
    
    
    
    
    
    
    
    
    
    
    5,070Net loss
    
    $
    (716
    )
    
    $
    (1,869
    )
    
    $
    
    
    
    $
    
    
    
    $
    (2,585
    )STATEMENT OF CASH FLOWSNet cash provided by operating activities
    
    $
    75
    
    
    $
    3,721
    
    
    $
    
    
    
    $
    
    
    
    $
    3,796Net cash used in investing activities
    
    
    (75
    )
    
    
    (3,489
    )
    
    
    
    
    
    
    
    
    
    
    (3,564
    )Net cash used in financing activities
    
    
    
    
    
    
    (7,447
    )
    
    
    
    
    
    
    
    
    
    
    (7,447
    )
  19




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##### Table of Contents



Black Gaming, LLC and Subsidiaries
 Notes to Condensed Consolidated Financial Statements (unaudited) (continued)
 11. Supplemental Guarantor Condensed Consolidating Financial Statements (continued)
 Non-Guarantor
    
    
    GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedFor the six months ended June 30, 2007STATEMENT OF OPERATIONS (unaudited)Net Revenues
    
    $
    
    
    
    $
    91,472
    
    
    $
    
    
    
    $
    (3,150
    )
    
    $
    88,322Operating Expenses:Casino
    
    
    
    
    
    
    26,983
    
    
    
    
    
    
    
    
    
    
    
    26,983Food and beverage
    
    
    
    
    
    
    11,821
    
    
    
    
    
    
    
    
    
    
    
    11,821Hotel
    
    
    
    
    
    
    3,199
    
    
    
    
    
    
    
    
    
    
    
    3,199Other
    
    
    
    
    
    
    6,791
    
    
    
    
    
    
    
    
    
    
    
    6,791General and administrative
    
    
    1,295
    
    
    
    26,894
    
    
    
    
    
    
    
    (3,150
    )
    
    
    25,039Depreciation and amortization
    
    
    8
    
    
    
    8,351
    
    
    
    
    
    
    
    
    
    
    
    8,359Loss on disposal of assets
    
    
    
    
    
    
    98
    
    
    
    
    
    
    
    
    
    
    
    98Operating (loss) income
    
    
    (1,303
    )
    
    
    7,335
    
    
    
    
    
    
    
    
    
    
    
    6,032Other Expense:Interest expense, net
    
    
    
    
    
    
    10,216
    
    
    
    
    
    
    
    
    
    
    
    10,216Net loss
    
    $
    (1,303
    )
    
    $
    (2,881
    )
    
    $
    
    
    
    $
    
    
    
    $
    (4,184
    )STATEMENT OF CASH FLOWSNet cash provided by operating activities
    
    $
    170
    
    
    $
    7,553
    
    
    $
    
    
    
    $
    
    
    
    $
    7,723Net cash used in investing activities
    
    
    (170
    )
    
    
    (7,204
    )
    
    
    
    
    
    
    
    
    
    
    (7,374
    )Net cash provided by financing activities
    
    
    
    
    
    
    139
    
    
    
    
    
    
    
    
    
    
    
    139
  20




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 You should read the following discussion and analysis together with our unaudited condensed
consolidated financial statements and the accompanying notes. This discussion contains
forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as
amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities
Litigation Reform Act of 1995, including statements regarding our expected financial position,
business and financing plans. Some of the forward-looking statements can be identified by the use
of forward-looking terms such as believes, expects, may, will, should, could, seek,
intends, plans, estimates, anticipates, or other comparable terms. Forward-looking
statements involve inherent risks and uncertainties which could cause actual results to differ
materially from those in the forward-looking statement, including those discussed herein and
elsewhere in our Form 10-K for the year ended December 31, 2007, particularly under the heading
Risk Factors. We caution readers not to place undue reliance upon any such forward-looking
statements, which speak only as of the date made. Unless the context indicates otherwise, all
references to the Company, Black Gaming, we, us and our refer to Black Gaming, LLC and
its direct and indirect wholly owned subsidiaries, Virgin River Casino Corporation, RBG, LLC, B & B
B, Inc., Casablanca Resorts, LLC, Oasis Interval Ownership, LLC, Oasis Interval Management, LLC,
Oasis Recreational Properties, Inc. and R. Black, Inc.
 Overview
      21




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##### Table of Contents




    
    VRCC received 100 shares of R. Black, Inc. (RBI) from the Black Trust. The Black Trust
owns 100% of the outstanding shares of VRCC. The 100 shares of RBI, representing 100% of the
outstanding capital stock of RBI, were exchanged for 3.68 shares of VRCC held by the Black
Trust, representing 3.68% of the outstanding capital stock of VRCC. RBI does not have any
material operations, liabilities or assets other than a 5.47% ownership in RBG. The transfer
of shares of RBI to VRCC was accounted for at the historical cost of RBG as RBI and VRCC were
under common control.
    
    VRCC received a 3.8% membership interest in RBG from the Black Trust in exchange for 2.57
shares of VRCC held by the Black Trust, representing 2.57% of the outstanding capital stock of
VRCC. The transfer of membership interests of RBG to VRCC was accounted for at historical cost
as the Black Trust and VRCC were under common control.
    
    VRCC received a 1.92% membership interest in RBG from Glenn Teixeira in exchange for 1.29
shares of VRCC held by the Black Trust, representing 1.29% of the outstanding capital stock of
VRCC. The acquisition of the membership interests in RBG from Glenn Teixeira was accounted for
at fair value as it was considered an acquisition of a minority interest of a subsidiary.
Based upon an internal analysis the fair value of Glenn Teixeiras interest approximated book
value.
       22




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##### Table of Contents



Key Performance Indicators
   Financial Highlights of Black Gaming, LLC and Subsidiaries
 For the three and six months ended June 30, 2008 and 2007 (unaudited) (in thousands)
 Three months ended June 30,
    
    
    %
    
    
    Six months ended June 30,
    
    
    %2008
    
    
    2007
    
    
    Change
    
    
    2008
    
    
    2007
    
    
    ChangeCasino revenues
    
    $
    21,249
    
    
    $
    27,181
    
    
    
    (21.8
    %)
    
    $
    45,582
    
    
    $
    56,733
    
    
    
    (19.7
    %)Casino expenses
    
    
    10,314
    
    
    
    13,144
    
    
    
    (21.5
    %)
    
    
    22,025
    
    
    
    26,983
    
    
    
    (18.4
    %)Profit margin
    
    
    51.5
    %
    
    
    51.6
    %
    
    
    
    
    
    
    51.7
    %
    
    
    52.4
    %
    
    
    Food and beverage
revenues
    
    $
    8,621
    
    
    $
    10,737
    
    
    
    (19.7
    %)
    
    $
    18,007
    
    
    $
    21,751
    
    
    
    (17.2
    %)Food and beverage
expenses
    
    
    6,184
    
    
    
    5,857
    
    
    
    5.6
    %
    
    
    11,674
    
    
    
    11,821
    
    
    
    (1.2
    %)Profit margin
    
    
    28.3
    %
    
    
    45.5
    %
    
    
    
    
    
    
    35.2
    %
    
    
    45.7
    %
    
    
    Hotel revenues
    
    $
    7,939
    
    
    $
    9,453
    
    
    
    (16.0
    %)
    
    $
    16,044
    
    
    $
    19,802
    
    
    
    (19.0
    %)Hotel expenses
    
    
    2,178
    
    
    
    1,687
    
    
    
    29.1
    %
    
    
    3,855
    
    
    
    3,199
    
    
    
    20.5
    %Profit margin
    
    
    72.6
    %
    
    
    82.2
    %
    
    
    
    
    
    
    76.0
    %
    
    
    83.8
    %
    
    
    Other revenues
    
    $
    4,682
    
    
    $
    5,466
    
    
    
    (14.3
    %)
    
    $
    10,259
    
    
    $
    11,240
    
    
    
    (8.7
    %)Other expenses
    
    
    2,559
    
    
    
    3,355
    
    
    
    (23.7
    %)
    
    
    5,010
    
    
    
    6,791
    
    
    
    (26.2
    %)Promotional allowances
    
    $
    6,509
    
    
    $
    9,887
    
    
    
    (34.2
    %)
    
    $
    15,356
    
    
    $
    21,204
    
    
    
    (27.6
    %)Percent of gross
revenues
    
    
    15.3
    %
    
    
    18.7
    %
    
    
    
    
    
    
    17.1
    %
    
    
    19.4
    %
    
    
    General and
administrative
expenses
    
    $
    10,278
    
    
    $
    12,103
    
    
    
    (15.1
    %)
    
    $
    20,725
    
    
    $
    25,039
    
    
    
    (17.2
    %)Percent of net revenues
    
    
    28.6
    %
    
    
    28.2
    %
    
    
    
    
    
    
    27.8
    %
    
    
    28.3
    %
    
    
    
 Three and six months ended June 30, 2008 compared to the three and six months ended June 30, 2007
 Consolidated Net Revenues.
  23




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##### Table of Contents



Consolidated Operating Income.
  Casino.
  Food and Beverage.
  24




---



##### Table of Contents



Hotel.
  Other Revenues.
  Promotional Allowances.
  General and Administrative (G&A).
   25




---



##### Table of Contents



Depreciation and Amortization.
  Interest Expense.
  Liquidity and Capital Resources
 Cash Flows and Credit Facility
  Operating Activities
  Investing Activities
   26




---



##### Table of Contents



Financing Activities
  Contractual Obligations and Commitments for Black Gaming, LLC
   Other Liquidity Matters
    27




---



##### Table of Contents



3 4
  Critical Accounting Policies for Black Gaming, LLC
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk.
  Maturity
    
    
    Face
    
    
    Carrying
    
    
    EstimatedDate
    
    
    Amount
    
    
    Value
    
    
    Fair ValueSenior secured credit facility
at an average interest rate of
7.06%
    
    June 2011
    
    $
    15,000
    
    
    $
    6,000
    
    
    $
    6,0009% senior secured notes
    
    January 2012
    
    
    125,000
    
    
    
    125,000
    
    
    
    87,50012 3/4 % senior subordinated notes
    
    January 2013
    
    
    66,000
    
    
    
    61,747
    
    
    
    29,535Total
    
    
    
    
    
    $
    206,000
    
    
    $
    192,747
    
    
    $
    123,035
   Current Portion as of June 30,2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    Thereafter
    
    
    TotalLong-term debt
(including current
portion):Fixed-rate
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    125,000
    
    
    $
    66,000
    
    
    $
    
    
    
    $
    191,000Average interest rate
    
    
    10.24
    %
    
    
    10.30
    %
    
    
    10.30
    %
    
    
    10.30
    %
    
    
    12.48
    %
    
    
    12.75
    %
    
    
    10.48
    %Variable-rate
    
    $
    
    
    
    $
    
    
    
    $
    6,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    6,000Average interest rate
    
    
    7.06
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7.06
    %
   28




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##### Table of Contents



Item 4. Controls and Procedures.
 Evaluation of Disclosure Controls
   Limitations on the Effectiveness of Controls
  Conclusions
  Changes in Internal Controls
 i.e.
  29




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  
 Item 1A. Risk Factors.
  Risks Related to Our Business
 Recent Economic Developments  The economic slow down and probable recession have had an adverse
impact on our business.
  Risks Related to the Notes and the Foothill Facility
 Foothill Facility  Should the current economic conditions and operational declines continue, we
may need to request amendments and/or waivers to certain financial covenants in our Foothill
Facility.
   3 4
   30




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##### Table of Contents



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Item 3. Defaults Upon Senior Securities.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
  
 Item 5. Other Information.
  
 Item 6. Exhibits.
 10.1
    
    
    Second Amendment to Credit Agreement dated June 20, 2008 by and among Virgin
River Casino Corporation, RBG, LLC, B&BB, Inc., certain subsidiaries, Wells Fargo
Foothill, Inc. as arranger and administrative agent and the other lending parties
thereto, and Exhibit A thereto, Reaffirmation and Consent executed by Black Gaming, LLC
and R. Black, Inc., incorporated by reference to registrants Current Report on Form
8-K, as filed with the Securities and Exchange Commission on June 24, 2008.31.1
    
    
    Certification pursuant to §302 of the Sarbanes-Oxley Act of 2002, Robert R. Black, Sr.31.2
    
    
    Certification pursuant to §302 of the Sarbanes-Oxley Act of 2002, Sean P. McKay32.1
    
    
    Certification pursuant to §906 of the Sarbanes-Oxley Act of 2002, Robert R. Black, Sr.32.2
    
    
    Certification pursuant to §906 of the Sarbanes-Oxley Act of 2002, Sean P. McKay
  31




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##### Table of Contents



SIGNATURES
  BLACK GAMING, LLCBy:
    /s/ Sean P. McKay
    August 14, 2008Sean P. McKayChief Accounting Officer
(Principal Financial Officer)  32




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##### Table of Contents



ExhibitNumber
    
    Description10.1
    
    
    Second Amendment to Credit Agreement dated June 20, 2008 by and among Virgin River Casino
Corporation, RBG, LLC, B&BB, Inc., certain subsidiaries, Wells Fargo Foothill, Inc. as
arranger and administrative agent and the other lending parties thereto, and Exhibit A
thereto, Reaffirmation and Consent executed by Black Gaming, LLC and R. Black, Inc.,
incorporated by reference to registrants Current Report on Form 8-K, as filed with the
Securities and Exchange Commission on June 24, 2008.31.1
    
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 200232.2
    
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
  33