**UNITEDSTATES SECURITIES AND EXCHANGE COMMISSION****WASHINGTON,D.C. 20549**

**FORM 10-Q**

| **(Mark One)** |   | ** **                                                                                   |
|----------------|--------|----------------------------------------------------------------------------------------------|
| **x**          |   | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE SECURITIES EXCHANGE ACT OF 1934** |

 

**Forthe quarterly period ended September 30, 2006**

**OR**

| **o** |   | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|-------|--------|-----------------------------------------------------------------------------------------------|

 

**Forthe transition period from                      to         **

**CommissionFile Number 333-123179**

**Virgin River Casino CorporationRBG, LLC.B & B B, Inc.******(Exact Name ofRegistrant as Specified in its Charter)

| **NEVADA**                                |   | **88-0238611**          |
|-------------------------------------------|--------|-------------------------|
| **NEVADA**                                |   | **86-0860535**          |
| **NEVADA**                                |   | **88-0254007**          |
| (State or Other  Jurisdiction             |   | (I.R.S. Employer        |
| of Incorporation  or Organization)        |   | Identification  Number) |
| **897 West Mesquite Boulevard**           |   | ** **              |
| **Mesquite,  Nevada**                     |   | **89027**               |
| (Address of  Principal Executive Offices) |   | (Zip Code)              |

 

**(702) 346-4000**(Registrant’s Telephone Number,Including Area Code)

Indicate by check markwhether the Registrant (1) has filed all reports required by Section 13 or15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (orfor such shorter period that the Registrant was required to file such reports)and (2) has been subject to such filing requirements for the past 90days.    Yes  x No o

Indicate by checkmark whether the Registrant is a large accelerated , an accelerated filer, or anon-accelerated filer. See definition of “accelerated filer and largeaccelerated filer” in Rule 12b-2 of the Exchange Act. (Check One)

| Large Accelerated Filer o |   | Accelerated  Filer o |   | Non-accelerated  filer x |
|---------------------------|--------|----------------------|--------|--------------------------|

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).  Yes o No x

Number of shares ofcommon stock outstanding of Virgin River Casino Corporation as of November 1,2006:100 shares of common stock.

Number of shares ofcommon stock outstanding of B & B B as of November 1, 2006: 16.75 shares ofcommon stock.

 

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| **PART I — FINANCIAL  INFORMATION**                                                                                                    |
|---------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                        |
| ITEM  1. FINANCIAL STATEMENTS.                                                                                                              |
| **Virgin  River Casino Corporation Condensed Consolidated Financial Statements**                                                            |
| *Condensed Consolidated Balance Sheets-September 30,  2006 (unaudited) and December 31, 2005*                                          |
| *Condensed Consolidated Statements of Operations  (unaudited) For the Three Months and Nine Months Ended September 30,  2006 and 2005* |
| *Condensed Consolidated Statements of Cash Flows  (unaudited) For the Nine Months Ended September 30, 2006 and 2005*                   |
| *Notes to Condensed Consolidated Financial Statements  (unaudited)*                                                                         |
| **RBG,  LLC Condensed Consolidated Financial Statements**                                                                                   |
| *Condensed Consolidated Balance Sheets-September 30,  2006 (unaudited) and December 31, 2005*                                     |
| *Condensed Consolidated Statements of Operations (unaudited)  For the Three Months and Nine Months Ended September 30, 2006 and 2005*  |
| *Condensed Consolidated Statements of Cash Flows  (unaudited) For the Nine Months Ended September 30, 2006 and 2005*                   |
| *Notes to Condensed Consolidated Financial Statements  (unaudited)*                                                                         |
| **B &  B B, Inc. (doing business as Virgin River Casino Hotel/Casino/Bingo)  Condensed Financial Statements**                           |
| *Condensed Balance Sheets-September 30, 2006  (unaudited) and December 31, 2005*                                                       |
| *Condensed Statements of Operations (unaudited) For the  Three Months and Nine Months Ended September 30, 2006 and 2005*               |
| *Condensed Statements of Cash Flows (unaudited) For the  Nine Months Ended September 30, 2006 and 2005*                                |
| *Notes to Condensed Financial Statements (unaudited)*                                                                                       |
| ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF  FINANCIAL CONDITION AND RESULTS OF OPERATIONS                                         |
| ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT  MARKET RISK                                                                         |
| ITEM 4. CONTROLS AND PROCEDURES                                                                                                             |
|                                                                                                                                        |
| **PART  II — OTHER INFORMATION**                                                                                                       |
|                                                                                                                                        |
| ITEM  1. LEGAL PROCEEDINGS                                                                                                                  |
| NONE                                                                                                                                        |
| 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                                                                                                                           |
|                                                                                                                                        |
| **SIGNATURES**                                                                                                                              |

 

2

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**PART I —FINANCIAL INFORMATION**

## **Item1.  Financial Statements.**

**VirginRiver Casino Corporation**

### **Condensed Consolidated Balance Sheets(in thousands)**

| ** **                                                                                                  | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|-------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                                                                                  | ** ** | **2006**               | ** ** | **2005**              | ** ** |
| ** **                                                                                                  | ** ** | **(unaudited)**        | ** ** | ** **            | ** ** |
| **Assets**                                                                                                  |       |                   |       |                  |       |
| Current assets:                                                                                             |       |                   |       |                  |       |
| Cash and cash  equivalents                                                                                  |       | $                      | 6,668      |                  | $          | 9,421 |   |
| Accounts  receivable, net                                                                                   |       | 1,904                  |       | 1,241                 |       |
| Related party  receivables                                                                                  |       | 281                    |       | 95                    |       |
| Related company  receivables                                                                                |       | 5,188                  |       | 395                   |       |
| Inventories                                                                                                 |       | 1,593                  |       | 1,652                 |       |
| Property held  for vacation interval sales                                                                  |       | 352                    |       | 392                   |       |
| Prepaid expenses                                                                                            |       | 3,408                  |       | 3,194                 |       |
| Current portion  of notes receivable                                                                        |       | 191                    |       | 303                   |       |
| Total current assets                                                                                        |       | 19,585                 |       | 16,693                |       |
| Property and equipment,  net                                                                                |       | 119,799                |       | 123,092               |       |
| Notes receivable, less  current portion                                                                     |       | 1,151                  |       | 1,821                 |       |
| Other assets                                                                                                |       | 1,486                  |       | 217                   |       |
| Deferred financing fees                                                                                     |       | 7,272                  |       | 8,337                 |       |
| Goodwill and other  intangible assets, net                                                                  |       | 29,573                 |       | 31,193                |       |
| Total assets                                                                                                |       | $                      | 178,866    |                  | $          | 181,353 |   |
| **Liabilities  and Stockholder’s Deficit**                                                             |       |                   |       |                  |       |
| Current liabilities:                                                                                        |       |                   |       |                  |       |
| Bank overdraft                                                                                              |       | $                      | —     |                  | $          | 548 |   |
| Current portion  of gaming equipment financing                                                              |       | 2,989                  |       | 2,528                 |       |
| Current portion  of long-term debt                                                                          |       | 40                     |       | 614                   |       |
| Accounts payable                                                                                            |       | 2,301                  |       | 2,784                 |       |
| Accrued  liabilities                                                                                        |       | 13,120                 |       | 15,041                |       |
| Related company  payable                                                                                    |       | 5,664                  |       | 99                    |       |
| Total current  liabilities                                                                                  |       | 24,114                 |       | 21,614                |       |
| Gaming equipment  financing, less current portion                                                           |       | 1,214                  |       | 3,306                 |       |
| Long-term debt,  less current portion                                                                       |       | 174,737                |       | 172,333               |       |
| Fair value of interest  rate swaps                                                                          |       | —                 |       | 195                   |       |
| Minority interest                                                                                           |       | 16,661                 |       | 16,414                |       |
| Commitments and  contingencies                                                                              |       |                   |       |                  |       |
| Stockholder’s deficit:                                                                                 |       |                   |       |                  |       |
| Common stock, no  par value; authorized 2,500 shares, 100 shares issued and 88 shares outstanding |       |                   |       | —                |       |
| Additional paid-in  capital                                                                                 |       | 3,168                  |       | 3,168                 |       |
| Deemed  distribution                                                                                        |       | (21,003                | )          | (21,472               | )          |
| Accumulated  deficit                                                                                        |       | (20,025                | )          | (14,205               | )          |
| Total stockholder’s  deficit                                                                           |       | (37,860                | )          | (32,509               | )          |
| Total liabilities and stockholder’s deficit                                                            |       | $                      | 178,866    |                  | $          | 181,353 |   |

 

The accompanying notes are an integral part of thesecondensed consolidated financial statements.

3

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**VirginRiver Casino Corporation**

**CondensedConsolidated Statements of Operations (unaudited)**(in thousands)
| ** **                                                                                | ** ** | **Three months ended** | ** ** | **Nine months ended** | ** ** |
|-------------------------------------------------------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                                                                                | ** ** | **September 30,**           | ** ** | **September 30,**          | ** ** | **September 30,** | ** ** | **September 30,** | ** ** |
| ** **                                                                                | ** ** | **2006**                         | ** ** | **2005**                        | ** ** | **2006** | ** ** | **2005** | ** ** |
|                                                                                      |       |                             |       |                            |       |   |   |   |   |
| Revenues                                                                                  |       |                             |       |                            |       |   |   |   |   |
| Casino                                                                                    |       | $                                | 16,410     |                            | $          | 14,283 |   | $ | 51,256 |   | $ | 45,861 |   |
| Food and  beverage                                                                        |       | 7,543                            |       | 7,104                           |       | 23,629 |   | 22,994 |   |
| Hotel                                                                                     |       | 5,521                            |       | 4,761                           |       | 18,998 |   | 15,643 |   |
| Related company  rental income                                                            |       | 1,575                            |       | 1,575                           |       | 4,725 |   | 4,725 |   |
| Other                                                                                     |       | 3,277                            |       | 3,092                           |       | 13,777 |   | 13,924 |   |
| Total revenues                                                                            |       | 34,326                           |       | 30,815                          |       | 112,385 |   | 103,147 |   |
| Less—promotional  allowances                                                         |       | (6,386                           | )          | (4,460                          | )          | (19,520 | ) | (13,986 | ) |
| Net revenues                                                                              |       | 27,940                           |       | 26,355                          |       | 92,865 |   | 89,161 |   |
| Operating expenses:                                                                       |       |                             |       |                            |       |   |   |   |   |
| Casino                                                                                    |       | 8,529                            |       | 7,711                           |       | 25,078 |   | 22,729 |   |
| Food and  beverage                                                                        |       | 4,243                            |       | 4,542                           |       | 13,529 |   | 14,413 |   |
| Hotel                                                                                     |       | 1,000                            |       | 1,723                           |       | 3,892 |   | 5,352 |   |
| Other                                                                                     |       | 2,657                            |       | 2,513                           |       | 8,565 |   | 9,110 |   |
| General and  administrative                                                               |       | 9,630                            |       | 8,262                           |       | 26,390 |   | 23,361 |   |
| Depreciation and  amortization                                                            |       | 2,936                            |       | 2,465                           |       | 9,419 |   | 7,270 |   |
| Loss on sale and  disposal of assets                                                      |       | —                           |       | 79                              |       | 248 |   | 729 |   |
| Total operating  expenses                                                                 |       | 28,995                           |       | 27,295                          |       | 87,121 |   | 82,964 |   |
| Operating (loss) income                                                                   |       | (1,055                           | )          | (940                            | )          | 5,744 |   | 6,197 |   |
| Other income (expense):                                                                   |       |                             |       |                            |       |   |   |   |   |
| Interest expense                                                                          |       | (4,362                           | )          | (4,571                          | )          | (13,177 | ) | (13,287 | ) |
| Change in fair  value of interest rate swaps                                              |       | —                           |       | 366                             |       | 195 |   | 1,102 |   |
| Return on investment with MDW, LLC                                                        |       | 264                              |       | (113                            | )          | 484 |   | (288 | ) |
| Loss before cumulative  effective of change in accounting principle and minority interest |       | (5,153                           | )          | (5,258                          | )          | (6,754 | ) | (6,276 | ) |
| Cumulative effect of  change in accounting principle                                      |       | —                           |       | —                          |       | (196 | ) | — |   |
| Loss before minority  interest                                                            |       | (5,153                           | )          | (5,258                          | )          | (6,950 | ) | (6,276 | ) |
| Minority interest in  loss (income) from RBG, LLC and Casablanca Resorts, LLC             |       | 222                              |       | 248                             |       | (247 | ) | (254 | ) |
| Net loss                                                                                  |       | $                                | (4,931     | )                               | $          | (5,010 | ) | $ | (7,197 | ) | $ | (6,530 | ) |

 

The accompanying notes are an integral part of thesecondensed consolidated financial statements.

4

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**VirginRiver Casino Corporation**

**CondensedConsolidated Statements of Cash Flows (unaudited)**(in thousands) 
| ** **                                                                       | ** ** | **Nine months ended** | ** ** |
|----------------------------------------------------------------------------------|------------|---------------------------------|------------|
| ** **                                                                       | ** ** | **September 30,**          | ** ** | **September 30,** | ** ** |
| ** **                                                                       | ** ** | **2006**                        | ** ** | **2005** | ** ** |
| Cash flows from  operating activities:                                           |       |                            |       |   |   |
| Net loss                                                                         |       | $                               | (7,197     | ) | $ | (6,530 | ) |
| Adjustments to  reconcile net loss to net cash provided by operating activities: |       |                            |       |   |   |
| Depreciation and  amortization                                                   |       | 9,419                           |       | 7,270 |   |
| Minority  interest in income from RBG, LLC and Casablanca Resorts, LLC           |       | 247                             |       | 254 |   |
| Change in fair  value of interest rate swaps                                     |       | (195                            | )          | (1,102 | ) |
| Loss on sale and  disposal of assets                                             |       | 248                             |       | 729 |   |
| Cumulative  effect of change in accounting principle                             |       | 196                             |       | — |   |
| Amortization of  deferred financing fees                                         |       | 1,063                           |       | 1,030 |   |
| Accretion of  senior subordinated notes                                          |       | 4,403                           |       | 3,721 |   |
| Interest expense  on gaming equipment financing                                  |       | 52                              |       | 232 |   |
| Cost of vacation  intervals sales                                                |       | 41                              |       | 81 |   |
| Change in  operating assets and liabilities:                                     |       |                            |       |   |   |
| Accounts,  related company and related party receivables, net                    |       | (4,265                          | )          | 1,395 |   |
| Inventories                                                                      |       | 59                              |       | (1 | ) |
| Prepaid expenses                                                                 |       | (214                            | )          | (575 | ) |
| Notes receivable                                                                 |       | 586                             |       | 304 |   |
| Accounts  payable, accrued liabilities and related company payables              |       | 3,689                           |       | 3,019 |   |
| Net cash provided by  operating activities                                       |       | 8,132                           |       | 9,827 |   |
| Cash flows from  investing activities:                                           |       |                            |       |   |   |
| Proceeds  received from sale of assets                                           |       | 43                              |       | 145 |   |
| Purchase price  adjustment                                                       |       | —                          |       | (1,218 | ) |
| Capital  expenditures                                                            |       | (4,635                          | )          | (9,197 | ) |
| Net cash used in  investing activities                                           |       | (4,592                          | )          | (10,270 | ) |
| Cash flows from  financing activities:                                           |       |                            |       |   |   |
| Proceeds from  issuance of long-term debt                                        |       | 5,000                           |       | 1,666 |   |
| Decrease in bank  overdraft                                                      |       | (548                            | )          | (1,480 | ) |
| Payment of long-term  debt                                                       |       | (7,573                          | )          | (1,306 | ) |
| Payment on  gaming equipment financing                                           |       | (1,879                          | )          | (619 | ) |
| Payment of  obligations under capital lease                                      |       | —                          |       | (13 | ) |
| Payment of  financing fees                                                       |       | —                          |       | (307 | ) |
| Tax distributions  paid                                                          |       | —                          |       | (1,783 | ) |
| Change in other  assets                                                          |       | (1,293                          | )          | 29 |   |
| Net cash used in  financing activities                                           |       | (6,293                          | )          | (3,813 | ) |
| Net decrease in cash  and cash equivalents                                       |       | (2,753                          | )          | (4,256 | ) |
| Cash and cash  equivalents at beginning of year                                  |       | 9,421                           |       | 11,114 |   |
| Cash and cash equivalents at end of period                                       |       | $                               | 6,668      |   | $ | 6,858 |   |

 

The accompanying notes are an integral part of thesecondensed consolidated financial statements.

5

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**VirginRiver Casino Corporation**

**CondensedConsolidated Statements of Cash Flows (unaudited) (continued)**(in thousands)
| ** **                                             | ** ** | **Nine months ended** | ** ** |
|--------------------------------------------------------|------------|---------------------------------|------------|
| ** **                                             | ** ** | **September 30,**          | ** ** | **September 30,** | ** ** |
| ** **                                             | ** ** | **2006**                        | ** ** | **2005** | ** ** |
| Supplemental  cash flow disclosure:                    |       |                            |       |   |   |
| Cash paid for interest                                 |       | $                               | 5,488      |   | $ | 5,889 |   |
| Acquisition of assets with gaming equipment  financing |       | $                               | 215        |   | $ | 5,202 |   |
| Equity contribution                                    |       | $                               | 1,377      |   | $ | — |   |

 

The accompanying notes are an integral part of thesecondensed consolidated financial statements.

6

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**VirginRiver Casino Corporation**

**Notes to CondensedConsolidated Financial Statements (unaudited)September 30, 2006**

**1.             Basis of Presentation andBackground**

The accompanying are the condensed consolidatedfinancial statements of Virgin River Casino Corporation, which includes theaccounts of RBG, LLC (doing business as CasaBlanca Resort/Casino/Golf/Spa) andits wholly owned subsidiary Casablanca Resorts, LLC (doing business as OasisResort & Casino) (collectively the “Company”). Virgin River CasinoCorporation (“VRCC”) owns 88.8% of RBG, LLC (“RBG”) and Casablanca Resorts, LLC(“Resorts LLC”). Robert R. Black, Sr. (“Mr. Black”) is the sole shareholder ofVRCC and owns 9.28% of RBG individually and through another entity.  Mr. Black also is the sole shareholder of B& B B, Inc. (doing business as Virgin River Hotel/Casino/Bingo) (“B&BB”).The Company and B&BB are collectively referred to as the “Companies.” TheCompanies are operated under common management. Significant intercompany items and transactions of the Company have beeneliminated.

***Interim Financial Statements***— The accompanying unaudited condensedconsolidated financial statements as of September 30, 2006 and for the threeand nine-month periods ended September 30, 2006 and 2005 are unaudited.  In the opinion of management, all adjustments(which include normal recurring adjustments) necessary for a fair presentationof the Company’s financial position and results of operations for such periods,have been included.  The accompanyingunaudited condensed consolidated financial statements should be read inconjunction with the Company’s audited consolidated financial statements filedon Form 10-K for the year ended December 31, 2005.  The results for the three and nine-monthperiods ended September 30, 2006 are not necessarily indicative of the resultsthat may be expected for the year ending December 31, 2006, or for any otherperiod.

***Reclassifications***— Certain previously reported amounts inthe condensed consolidated financial statements have been reclassified toconform to the current period’s presentation.

**2.             Property and Equipment**

Property andequipment consists of the following (in thousands):

|                                                      | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                           | ** ** | **2006**               | ** ** | **2005**              | ** ** |
| ** **                                           | ** ** | **(unaudited)**        | ** ** | ** **            | ** ** |
| Land                                                 |       | $                      | 35,838     |                  | $          | 35,838 |   |
| Buildings                                            |       | 72,776                 |       | 71,774                |       |
| Land and  leasehold improvements                     |       | 18,507                 |       | 18,400                |       |
| Furniture,  fixtures and equipment                   |       | 40,529                 |       | 38,623                |       |
| Construction in  progress                            |       | 1,501                  |       | 1,043                 |       |
|                                                 |       | 169,151                |       | 165,678               |       |
| Less—accumulated  depreciation and amortization |       | (49,352                | )          | (42,586               | )          |
| Property and equipment,  net                         |       | $                      | 119,799    |                  | $          | 123,092 |   |

 

As a result of the third party business valuation thatwas conducted in the fourth quarter of 2005, the Company has re-evaluated theuseful lives of their slot machines (included in furniture, fixture andequipment above) and effective January 1, 2006, changed that estimate fromseven years to five years.  For the threeand nine months ended September 30, 2006, operating income of the Companydecreased approximately $204,000 and $544,000, respectively, as a result of thechange in the estimated lives.

7

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**VirginRiver Casino Corporation**

**Notesto Condensed Consolidated Financial Statements (unaudited) (continued)**

**3.             Notes Receivable**

Notes receivableconsist of the following (in thousands):

|                                       | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|---------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                            | ** ** | **2006**               | ** ** | **2005**              | ** ** |
| ** **                            | ** ** | **(unaudited)**        | ** ** | ** **            | ** ** |
| Vacation  interval notes receivable   |       | $                      | 1,770      |                  | $          | 2,519 |   |
| Allowance for  possible credit losses |       | (428                   | )          | (395                  | )          |
| Total notes  receivable               |       | 1,342                  |       | 2,124                 |       |
| Less: current  portion                |       | (191                   | )          | (303                  | )          |
| Non-current notes  receivable         |       | $                      | 1,151      |                  | $          | 1,821 |   |

 

Notes generated from thesale of vacation intervals generally bear interest at annual rates ranging from12.75% to 14.75% and have terms of 5 to 7 years. The vacation intervalnotes receivable are collateralized by the right to use and deeds of trust onthe vacation interval sold.

In January of 2006, the Company adopted the provisionsof SFAS 152, “*Accounting for Real EstateTime-Sharing Transactions*.” SFAS 152 amends existing accountingguidance to reference the financial accounting and reporting guidance for realestate time-sharing transactions provided in AICPA Statement of Position 04-02,“*Accounting for Real Estate Time-SharingTransactions*.” In determining the allowance for possible creditlosses, the Company, in accordance with SFAS 152, uses a technique referred toas static pool analysis, which tracks uncollectible notes receivable based oneach year’s sales over the entire life of those notes.  The Company considers whether the historicaleconomic conditions are comparable to current economic conditions.  If current economic conditions differ fromthe economic conditions in effect when the historical experience was generated,the Company adjusts the allowance for possible credit losses to reflect theexpected effects of current economic conditions on uncollectibility.  The Company groups all notes receivables inone pool for analytical purposes based on historical collectibility andcustomer demographics.  As a result ofthe change in accounting for the allowance for possible credit losses, theCompany has recorded in the accompanying statement of operations for thenine-months ended September 30, 2006, a cumulative effect of a change inaccounting principle of $196,000 to increase the allowance for possible creditlosses.

**4.             Long-term Debt**

Long-term debtconsists of the following (in thousands): 

|                                                                                                                                                                                                                                                                                                               | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                                                                                                                                                                                                                                                                                    | ** ** | **2006**               | ** ** | **2005**              | ** ** |
| ** **                                                                                                                                                                                                                                                                                                    | ** ** | **(unaudited)**        | ** ** | ** **            | ** ** |
| Revolving credit  facility totaling $15 million with Wells Fargo Foothill, at a margin above  prime or LIBOR, as defined; collateralized by substantially all real and  personal property, leases, intangibles and other interests of the Companies  as defined.                                              |       | $                      | —     |                  | $          | 2,000 |   |
| 9% senior  secured notes, interest payable semiannually, principal due January 15,  2012, callable January 15, 2009                                                                                                                                                                                 |       | 125,000                |       | 125,000               |       |
| 123⁄4% senior  subordinated notes, non-cash interest will accrue at an annual rate of 123⁄4%  in the form of increase accreted value until January 15, 2009. Beginning  January 15, 2009, interest payable semiannually, principal due January 15,  2013, callable January 15, 2009 |       | 49,737                 |       | 45,333                |       |
|                                                                                                                                                                                                                                                                                                               |            |                        |            |                       |            |  |  |

** **

8

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**VirginRiver Casino Corporation**

**Notesto Condensed Consolidated Financial Statements (unaudited) (continued)**

**4.             Long-term Debt (cont’d)**

|                                                                                                                                                                                         | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                                                                                                                                                              | ** ** | **2006**               | ** ** | **2005**              | ** ** |
| ** **                                                                                                                                                                              | ** ** | **(unaudited)**        | ** ** | ** **            | ** ** |
| Promissory note  payable to Wells Fargo Equipment Finance, Inc. payable in monthly  installments of $37 at an interest rate of 6.97%, due June 2006                                     |       | —                 |       | 363                   |       |
| Hypothecation  Note at prime plus 3.0% (10.25% at December 31, 2005), collateralized by  certain notes receivable as defined; guaranteed by one of the initial  members, due April 2004 |       | —                 |       | 94                    |       |
| Promissory note  payable to Wells Fargo Equipment Finance, Inc. payable in monthly  installments of $14 at an interest rate of 6.21%, due December 2006                                 |       | 40                     |       | 157                   |       |
|                                                                                                                                                                                    |       | 174,777                |       | 172,947               |       |
| Less—current  portion                                                                                                                                                              |       | (40                    | )          | (614                  | )          |
| Total long-term  debt                                                                                                                                                                   |       | $                      | 174,737    |                  | $          | 172,333 |   |
|                                                                                                                                                                                         |            |                        |            |                       |            |  |  |

***Foothill Facility***

The Wells Fargo Foothill, Inc. credit facility (“FoothillFacility”) is secured by substantially all the assets of the Companies. Duringthe life of the Foothill Facility, the Companies may borrow up to the lesser of(1) $15.0 million less the Letter of Credit Usage, as defined, lessthe Bank Product Reserve, as defined, or (2) the Borrowing Base, asdefined, less the Letter of Credit Usage. At September 30, 2006, no amounts were drawn under the FoothillFacility.  Accordingly, the availabilityunder the Foothill Facility at September 30, 2006 was $15.0 million.

Under the terms of the Foothill Facility, interestaccrues on the outstanding principal balance at LIBOR plus the LIBOR RateMargin, which is 3.5%, or the Base Rate, as defined, plus the Base Rate Margin,which is 2%.  LIBOR was approximately5.32% at September 30, 2006.  TheFoothill Facility also contains certain financial and other covenants.  These include a minimum trailing twelve-monthEarnings before Interest, Taxes, Depreciation and Amortization (“EBITDA”) of$15,000,000 for the Companies and limitations on other indebtedness and capitalexpenditures, as defined.  The Companieswere in compliance with these covenants at September 30, 2006 and December 31,2005.  The outstanding balance on theFoothill Facility is a joint and several obligation of the Companies.

***Senior Secured and SeniorSubordinated Notes***

In December 2004, as part of an ownership buyout (the “Buyout”),VRCC, RBG and B&BB (the “Issuers”) issued $125.0 million of 9% seniorsecured notes (“Senior Notes”) due on January 15, 2012 and$39.9 million in gross proceeds of 123⁄4% senior subordinated notes (“SeniorSub Notes”) due January 15, 2013 (collectively the “Notes”).  The Notes are joint and several obligationsof the Issuers and all current and future subsidiaries of the Issuers.  Although the Notes are joint and severalobligations of the Issuers, the allocation of the balance of the Notes to theindividual balance sheets of B&BB, VRCC and RBG was according to the flowof funds at the date of the Buyout with the proceeds of the Senior Notesnecessary to purchase the interests of B&BB recorded on the balance sheetof B&BB and the remaining proceeds of the Senior Notes and Senior Sub Notesrecorded on the consolidated balance sheet of VRCC.  The

9

----

**VirginRiver Casino Corporation**

**Notesto Condensed Consolidated Financial Statements (unaudited) (continued)**

**4.             Long-term Debt (cont’d)**

condensed consolidated balance sheet of the Companyreflects the full obligation of the Notes at September 30, 2006, with theamount recorded on the balance sheet of B&BB recognized as a deemeddistribution to reflect the net obligation of the Notes recorded on thecondensed consolidated balance sheet of the Company at September 30, 2006. AtSeptember 30, 2006, the net amount of the Notes recorded on the Company’scondensed consolidated balance sheet was $154.1 million. The Senior Notes payinterest semiannually while the Senior Sub Notes accrue interest in the form ofincreased accreted value until January 15, 2009, when the carrying bookvalue of the Senior Sub Notes will be $66.0 million.  At that point the Senior Sub Notes will payinterest semiannually on the same dates as the Senior Notes.

The indentures (the “Indentures”) governing theIssuers’ Notes contain certain customary financial and other covenants, whichlimit the Issuers’ ability to incur additional debt.  The Indentures provide that the Issuers maynot incur additional indebtedness, other than specified types of indebtedness,unless the Consolidated Coverage Ratio, as defined, on a pro-forma basis afterthe incurrence of the additional indebtedness is at least 2.00 to 1.00. As ofSeptember 30, 2006, the Issuers have incurred $0 of additional indebtedness asdefined.

The Indentures also containother covenants which limit the ability of the Issuers and Guarantors, asdefined, under the Indentures to pay dividends, redeem stock, or make otherdistributions, make investments, create certain liens, enter into certaintransactions with affiliates, utilize proceeds from asset sales, transfer or sellassets, issue or sell equity interests of subsidiaries and enter into certainmergers and consolidations, as defined in the Indentures.  There are no restrictions related to thetransfer of funds between the Issuers, Guarantors and their respective subsidiaries.  The Issuers were in compliance with thesecovenants at September 30, 2006 and December 31, 2005.

The Senior Notes are secured by substantially allexisting and future assets of the Issuers and the Guarantors, as defined, aswell as the equity interest of the Guarantors, the equity interests of Mr.Black and his affiliate in the Issuers. The Guarantors are all the wholly owned subsidiaries of the Issuers.

The Senior Notes are subordinated to the securityinterests of the Foothill Facility.  TheSenior Sub Notes are subordinate to the Senior Notes and all other indebtednessof the Companies.

***InterestRate Swaps***

The Companies interest rateswaps terminated effective June 30, 2006.

**5.             Gaming Equipment Financing**

The Company from time to time enters into agreementswith gaming manufacturers to finance the purchase of gaming equipment.  Contractual terms of the agreements with thegaming manufacturers consist of payment terms of less than one year to up tothree years without interest.  In theevent that an agreement with a gaming manufacturer extends past a year, theCompany will impute interest at a rate of 8%.

10

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**VirginRiver Casino Corporation**

**Notes to Condensed ConsolidatedFinancial Statements (unaudited) (continued)**

**5.             Gaming Equipment Financing (cont’d)**

Gaming equipmentfinancing consists of the following (in thousands): 
| ** **                                                                                                                                      | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                                                                                                                      | ** ** | **2006**               | ** ** | **2005**              | ** ** |
| ** **                                                                                                                                      | ** ** | **(unaudited)**        | ** ** | ** **            | ** ** |
| Gaming equipment  financing to purchase 205 games, no payments for one year and monthly  payments of $106 for 24 months beginning February 2006 |       | $                      | 1,625      |                  | $          | 2,320 |   |
| Gaming equipment  financing to purchase 68 games, no payments for one year and monthly payments  of $43 for 24 months beginning January 2006    |       | 651                    |       | 945                   |       |
| Gaming equipment  financing to purchase 70 games, no payments for one year and monthly payments  of $39 for 24 months beginning March 2006      |       | 654                    |       | 838                   |       |
| Gaming equipment  financing to purchase 60 games, monthly payments of $20 for 36 months  beginning April 2005                                   |       | 353                    |       | 513                   |       |
| Gaming equipment  financing to purchase 64 games, no payments for one year and monthly payments  of $26 for 24 months beginning February 2006   |       | 398                    |       | 577                   |       |
| Gaming equipment  financing to purchase 38 games, monthly payments of $13 for 36 months  beginning April 2005                                   |       | 210                    |       | 312                   |       |
| Gaming equipment  financing to purchase 20 games, no payments for one year and monthly payments  of $8 for 24 months beginning January 2006     |       | 112                    |       | 174                   |       |
| Gaming equipment  financing, monthly payments of $3 for 36 months beginning January 2005                                                        |       | 33                     |       | 59                    |       |
| Gaming equipment financing to purchase 6 games, no  payments for one year and monthly payments of $6 for 24 months beginning  February 2007     |       | 65                     |       | —                |       |
| Gaming equipment financing, monthly payments of $1  for 36 months beginning July 2006                                                           |       | 32                     |       | —                |       |
| Gaming equipment  financing with terms of less than 12 months                                                                                   |       | 70                     |       | 96                    |       |
|                                                                                                                                            |       | 4,203                  |       | 5,834                 |       |
|  Less current portion                                                                                                                      |       | (2,989                 | )          | (2,528                | )          |
| Gaming equipment  financing, long-term portion                                                                                                  |       | $                      | 1,214      |                  | $          | 3,306 |   |

 

11

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**VirginRiver Casino Corporation**

**Notesto Condensed Consolidated Financial Statements (unaudited) (continued)**

**6.             RelatedParty Transactions**

MJB Development is a real estate construction companyowned by a former shareholder of the Companies which provides storages servicesassociated with hotel facilities of the Company.  Total charges for leasing of storage containerstotaled $0, $0, $0 and $70,000 during the three and nine-months ended September30, 2006 and 2005, respectively, and are included in the accompanyingconsolidated statements of operations.

Virgin River Foodmart, Inc., a Nevadacorporation, (“Foodmart”) is owned by Mr. Black and his siblings.  Participants in the Company’s slot clubprogram are able to redeem their points for gasoline at the Foodmart.  Foodmart charges the Company the retailamount of gas purchased with player points. Charges associated with thepoint redemption for gasoline at the Foodmart were $0, $1,000, $30,000 and$106,000 for the three and nine-months ended September 30, 2006 and 2005,respectively.

Black, LoBello &Pitegoff is a law firm managed by the daughter of Mr. Black. The Company retains Black,LoBello & Pitegoff as outside legal counsel, and has paid legal feesfor legal services in the amount of $47,000, $115,000, $68,000 and $112,000 forthe three and nine-months ended September 30, 2006 and 2005, respectively.

Pursuant to the Indentures, Mr. Black is entitled to amanagement fee for his management of the Company business of up to 5% ofEBITDA, as defined.  The Company expensed$222,000, $661,000, $192,000 and $576,000 during the three and nine-monthsended September 30, 2006 and 2005, respectively, associated with thismanagement fee.

During the three and nine months ended September 30,2006, it was determined upon completion of the Companies’ income tax returnsthat $1,377,000 was overpaid by the Companies to Mr. Black for taxdistributions during the year ended December 31, 2005.  As a result, the Companies offset thatoverpayment against earned and unpaid management fees during the three and ninemonths ended September 30, 2006 which resulted in an equity contribution of$1,377,000 to the Company.

Gaming Research is a consulting firm retained toperform marketing research for the Company. The principal of Gaming Research is the father of the Company’s chiefoperating officer.  Gaming Researchreceived consulting fees of $32,000, $80,000, $0 and $0 for the three andnine-months ended September 30, 2006 and 2005, respectively.

Resorts LLC provided management and other services totwo related parties that manage and operate the home owners associations of thevacation intervals sold at the property. Included in the accompanying condensed consolidated balance sheet atSeptember 30, 2006 and December 31, 2005 is a receivable for $281,000 and$95,000, respectively, related to amounts owed for those services.

MDW, LLC (“MDW”) is a Nevada limited-liabilitycompany in which Mr. Black has an interest. On December 15, 2004, pursuant to a termination agreement, theCompany terminated its lease with MDW and entered into an arrangement with MDWto sell condominiums.  During the three andnine months ended September 30, 2006, the Company recorded approximately $0.3million and $0.5 million in other income, respectively, and during the threeand nine months ended September 30, 2005, recorded $0.1 million and $0.3million in other expense, respectively, related to the Company’s investmentwith MDW.

12

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**VirginRiver Casino Corporation**

**Notesto Condensed Consolidated Financial Statements (unaudited) (continued)**

**7.             Commitmentsand Contingencies**

In January 2006, Oasis Interval Ownership, LLC enteredinto an agreement with Global Exchange Development Corp. to sell substantiallyall of the unsold time share intervals at the Oasis Hotel and Casino.  The sale is expected to close in threeseparate closings each involving approximately one-third of the unsold timeshare intervals at the Oasis Hotel and Casino. Each close is expected to occurwithin 6 months of the preceding close.   The first closing occurred in January 2006 for $280,000.  As part of the close, Global ExchangeDevelopment Corp. executed a note payable to Oasis Interval Ownership, LLC inthe amount of $224,000 due January 2007 at an interest rate of 4.38%.  The note was fully paid in April of2006.  The second closing occurred inJune 2006 for $288,000 in cash.

**8.             SubsequentEvents**

As part of the acquisition of the Oasis Hotel andCasino in July 2001, WSR, Inc, (“WSR”) the former owners of the property,retained rights that enabled them to have certain land owned by the Oasis Hoteland Casino in Arizona re-conveyed to them if any of the following events wereto occur: 1) WSR is able to purchase the land, currently leased to the OasisHotel and Casino, from the State of Arizona and sell the portion of the landused in the operation of the Palms Golf Course back to the Oasis Hotel andCasino; or 2) The Oasis Hotel and Casino is not able to renegotiate a long-termextension to the current lease with the State of Arizona that expires in April2008 and is required to develop existing land to replace the leased land forthe golf course operation.  In August2006, the Companies purchased those rights for approximately $1.1 million whichare included in other assets in the accompanying condensed consolidated balancesheet.

In conjunction with the purchase of those rights, inOctober 2006, the Companies began efforts to market and sell the 350 acres ofland the Companies own in Arizona.  TheCompanies are utilizing a Las Vegas real estate firm, Diversified Interests,which is owned 100% by Mr. Black, to market the property.  The Companies currently expect to sell theland within the next year.  As a resultof the Companies’ decision, at September 30, 2006, the Companies hadapproximately $325,000 in current assets, $258,000 in current liabilities and$8.9 million in non-current assets that subsequent to September 30, 2006, uponmeeting all requirements of SFAS No. 144, “Accounting for the Impairment orDisposal of Long-Lived Assets”, will be recorded as held for sale in theaccompanying consolidated balance sheet.

In October 2006, the Companies adopted the BlackGaming Long Term Incentive Plan (“LTIP”). LTIP is a long-term formula based compensation plan utilizing EBITDA, asdefined, Long-term Debt, as defined, cash and a fixed multiple to compensatesenior executives for increasing the operating performance and financialcondition of the Companies in the event the executive remains with theCompanies.  Future compensation, commencingin the fourth quarter of the year ended December 31, 2006, recognized inaccordance with LTIP will be accounted for using the intrinsic value methodallowed for nonpublic entities as defined and prescribed by SFAS 123(R) “ShareBased Payment”.

The Companies have commenced action to reorganize (the“Proposed Reorganization”) the entities, Virgin River Casino Corporation, RBG,LLC, and B & B B, Inc. under a single holding company, BlackGaming, LLC, a Nevada limited-liability company (“Black Gaming”). The Companiesare currently seeking the necessary approvals and licenses from appropriateparties, including but not limited to appropriate gaming authorities. While theCompanies hope the Proposed Reorganization will be effective prior toJanuary 1, 2007, no assurance can be given that the ProposedReorganization will be effective by that date, if ever. As currently proposed,when the Proposed Reorganization is completed, Black Gaming will guaranteepayment of the Companies’ 9% senior secured notes and 12 3/4% seniorsubordinated notes.

 

 

13

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**RBG, LLC**

**CondensedConsolidated Balance Sheets**(in thousands)

 
| ** **                                           | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                           | ** ** | **2006**               | ** ** | **2005**              | ** ** |
| ** **                                           | ** ** | **(unaudited)**        | ** ** | ** **            | ** ** |
| **Assets**                                           |       |                   |       |                  |       |
| Current assets:                                      |       |                   |       |                  |       |
| Cash and cash  equivalents                           |       | $                      | 6,432      |                  | $          | 7,815 |   |
| Accounts  receivable, net                            |       | 1,899                  |       | 1,226                 |       |
| Related party  receivables                           |       | 281                    |       | 95                    |       |
| Related company  receivables                         |       | 5,188                  |       | 620                   |       |
| Inventories                                          |       | 1,593                  |       | 1,652                 |       |
| Property held  for vacation interval sales           |       | 352                    |       | 392                   |       |
| Prepaid expenses                                     |       | 3,328                  |       | 3,116                 |       |
| Current portion  of notes receivable                 |       | 191                    |       | 303                   |       |
| Total current assets                                 |       | 19,264                 |       | 15,219                |       |
| Property and equipment,  net                         |       | 81,932                 |       | 84,397                |       |
| Notes receivable, less  current portion              |       | 1,151                  |       | 1,821                 |       |
| Other assets                                         |       | 1,486                  |       | 217                   |       |
| Goodwill and other  intangible assets, net           |       | 29,573                 |       | 31,193                |       |
| Total assets                                         |       | $                      | 133,406    |                  | $          | 132,847 |   |
| **Liabilities  and Members’ Deficit**           |       |                   |       |                  |       |
| Current liabilities:                                 |       |                   |       |                  |       |
| Bank overdraft                                       |       | $                      | —     |                  | $          | 548 |   |
| Current portion  of gaming equipment financing       |       | 2,989                  |       | 2,528                 |       |
| Current portion  of long-term debt                   |       | 40                     |       | 614                   |       |
| Accounts payable                                     |       | 2,277                  |       | 2,762                 |       |
| Accrued  liabilities                                 |       | 13,088                 |       | 16,119                |       |
| Related company  payable                             |       | 863                    |       | 196                   |       |
| Total current  liabilities                           |       | 19,257                 |       | 22,767                |       |
| Gaming equipment  financing, less current portion    |       | 1,214                  |       | 3,306                 |       |
| Long-term debt,  less current portion                |       | 174,737                |       | 172,333               |       |
| Fair value of interest  rate swaps                   |       | —                 |       | 195                   |       |
| Commitments and  contingencies                       |       |                   |       |                  |       |
| Members’ deficit:                               |       |                   |       |                  |       |
| Members’  contributions and accumulated deficit |       | 115,335                |       | 113,129               |       |
| Deemed  distribution                                 |       | (177,137               | )          | (178,883              | )          |
| Total members’ deficit                          |       | (61,802                | )          | (65,754               | )          |
| Total liabilities and  members’ deficit         |       | $                      | 133,406    |                  | $          | 132,847 |   |

 

The accompanying notes are an integral part of thesecondensed consolidated financial statements.

 

14

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**RBG, LLC**

**CondensedConsolidated Statements of Operations (unaudited)(in thousands)**
| ** **                                                                   | ** ** | **Three months ended** | ** ** | **Nine months ended** | ** ** |
|------------------------------------------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                                                                   | ** ** | **September 30,**           | ** ** | **September 30,**          | ** ** | **September 30,** | ** ** | **September 30,** | ** ** |
| ** **                                                                   | ** ** | **2006**                         | ** ** | **2005**                        | ** ** | **2006** | ** ** | **2005** | ** ** |
| Revenues                                                                     |       |                             |       |                            |       |   |   |   |   |
| Casino                                                                       |       | $                                | 16,410     |                            | $          | 14,283 |   | $ | 51,256 |   | $ | 45,861 |   |
| Food and  beverage                                                           |       | 7,543                            |       | 7,104                           |       | 23,629 |   | 22,994 |   |
| Hotel                                                                        |       | 5,521                            |       | 4,742                           |       | 18,653 |   | 15,205 |   |
| Other                                                                        |       | 3,200                            |       | 2,999                           |       | 13,552 |   | 13,675 |   |
| Total revenues                                                               |       | 32,674                           |       | 29,128                          |       | 107,090 |   | 97,735 |   |
| Less—promotional  allowances                                            |       | (6,386                           | )          | (4,459                          | )          | (19,445 | ) | (13,966 | ) |
| Net revenues                                                                 |       | 26,288                           |       | 24,669                          |       | 87,645 |   | 83,769 |   |
| Operating expenses:                                                          |       |                             |       |                            |       |   |   |   |   |
| Casino                                                                       |       | 8,529                            |       | 7,711                           |       | 25,078 |   | 22,729 |   |
| Food and  beverage                                                           |       | 4,243                            |       | 4,542                           |       | 13,529 |   | 14,413 |   |
| Hotel                                                                        |       | 998                              |       | 1,633                           |       | 3,594 |   | 4,995 |   |
| Other                                                                        |       | 2,657                            |       | 2,513                           |       | 8,565 |   | 9,110 |   |
| General and  administrative                                                  |       | 9,466                            |       | 8,195                           |       | 26,146 |   | 23,116 |   |
| Depreciation and  amortization                                               |       | 2,555                            |       | 1,994                           |       | 8,291 |   | 5,859 |   |
| Loss on sale and  disposal of assets                                         |       | —                           |       | 79                              |       | 248 |   | 729 |   |
| Total operating  expenses                                                    |       | 28,448                           |       | 26,667                          |       | 85,451 |   | 80,951 |   |
| Operating (loss) income                                                      |       | (2,160                           | )          | (1,998                          | )          | 2,194 |   | 2,818 |   |
| Other income (expense):                                                      |       |                             |       |                            |       |   |   |   |   |
| Interest expense                                                             |       | (86                              | )          | (357                            | )          | (416 | ) | (1,048 | ) |
| Change in fair  value of interest rate swaps                                 |       | —                           |       | 262                             |       | 140 |   | 789 |   |
| Return on investment with MDW, LLC                                           |       | 264                              |       | (113                            | )          | 484 |   | (288 | ) |
| (Loss) income before  cumulative effective of change in accounting principle |       | (1,982                           | )          | (2,206                          | )          | 2,402 |   | 2,271 |   |
| Cumulative effect of  change in accounting principle                         |       | —                           |       | —                          |       | (196 | ) | — |   |
| Net income (loss)                                                            |       | $                                | (1,982     | )                               | $          | (2,206 | ) | $ | 2,206 |   | $ | 2,271 |   |

 

The accompanying notes are an integral part of thesecondensed consolidated financial statements.

 

15

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**RBG, LLC**

**CondensedConsolidated Statements of Cash Flows (unaudited)****(in thousands)**
| ** **                                                                         | ** ** | **Nine months ended** | ** ** |
|------------------------------------------------------------------------------------|------------|---------------------------------|------------|
| ** **                                                                         | ** ** | **September 30,**          | ** ** | **September 30,** | ** ** |
| ** **                                                                         | ** ** | **2006**                        | ** ** | **2005** | ** ** |
|                                                                               |       |                            |       |   |   |
| Cash flows from  operating activities:                                             |       |                            |       |   |   |
| Net income                                                                         |       | $                               | 2,206      |   | $ | 2,271 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities: |       |                            |       |   |   |
| Depreciation and  amortization                                                     |       | 8,291                           |       | 5,859 |   |
| Change in fair  value of interest rate swaps                                       |       | (140                            | )          | (789 | ) |
| Loss on sale and  disposal of assets                                               |       | 248                             |       | 729 |   |
| Cumulative  effect of change in accounting principle                               |       | 196                             |       | — |   |
| Interest expense  on gaming equipment financing                                    |       | 52                              |       | 232 |   |
| Cost of vacation  intervals sales                                                  |       | 41                              |       | 81 |   |
| Change in  operating assets and liabilities:                                       |       |                            |       |   |   |
| Accounts,  related company and related party receivables, net                      |       | (5,259                          | )          | 103 |   |
| Inventories                                                                        |       | 59                              |       | (1 | ) |
| Prepaid expenses                                                                   |       | (212                            | )          | (570 | ) |
| Notes receivable                                                                   |       | 586                             |       | 304 |   |
| Accounts  payable, accrued liabilities and related company payables                |       | 1,137                           |       | 1,542 |   |
| Net cash provided by  operating activities                                         |       | 7,205                           |       | 9,761 |   |
| Cash flows from investing  activities:                                             |       |                            |       |   |   |
| Proceeds  received from sale of assets                                             |       | 43                              |       | 145 |   |
| Capital  expenditures                                                              |       | (4,335                          | )          | (8,944 | ) |
| Net cash used in  investing activities                                             |       | (4,292                          | )          | (8,799 | ) |
| Cash flows from  financing activities:                                             |       |                            |       |   |   |
| Proceeds from  issuance of long-term debt                                          |       | —                          |       | 209 |   |
| Decrease in bank  overdraft                                                        |       | (548                            | )          | (1,480 | ) |
| Payment of long-term  debt                                                         |       | (573                            | )          | (1,126 | ) |
| Payment on  gaming equipment financing                                             |       | (1,879                          | )          | (619 | ) |
| Payment of  obligations under capital lease                                        |       | —                          |       | (13 | ) |
| Change in other  assets                                                            |       | (1,296                          | )          | 16 |   |
| Net cash used in  financing activities                                             |       | (4,296                          | )          | (3,013 | ) |
| Net decrease in cash  and cash equivalents                                         |       | (1,383                          | )          | (2,051 | ) |
| Cash and cash  equivalents at beginning of year                                    |       | 7,815                           |       | 7,544 |   |
| Cash and cash equivalents at end of period                                         |       | $                               | 6,432      |   | $ | 5,493 |   |

 

The accompanying notes are an integral part of thesecondensed consolidated financial statements.

16

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**RBG, LLC**

**CondensedConsolidated Statements of Cash Flows (unaudited) (continued)****(in thousands)**
| ** **                                             | ** ** | **Nine months ended** | ** ** |
|--------------------------------------------------------|------------|---------------------------------|------------|
| ** **                                             | ** ** | **September 30,**          | ** ** | **September 30,** | ** ** |
| ** **                                             | ** ** | **2006**                        | ** ** | **2005** | ** ** |
| Supplemental  cash flow disclosure:                    |       |                            |       |   |   |
| Cash paid for interest                                 |       | $                               | 192        |   | $ | 539 |   |
| Acquisition of assets with gaming equipment  financing |       | $                               | 215        |   | $ | 5,513 |   |

 

The accompanying notes are an integral part of thesecondensed consolidated financial statements.

 

17

----

 

**RBG, LLC**

**Notes to CondensedFinancial Statements (unaudited)**September 30, 2006

**1.             Basis of Presentation and Background**

The accompanyingcondensed consolidated financial statements include the accounts of RBG, LLC(doing business as CasaBlanca Resort/Casino/Golf/Spa) and its wholly ownedsubsidiary Casablanca Resorts, LLC (doing business as Oasis Resort &Casino) (“Resorts LLC”). Virgin River Casino Corporation (“VRCC”) owns 88.8% ofRBG, LLC (“RBG”) and Casablanca Resorts, LLC (“Resorts LLC”). Robert R. Black,Sr. (“Mr. Black”) is the sole shareholder of VRCC and owns 9.28% of RBGindividually and through another entity. Mr. Black also is the sole shareholder of B & B B, Inc. (doingbusiness as Virgin River Hotel/Casino/Bingo) (“B&BB”). VRCC, RBG andB&BB (collectively the “Companies”) are operated under common management.Significant intercompany items and transactions of RBG have been eliminated.

***Interim Financial Statements***— The accompanying unaudited condensedconsolidated financial statements as of September 30, 2006 and for the threeand nine-month periods ended September 30, 2006 and 2005 are unaudited.  In the opinion of management, all adjustments(which include normal recurring adjustments) necessary for a fair presentationof RBG’s financial position and results of operations for such periods, havebeen included.   The accompanyingunaudited condensed consolidated financial statements should be read inconjunction with RBG’s audited consolidated financial statements filed on Form10-K for the year ended December 31, 2005. The results for the three and nine-month periods ended September 30,2006 are not necessarily indicative of the results that may be expected for theyear ending December 31, 2006, or for any other period.

***Reclassifications***— Certain previously reported amounts inthe condensed consolidated financial statements have been reclassified toconform to the current period’s presentation.

**2.             RelatedCompany Receivables and Payables**

The relatedcompany receivables at September 30, 2006 and December 31, 2005 consist of thefollowing (in thousands):
| ** **                   | ** ** | **September 30,  2006** | ** ** | **December 31,  2005** | ** ** |
|------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| ** **                   | ** ** | **(unaudited)**              | ** ** | ** **                  | ** ** |
| Virgin River  Casino Corp.   |       | $                            | —     |                        | $          | 225 |   |
| B&BB                     |       | 5,188                        |       | 395                         |       |
| Related company  receivables |       | $                            | 5,188      |                        | $          | 620 |   |

 

The relatedcompany payables at September 30, 2006 and December 31, 2005 consist of thefollowing (in thousands):
| ** **                 | ** ** | **September 30,  2006** | ** ** | **December 31,  2005** | ** ** |
|----------------------------|------------|------------------------------|------------|-----------------------------|------------|
| ** **                 | ** ** | **(unaudited)**              | ** ** | ** **                  | ** ** |
| Virgin River  Casino Corp. |       | $                            | 863        |                        | $          | 196 |   |
|                            |            |                              |            |                             |            |  |  |

 

18

 

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**RBG, LLC**

**Notes to CondensedConsolidated Financial Statements (unaudited) (continued)**

**2.            Related Company Receivablesand Payables (cont’d)**

The transactions between the RBG and the entitiesabove are based on informal arrangements. At September 30, 2006 and December 31, 2005, there are no specificpayment terms nor do any of the receivables or payables require the payment ofany interest.

**3.             Property and Equipment**

Property andequipment consists of the following (in thousands):
| ** **                                           | ** ** | **September 30,  2006** | ** ** | **December 31,  2005** | ** ** |
|------------------------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| ** **                                           | ** ** | **(unaudited)**              | ** ** | ** **                  | ** ** |
| Land                                                 |       | $                            | 21,147     |                        | $          | 21,147 |   |
| Buildings                                            |       | 42,050                       |       | 41,048                      |       |
| Land and  leasehold improvements                     |       | 14,379                       |       | 14,272                      |       |
| Furniture,  fixtures and equipment                   |       | 39,179                       |       | 37,454                      |       |
| Construction in  progress                            |       | 1,290                        |       | 951                         |       |
|                                                 |       | 118,045                      |       | 114,872                     |       |
| Less—accumulated  depreciation and amortization |       | (36,113                      | )          | (30,475                     | )          |
| Property and equipment,  net                         |       | $                            | 81,932     |                        | $          | 84,397 |   |

 

**As aresult of the third party business valuation that was conducted in the forthquarter of 2005, RBG has re-evaluated the useful lives of their slot machines(included in furniture, fixtures and equipment above) and effective January 1,2006, changed that estimate from seven years to five years. For the three andnine months ended September 30, 2006, operating income of RBG decreasedapproximately $204,000 and $544,000, respectively, as a result of the change inthe estimated lives**.

**4.             Notes Receivable**

Notes receivableconsist of the following (in thousands):
| ** **                            | ** ** | **September 30,  2006** | ** ** | **December 31,  2005** | ** ** |
|---------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| ** **                            | ** ** | **(unaudited)**              | ** ** | ** **                  | ** ** |
| Vacation  interval notes receivable   |       | $                            | 1,770      |                        | $          | 2,519 |   |
| Allowance for  possible credit losses |       | (428                         | )          | (395                        | )          |
| Total notes  receivable               |       | 1,342                        |       | 2,124                       |       |
| Less: current  portion                |       | (191                         | )          | (303                        | )          |
| Non-current notes  receivable         |       | $                            | 1,151      |                        | $          | 1,821 |   |

 

Notes generated from thesale of vacation intervals generally bear interest at annual rates ranging from12.75% to 14.75% and have terms of 5 to 7 years. The vacation intervalnotes receivable are collateralized by the right to use and deeds of trust onthe vacation interval sold.

19

 

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**RBG, LLC**

**Notes to CondensedConsolidated Financial Statements (unaudited) (continued)**

**4.             Notes Receivable (cont’d)**

In January of 2006, RBG adopted the provisions ofSFAS 152, “*Accounting for Real Estate Time-SharingTransactions*.” SFAS 152 amends existing accounting guidance toreference the financial accounting and reporting guidance for real estatetime-sharing transactions provided in AICPA Statement of Position 04-02, “*Accounting for Real Estate Time-Sharing Transactions*.” Inaccordance with SFAS 152, RBG now uses a technique referred to as static poolanalysis, which tracks uncollectible notes receivable based on each year’ssales over the entire life of those notes. RBG considers whether the historical economic conditions are comparableto current economic conditions.  Ifcurrent economic conditions differ from the economic conditions in effect whenthe historical experience was generated, RBG adjusts the allowance for possiblecredit losses to reflect the expected effects of current economic conditions onuncollectibility.  RBG groups all notesreceivables in one pool for analytical purposes based on historicalcollectibility and customer demographics. As a result of the change in accounting for the allowance for possiblecredit losses, RBG has recorded in the accompanying statement of operations forthe nine-months ended September 30, 2006, a cumulative effect of a change inaccounting principle of $196,000 to increase the allowance for possible creditlosses.

**5.            **Long-term Debt

Long-term debtconsists of the following (in thousands): 
| ** **                                                                                                                                                                                                                                                                                  | ** ** | **September 30,  2006** | ** ** | **December 31,  2005** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| ** **                                                                                                                                                                                                                                                                                  | ** ** | **(unaudited)**              | ** ** | ** **                  | ** ** |
| Revolving credit  facility totaling $15 million with Wells Fargo Foothill, at a margin above  prime or LIBOR, as defined; collateralized by substantially all real and  personal property, leases, intangibles and other interests of the Companies  as defined.                            |       | $                            | —     |                        | $          | 2,000 |   |
| 9% senior  secured notes, interest payable semiannually, principal due January 15, 2012,  callable January 15, 2009                                                                                                                                                                         |       | 125,000                      |       | 125,000                     |       |
| 12 3⁄4% senior  subordinated notes, non-cash interest will accrue at an annual rate of 12 3⁄4%  in the form of increase accreted value until January 15, 2009. Beginning  January 15, 2009, interest payable semiannually, principal due January 15,  2013, callable January 15, 2009 |       | 49,737                       |       | 45,333                      |       |
| Promissory note  payable to Wells Fargo Equipment Finance, Inc. payable in monthly  installments of $37 at an interest rate of 6.97%, due June 2006                                                                                                                                         |       | —                       |       | 363                         |       |
| Hypothecation  Note at prime plus 3.0% (10.75% at March 31, 2006), collateralized by certain  notes receivable as defined; guaranteed by one of the initial members, due  April 2004                                                                                                        |       | —                       |       | 94                          |       |
| Promissory note  payable to Wells Fargo Equipment Finance, Inc. payable in monthly  installments of $14 at an interest rate of 6.21%, due December 2006                                                                                                                                     |       | 40                           |       | 157                         |       |
|                                                                                                                                                                                                                                                                                        |       | 174,777                      |       | 172,947                     |       |
| Less—current  portion                                                                                                                                                                                                                                                                  |       | (40                          | )          | (614                        | )          |
| Total long-term  debt                                                                                                                                                                                                                                                                       |       | $                            | 174,737    |                        | $          | 172,333 |   |

 

20

 

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**RBG, LLC**

**Notes to CondensedConsolidated Financial Statements (unaudited) (continued)**

**5.             Long-term Debt (cont’d)**

***FoothillFacility***

The Wells Fargo Foothill, Inc. credit facility (“FoothillFacility”) is secured by substantially all the assets of the Companies. Duringthe life of the Foothill Facility, the Companies may borrow up to the lesser of(1) $15.0 million less the Letter of Credit Usage, as defined, lessthe Bank Product Reserve, as defined, or (2) the Borrowing Base, asdefined, less the Letter of Credit Usage. At September 30, 2006, no amounts were drawn under the FoothillFacility.  Accordingly, the availabilityunder the Foothill Facility at September 30, 2006 was $15.0 million.

Under the terms of the Foothill Facility, interestaccrues on the outstanding principal balance at LIBOR plus the LIBOR RateMargin, which is 3.5%, or the Base Rate, as defined, plus the Base Rate Margin,which is 2%.  LIBOR was approximately5.32% at September 30, 2006.  TheFoothill Facility also contains certain financial and other covenants.  These include a minimum trailing twelve-monthEarnings before Interest, Taxes, Depreciation and Amortization (“EBITDA”) of$15,000,000 for the Companies and limitations on other indebtedness and capitalexpenditures, as defined.  The Companieswere in compliance with these covenants at September 30, 2006 and December 31,2005.

The outstanding balance on the Foothill Facility is ajoint and several obligation of the Companies. The condensed consolidatedbalance sheet of RBG reflects the full obligation of the Foothill Facility atSeptember 30, 2006 and December 31, 2005 with the amount recorded on theconsolidated balance sheet of VRCC recognized as a deemed distribution toreflect the net obligation of the Foothill Facility on the consolidated balancesheet of RBG at September 30, 2006.

***SeniorSecured and Senior Subordinated Notes***

In December 2004, as part of an ownership buyout (the “Buyout”),VRCC, RBG and B&BB (the “Issuers”) issued $125.0 million of 9% seniorsecured notes (“Senior Notes”) due on January 15, 2012 and$39.9 million in gross proceeds of 123⁄4% senior subordinated notes (“SeniorSub Notes”) due January 15, 2013 (collectively the “Notes”).  The Notes are joint and several obligationsof the Issuers and all current and future subsidiaries of the Issuers.  Although the Notes are joint and severalobligations of the Issuers, the allocation of the balance of the Notes to theindividual balance sheets of B&BB, VRCC and RBG was according to the flowof funds at the date of the Buyout with the proceeds of the Senior Notesnecessary to purchase the interests of B&BB recorded on the balance sheetof B&BB and the remaining proceeds of the Senior Notes and Senior Sub Notesrecording on the balance sheet of VRCC. The consolidated balance sheet of RBG reflects the full obligation ofthe Notes at September 30, 2006 with an amount recognized as a deemeddistribution to reflect the net obligation of the Notes recorded on theconsolidated balance sheet of RBG at September 30, 2006. At September 30, 2006,the net amount of the Notes recorded on RBG’s balance sheet was $0.

The Senior Notes pay interest semiannually while theSenior Sub Notes accrue interest in the form of increased accreted value untilJanuary 15, 2009, when the carrying book value of the Senior Sub Noteswill be $66.0 million.  At thatpoint the Senior Sub Notes will pay interest semiannually on the same dates asthe Senior Notes.

21

 

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**RBG, LLC**

**Notes to CondensedConsolidated Financial Statements (unaudited) (continued)**

**5.             Long-term Debt (cont’d)**

The indentures (the “Indentures”) governing theIssuers’ Notes contain certain customary financial and other covenants, whichlimit the Issuers’ ability to incur additional debt.  The Indentures provide that the Issuers maynot incur additional indebtedness, other than specified types of indebtedness,unless the Consolidated Coverage Ratio, as defined, on a pro-forma basis afterthe incurrence of the additional indebtedness is at least 2.00 to 1.00. As ofSeptember 30, 2006, the Issuers have incurred $0 of additional indebtedness asdefined. The Indentures also contain other covenants which limit the ability ofthe Issuers and Guarantors, as defined, under the Indentures to pay dividends,redeem stock, or make other distributions, make investments, create certainliens, enter into certain transactions with affiliates, utilize proceeds fromasset sales, transfer or sell assets, issue or sell equity interests ofsubsidiaries and enter into certain mergers and consolidations, as defined inthe Indentures.  There are norestrictions related to the transfer of funds between the Issuers, Guarantorsand their respective subsidiaries.  TheIssuers were in compliance with these covenants at September 30, 2006 andDecember 31, 2005.

The Senior Notes are secured by substantially allexisting and future assets of the Issuers and the Guarantors, as defined, aswell as the equity interest of the Guarantors, the equity interests of Mr.Black and his affiliate in the Issuers. The Guarantors are all the wholly owned subsidiaries of theIssuers.  The Senior Notes aresubordinated to the security interests of the Foothill Facility.  The Senior Sub Notes are subordinate to the SeniorNotes and all other indebtedness of the Companies.

***InterestRate Swaps***

The Companies interest rateswaps terminated effective June 30, 2006.

**6.             Gaming Equipment Financing**

RBG from time to time enters into agreements withgaming manufacturers to finance the purchase of gaming equipment.  Contractual terms of the agreements with thegaming manufactures consist of payment terms of less than one year to up tothree years without interest.  In theevent that an agreement with a gaming manufacturer extends past a year, RBGwill impute interest at a rate of 8%.

22

 

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**RBG, LLC**

**Notes to CondensedConsolidated Financial Statements (unaudited) (continued)**

**6.             Gaming Equipment Financing (cont’d)**

Gaming equipmentfinancing for RBG consists of the following (in thousands):  
| ** **                                                                                                                                      | ** ** | **September 30,  2006** | ** ** | **December 31,  2005** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| ** **                                                                                                                                      | ** ** | **(unaudited)**              | ** ** | ** **                  | ** ** |
| Gaming equipment  financing to purchase 205 games, no payments for one year and monthly  payments of $106 for 24 months beginning February 2006 |       | $                            | 1,625      |                        | $          | 2,320 |   |
| Gaming equipment  financing to purchase 68 games, no payments for one year and monthly payments  of $43 for 24 months beginning January 2006    |       | 651                          |       | 945                         |       |
| Gaming equipment  financing to purchase 70 games, no payments for one year and monthly payments  of $39 for 24 months beginning March 2006      |       | 654                          |       | 838                         |       |
| Gaming equipment  financing to purchase 60 games, monthly payments of $20 for 36 months  beginning April 2005                                   |       | 353                          |       | 513                         |       |
| Gaming equipment  financing to purchase 64 games, no payments for one year and monthly payments  of $26 for 24 months beginning February 2006   |       | 398                          |       | 577                         |       |
| Gaming equipment  financing to purchase 38 games, monthly payments of $13 for 36 months  beginning April 2005                                   |       | 210                          |       | 312                         |       |
| Gaming equipment  financing to purchase 20 games, no payments for one year and monthly payments  of $8 for 24 months beginning January 2006     |       | 112                          |       | 174                         |       |
| Gaming equipment  financing, monthly payments of $3 for 36 months beginning January 2005                                                        |       | 33                           |       | 59                          |       |
| Gaming equipment financing to purchase 6 games, no  payments for one year and monthly payments of $6 for 24 months beginning  February 2007     |       | 65                           |       | —                      |       |
| Gaming equipment financing, monthly payments of $1  for 36 months beginning July 2006                                                           |       | 32                           |       | —                      |       |
| Gaming equipment  financing with terms of less than 12 months                                                                                   |       | 70                           |       | 96                          |       |
|                                                                                                                                            |       | 4,203                        |       | 5,834                       |       |
|  Less current portion                                                                                                                      |       | (2,989                       | )          | (2,528                      | )          |
| Gaming equipment  financing, long-term portion                                                                                                  |       | $                            | 1,214      |                        | $          | 3,306 |   |

**7.             RelatedParty Transactions**

MJB Development is a real estate construction companyowned by a former shareholder of the Companies which provides storage servicesassociated with hotel facilities of RBG. Total charges for leasing of storage containers totaled $0, $0, $0 and$70,000 during the three and nine-months ended September 30, 2006 and 2005,respectively, and are included in the accompanying consolidated statements ofoperations.

Virgin River Foodmart, Inc., a Nevadacorporation, (“Foodmart”) is owned by Mr. Black and his siblings.  Participants in RBG’s slot club program areable to redeem their points for gasoline at the Foodmart.  Foodmart charges the Company the retailamount of gas purchased with player points. Charges associated with thepoint redemption for gasoline at the Foodmart were $0, $1,000, $30,000 and$106,000 for the three and nine-months ended September 30, 2006 and 2005,respectively.

Black, LoBello &Pitegoff is a law firm managed by the daughter of Mr. Black. RBG retains Black, LoBello &Pitegoff as outside legal counsel, and has paid legal fees for legal servicesin the amount of $46,000, $114,000, $60,000 and $87,000 for the three andnine-months ended September 30, 2006 and 2005, respectively.

Pursuant to the Indentures, Mr. Black is entitled to amanagement fee for his management of RBG’s business of up to 5% of EBITDA, asdefined.  RBG expensed $222,000,$661,000, $192,000 and $576,000 during the three and nine-months endedSeptember 30, 2006 and 2005, respectively, associated with this management fee.

Gaming Research is a consulting firm retained toperform marketing research for RBG.  Theprincipal of Gaming Research is the father of RBG’s chief operating officer.  Gaming Research received consulting fees of$32,000, $80,000, $0 and $0 for the three and nine-months ended September 30,2006 and 2005, respectively.

23

 

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**RBG, LLC**

**Notes to CondensedConsolidated Financial Statements (unaudited) (continued)**

**7.             RelatedParty Transactions (cont’d)**

Resorts LLC provided management and other services totwo related parties that manage and operate the home owners associations of thevacation intervals sold at the property. Included in the accompanying condensed consolidated balance sheet atSeptember 30, 2006 and December 31, 2005 is a receivable for $281,000 and$95,000, respectively, related to amounts owed for those services.

**8.             Commitmentsand Contingencies**

In January 2006, Oasis Interval Ownership, LLC enteredinto an agreement with Global Exchange Development Corp. to sell substantiallyall of the unsold time share intervals at the Oasis Hotel and Casino.  The sale is expected to close in threeseparate closings each involving approximately one-third of the unsold time shareintervals at the Oasis Hotel and Casino. Each close is expected to occur within6 months of the preceding close.    Thefirst closing occurred in January 2006 for $280,000.  As part of the close, Global ExchangeDevelopment Corp. executed a note payable to Oasis Interval Ownership, LLC inthe amount of $224,000 due January 2007 at an interest rate of 4.38%.  The note was fully paid in April of 2006. Thesecond closing occurred in June 2006 for $288,000 in cash.

**9.             SubsequentEvents**

As part of the acquisition of the Oasis Hotel andCasino in July 2001, WSR, Inc, (“WSR”) the former owners of the property,retained rights that enabled them to have certain land owned by the Oasis Hoteland Casino in Arizona re-conveyed to them if any of the following events wereto occur: 1) WSR is able to purchase the land, currently leased to the OasisHotel and Casino, from the State of Arizona and sell the portion of the landused in the operation of the Palms Golf Course back to the Oasis Hotel andCasino; or 2) The Oasis Hotel and Casino is not able to renegotiate a long-termextension to the current lease with the State of Arizona that expires in April2008 and is required to develop existing land to replace the leased land forthe golf course operation.  In August2006, the Companies purchased those rights for approximately $1.1 million whichare included in other assets in the accompanying condensed consolidated balancesheet.

In conjunction with the purchase of those rights, inOctober 2006, the Companies began efforts to market and sell the 350 acres ofland the Companies own in Arizona.  TheCompanies are utilizing a Las Vegas real estate firm, Diversified Interests,which is owned 100% by Mr. Black, to market the property.  The Companies currently expect to sell theland within the next year.  As a resultof the Companies’ decision, at September 30, 2006, the Companies hadapproximately $325,000 in current assets, $258,000 in current liabilities and$8.9 million in non-current assets that subsequent to September 30, 2006, uponmeeting all requirements of SFAS No. 144, “Accounting for the Impairment orDisposal of Long-Lived Assets”, will be recorded as held for sale in theaccompanying consolidated balance sheet.

In October 2006, the Companies adopted the BlackGaming Long Term Incentive Plan (“LTIP”). LTIP is a long-term formula based compensation plan utilizing EBITDA, asdefined, Long-term Debt, as defined, cash and a fixed multiple to compensatesenior executives for increasing the operating performance and financialcondition of the Companies in the event the executive remains with theCompanies.  Future compensation, commencingin the fourth quarter of the year ended December 31, 2006, recognized inaccordance with LTIP will be accounted for using the intrinsic value methodallowed for nonpublic entities as defined and prescribed by SFAS 123(R) “ShareBased Payment”.

The Companies have commenced action to reorganize (the“Proposed Reorganization”) the entities, Virgin River Casino Corporation, RBG,LLC, and B & B B, Inc. under a single holding company, BlackGaming, LLC, a Nevada limited-liability company (“Black Gaming”). The Companiesare currently seeking the necessary approvals and licenses from appropriateparties, including but not limited to appropriate gaming authorities. While theCompanies hope the Proposed Reorganization will be effective prior toJanuary 1, 2007, no assurance can be given that the ProposedReorganization will be effective by that date, if ever. As currently proposed,when the Proposed Reorganization is completed, Black Gaming will guaranteepayment of the Companies’ 9% senior secured notes and 12 3/4% seniorsubordinated notes.

 

24

 

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**RBG, LLC**

**Notes to Condensed ConsolidatedFinancial Statements (unaudited) (continued)**

**10.**          **Consolidating CondensedFinancial Information**

Casablanca Resorts, LLC, Oasis Recreational Properties, Inc., OasisInterval Management, LLC and Oasis Interval Ownership, LLC (together the “Guarantors”)have fully and unconditionally guaranteed, on a joint and several basis,payment of the Notes. Separate condensed financial statement information forRBG and its Guarantor Subsidiaries as of September 30, 2006 (unaudited) andDecember 31, 2005 and for the nine months ended September 30, 2006 and 2005(unaudited) is as follows (in thousands):
| ** **                                                   | ** ** | **RBG** | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Total  Consolidated** | ** ** |
|--------------------------------------------------------------|------------|---------|------------|----------------|------------|------------------|------------|-------------------------|------------|
| **As of September 30, 2006**                                 |       |    |       |           |       |             |       |                    |       |
| **BALANCE SHEET:**                                           |       |    |       |           |       |             |       |                    |       |
| Current Assets,  including intercompany accounts             |       | $       | 21,367     |           | $          | 18,076           |       | $                       | (20,179    | ) | $ | 19,264 |   |
| Property and  Equipment, net                                 |       | 44,031  |       | 37,901         |       | —           |       | 81,932                  |       |
| Goodwill and  Other Intangibles                              |       | 14,352  |       | 15,221         |       | —           |       | 29,573                  |       |
| Other assets  (liabilities), excluding intercompany accounts |       | 44,982  |       | 1,775          |       | (44,120          | )          | 2,637                   |       |
|                                                         |       | $       | 124,732    |           | $          | 72,973           |       | $                       | (64,299    | ) | $ | 133,406 |   |
|                                                         |       |    |       |           |       |             |       |                    |       |
| Current  Liabilities                                         |       | $       | 11,013     |           | $          | 28,423           |       | $                       | (20,179    | ) | $ | 19,257 |   |
| Long-term debt,  less current portion                        |       | 174,737 |       | —         |       | —           |       | 174,737                 |       |
| Gaming equipment  financing, less current portion            |       | 784     |       | 430            |       | —           |       | 1,214                   |       |
| Members’  (Deficit) Equity                              |       | (61,802 | )          | 44,120         |       | (44,120          | )          | (61,802                 | )          |
|                                                         |       | $       | 124,732    |           | $          | 72,973           |       | $                       | (64,299    | ) | $ | 133,406 |   |
|                                                         |       |    |       |           |       |             |       |                    |       |
| **As of December 31, 2005**                                  |       |    |       |           |       |             |       |                    |       |
| **BALANCE SHEET:**                                           |       |    |       |           |       |             |       |                    |       |
| Current Assets,  including intercompany accounts             |       | $       | 18,415     |           | $          | 6,911            |       | $                       | (10,107    | ) | $ | 15,219 |   |
| Property and  Equipment, net                                 |       | 46,783  |       | 37,614         |       | —           |       | 84,397                  |       |
| Goodwill and  Other Intangibles                              |       | 15,047  |       | 16,146         |       | —           |       | 31,193                  |       |
| Other Assets  (liabilities), including intercompany accounts |       | 44,384  |       | 716            |       | (43,062          | )          | 2,038                   |       |
|                                                         |       | $       | 124,629    |           | $          | 61,387           |       | $                       | (53,169    | ) | $ | 132,847 |   |
|                                                         |       |    |       |           |       |             |       |                    |       |
| Current  Liabilities                                         |       | $       | 15,854     |           | $          | 17,020           |       | $                       | (10,107    | ) | $ | 22,767 |   |
| Long-term debt,  less current portion                        |       | 172,333 |       | —         |       | —           |       | 172,333                 |       |
| Gaming equipment  financing, less current portion            |       | 2,100   |       | 1,206          |       | —           |       | 3,306                   |       |
| Fair value of  interest rate swaps                           |       | 96      |       | 99             |       | —           |       | 195                     |       |
| Members’  (Deficit) Equity                              |       | (65,754 | )          | 43,062         |       | (43,062          | )          | (65,754                 | )          |
|                                                         |       | $       | 124,629    |           | $          | 61,387           |       | $                       | (53,169    | ) | $ | 132,847 |   |

 

25

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**RBG, LLC**

**Notes to Condensed ConsolidatedFinancial Statements (unaudited) (continued)**

**10.**          **Consolidating CondensedFinancial Information (cont’d)**

**For the three-months endedSeptember 30, 2006**

**STATEMENT OFOPERATIONS**
| ** **                                                      | ** ** | **RBG** | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Total  Consolidated** | ** ** |
|-----------------------------------------------------------------|------------|---------|------------|----------------|------------|------------------|------------|-------------------------|------------|
|                                                            |       |    |       |           |       |             |       |                    |       |
| Net Revenues                                                    |       | $       | 14,199     |           | $          | 12,089           |       | $                       | —     |   | $ | 26,288 |   |
| Operating Expenses:                                             |       |    |       |           |       |             |       |                    |       |
| Casino                                                          |       | 4,753   |       | 3,776          |       | —           |       | 8,529                   |       |
| Food and beverage                                               |       | 2,287   |       | 1,956          |       | —           |       | 4,243                   |       |
| Hotel                                                           |       | 391     |       | 607            |       | —           |       | 998                     |       |
| Other                                                           |       | 1,555   |       | 1,102          |       | —           |       | 2,657                   |       |
| General and administrative                                      |       | 4,719   |       | 4,747          |       | —           |       | 9,466                   |       |
| Depreciation and amortization                                   |       | 1,239   |       | 1,316          |       | —           |       | 2,555                   |       |
|                                                            |       | 14,944  |       | 13,504         |       | —           |       | 28,448                  |       |
| Operating loss                                                  |       | (745    | )          | (1,415         | )          | —           |       | (2,160                  | )          |
| Income from investment in subsidiary                            |       | (1,444  | )          | —         |       | 1,444            |       | —                  |       |
| Change in fair value of swap                                    |       | —  |       | —         |       | —           |       | —                  |       |
| Return on investment with MDW, LLC                              |       | 264     |       | —         |       | —           |       | 264                     |       |
| Interest expense                                                |       | (57     | )          | (29            | )          | —           |       | (86                     | )          |
| Total other  income (expense)                                   |       | (1,237  | )          | (29            | )          | 1,444            |       | 178                     |       |
| (Loss) income  before cumulative change in accounting principle |       | (1,982  | )          | (1,444         | )          | 1,444            |       | (1,982                  | )          |
| Cumulative  effect of change in accounting principle            |       | —  |       | —         |       | —           |       | —                  |       |
| Net (loss)  income                                              |       | $       | (1,982     | )              | $          | (1,444           | )          | $                       | 1,444      |   | $ | (1,982 | ) |

 

**For thethree-months endedSeptember 30, 2005**

**STATEMENT OFOPERATIONS**
| Net Revenues                  |   | $      | 13,115 |   | $      | 11,554 |   | $      | — |   | $ | 24,669 |   |
|-------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|---|--------|--------|
| Operating  Expenses:          |   |   |   |   |   |   |   |   |   |
| Casino                        |   | 4,167  |   | 3,544  |   | — |   | 7,711  |   |
| Food and beverage             |   | 2,290  |   | 2,252  |   | — |   | 4,542  |   |
| Hotel                         |   | 685    |   | 948    |   | — |   | 1,633  |   |
| Other                         |   | 1,503  |   | 1,010  |   | — |   | 2,513  |   |
| General and administrative    |   | 4,315  |   | 3,880  |   | — |   | 8,195  |   |
| Depreciation and amortization |   | 1,172  |   | 822    |   | — |   | 1,994  |   |
| Loss on sale of assets        |   | 16     |   | 63     |   | — |   | 79     |   |
|                          |   | 14,148 |   | 12,519 |   | — |   | 26,667 |   |

 

 

26

----

**RBG, LLC**

**Notes to Condensed ConsolidatedFinancial Statements (unaudited) (continued)**

**9.**             **Consolidating CondensedFinancial Information (cont’d)**

**For thethree-months ended September 30, 2005**

**STATEMENT OFOPERATIONS**
| ** **                                                      | ** ** | **RBG** | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Total  Consolidated** | ** ** |
|-----------------------------------------------------------------|------------|---------|------------|----------------|------------|------------------|------------|-------------------------|------------|
| Operating loss                                                  |       | (1,033  | )          | (965           | )          | —           |       | (1,998                  | )          |
| Income from investment in subsidiary                            |       | (990    | )          | —         |       | 990              |       | —                  |       |
| Change in fair value of swap                                    |       | 77      |       | 185            |       | —           |       | 262                     |       |
| Return on investment with MDW, LLC                              |       | (113    | )          | —         |       | —           |       | (113                    | )          |
| Interest expense                                                |       | (147    | )          | (210           | )          | —           |       | (357                    | )          |
| Total other  income (expense)                                   |       | (1,173  | )          | (25            | )          | 990              |       | (208                    | )          |
| (Loss) income  before cumulative change in accounting principle |       | (2,206  | )          | (990           | )          | 990              |       | (2,206                  | )          |
| Net (loss)  income                                              |       | $       | (2,206     | )              | $          | (990             | )          | $                       | 990        |   | $ | (2,206 | ) |
|                                                                 |            |         |            |                |            |                  |            |                         |            |  |  |  |  |

 

**For thenine-months endedSeptember 30, 2006**

**STATEMENT OFOPERATIONS**
| Net Revenues                                             |   | $      | 45,645 |   | $      | 42,000 |   | $      | — |   | $ | 87,645 |   |
|----------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|---|--------|--------|
| Operating  Expenses:                                     |   |   |   |   |   |   |   |   |   |
| Casino                                                   |   | 14,281 |   | 10,797 |   | — |   | 25,078 |   |
| Food and beverage                                        |   | 7,195  |   | 6,334  |   | — |   | 13,529 |   |
| Hotel                                                    |   | 1,375  |   | 2,219  |   | — |   | 3,594  |   |
| Other                                                    |   | 4,798  |   | 3,767  |   | — |   | 8,565  |   |
| General and administrative                               |   | 12,787 |   | 13,359 |   | — |   | 26,146 |   |
| Depreciation and amortization                            |   | 4,149  |   | 4,142  |   | — |   | 8,291  |   |
| Loss on sale of assets                                   |   | 69     |   | 179    |   | — |   | 248    |   |
|                                                     |   | 44,654 |   | 40,797 |   | — |   | 85,451 |   |
| Operating income                                         |   | 991    |   | 1,203  |   | — |   | 2,194  |   |
| Income from investment in subsidiary                     |   | 1,058  |   | — |   | (1,058 | )      | — |   |
| Change in fair value of swap                             |   | 41     |   | 99     |   | — |   | 140    |   |
| Return on investment with MDW, LLC                       |   | 484    |   | — |   | — |   | 484    |   |
| Interest expense                                         |   | (243   | )      | (173   | )      | — |   | (416   | )      |
| Total other  income (expense)                            |   | 1,340  |   | (74    | )      | (1,058 | )      | 208    |   |
| Income before  cumulative change in accounting principle |   | 2,331  |   | 1,129  |   | (1,058 | )      | 2,402  |   |
| Cumulative  effect of change in accounting principle     |   | (125   | )      | (71    | )      | — |   | (196   | )      |
| Net income                                               |   | $      | 2,206  |   | $      | 1,058  |   | $      | (1,058 | )      | $ | 2,206  |   |

 

27

----

**RBG, LLC**

**Notes to Condensed ConsolidatedFinancial Statements (unaudited) (continued)**

**9.**             **Consolidating CondensedFinancial Information (cont’d)**

**For thenine-months endedSeptember 30, 2005**

**STATEMENTOF OPERATIONS**
| ** **                                               | ** ** | **RBG** | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Total  Consolidated** | ** ** |
|----------------------------------------------------------|------------|---------|------------|----------------|------------|------------------|------------|-------------------------|------------|
| Net Revenues                                             |       | $       | 42,991     |           | $          | 40,778           |       | $                       | —     |   | $ | 83,769 |   |
| Operating  Expenses:                                     |       |    |       |           |       |             |       |                    |       |
| Casino                                                   |       | 12,296  |       | 10,433         |       | —           |       | 22,729                  |       |
| Food and beverage                                        |       | 7,411   |       | 7,002          |       | —           |       | 14,413                  |       |
| Hotel                                                    |       | 2,144   |       | 2,851          |       | —           |       | 4,995                   |       |
| Other                                                    |       | 5,151   |       | 3,959          |       | —           |       | 9,110                   |       |
| General and administrative                               |       | 11,820  |       | 11,296         |       | —           |       | 23,116                  |       |
| Depreciation and amortization                            |       | 3,376   |       | 2,483          |       | —           |       | 5,859                   |       |
| Loss on sale of assets                                   |       | 33      |       | 696            |       | —           |       | 729                     |       |
|                                                     |       | 42,231  |       | 38,720         |       | —           |       | 80,951                  |       |
| Operating income                                         |       | 760     |       | 2,058          |       | —           |       | 2,818                   |       |
| Income from investment in subsidiary                     |       | 1,981   |       | —         |       | (1,981           | )          | —                  |       |
| Change in fair value of swap                             |       | 233     |       | 556            |       | —           |       | 789                     |       |
| Return on investment with MDW, LLC                       |       | (288    | )          | —         |       | —           |       | (288                    | )          |
| Interest expense                                         |       | (415    | )          | (633           | )          |             |       | (1,048                  | )          |
| Total other  income (expense)                            |       | 1,511   |       | (77            | )          | (1,981           | )          | (547                    | )          |
| Income before  cumulative change in accounting principle |       | 2,271   |       | 1,981          |       | (1,981           | )          | 2,271                   |       |
| Cumulative  effect of change in accounting principle     |       | —  |       | —         |       | —           |       | —                  |       |
| Net income  (loss)                                       |       | $       | 2,271      |           | $          | 1,981            |       | $                       | (1,981     | ) | $ | 2,271 |   |

 

**For thenine-months ended September 30, 2006**

**STATEMENT OF CASHFLOWS**
| Net cash  provided by operating activities |   | $      | 2,165 |   | $ | 5,040  |   | $      | — |   | $ | 7,205 |   |
|--------------------------------------------|--------|--------|-------|--------|---|--------|--------|--------|--------|--------|---|-------|--------|
| Net cash used in  investing activities     |   | (3,354 | )     | (938   | ) | — |   | (4,292 | )      |
| Net cash used in  financing activities     |   | (2,423 | )     | (1,873 | ) | — |   | (4,296 | )      |

 

**For thenine-months ended September 30, 2005**

**STATEMENT OF CASH FLOWS**
| Net cash  provided by operating activities |   | $      | 4,535 |   | $ | 5,226  |   | $      | — |   | $ | 9,761 |   |
|--------------------------------------------|--------|--------|-------|--------|---|--------|--------|--------|--------|--------|---|-------|--------|
| Net cash used in  investing activities     |   | (5,070 | )     | (3,729 | ) | — |   | (8,799 | )      |
| Net cash used in  financing activities     |   | (1,384 | )     | (1,629 | ) | — |   | (3,013 | )      |

 

28

----

**B & B B, Inc.(doing business as Virgin River Hotel/Casino/Bingo)**

**Condensed BalanceSheets(in thousands)**
| ** **                                                                                                  | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|-------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                                                                                  | ** ** | **2006**               | ** ** | **2005**              | ** ** |
| ** **                                                                                                  | ** ** | **(unaudited)**        | ** ** | ** **            | ** ** |
| **Assets**                                                                                                  |       |                   |       |                  |       |
| Current assets:                                                                                             |       |                   |       |                  |       |
| Cash and cash  equivalents                                                                                  |       | $                      | 4,890      |                  | $          | 6,211 |   |
| Accounts  receivable, net                                                                                   |       | 258                    |       | 155                   |       |
| Related company  receivables                                                                                |       | 5,637                  |       | 122                   |       |
| Inventories                                                                                                 |       | 443                    |       | 392                   |       |
| Prepaid expenses                                                                                            |       | 1,370                  |       | 1,361                 |       |
| Total current assets                                                                                        |       | 12,598                 |       | 8,241                 |       |
| Property and equipment,  net                                                                                |       | 10,558                 |       | 11,155                |       |
| Goodwill and other  intangible assets, net                                                                  |       | 10,588                 |       | 11,568                |       |
| Deferred financing fees                                                                                     |       | 987                    |       | 1,129                 |       |
| Other assets                                                                                                |       | 64                     |       | 15                    |       |
| Total assets                                                                                                |       | $                      | 34,795     |                  | $          | 32,108 |   |
| ** **                                                                                                  | ** ** | ** **             | ** ** | ** **            | ** ** |
| **Liabilities and Stockholder’s  Deficit**                                                             |       |                   |       |                  |       |
| Current liabilities:                                                                                        |       |                   |       |                  |       |
| Current portion  of long-term debt                                                                          |       | $                      | —     |                  | $          | 174 |   |
| Current portion  of gaming equipment financing                                                              |       | 1,877                  |       | 1,647                 |       |
| Accounts payable                                                                                            |       | 882                    |       | 843                   |       |
| Accrued  liabilities                                                                                        |       | 5,862                  |       | 10,245                |       |
| Related company  payable                                                                                    |       | 5,161                  |       | 418                   |       |
| Total current  liabilities                                                                                  |       | 13,782                 |       | 13,327                |       |
| Gaming equipment  financing, less current portion                                                           |       | 766                    |       | 2,063                 |       |
| Long-term debt,  less current portion                                                                       |       | 174,737                |       | 172,333               |       |
| Fair value of interest  rate swaps                                                                          |       | —                 |       | 195                   |       |
| Commitments and  contingencies                                                                              |       |                   |       |                  |       |
| Stockholder’s deficit:                                                                                 |       |                   |       |                  |       |
| Common stock, no  par value; authorized 2,500 shares, 100 shares issued and 88 shares outstanding |       | —                 |       | —                |       |
| Retained  earnings                                                                                          |       | 2,344                  |       | 2,613                 |       |
| Treasury stock,  at cost                                                                                    |       | (700                   | )          | (700                  | )          |
| Deemed  distribution                                                                                        |       | (156,134               | )          | (157,723              | )          |
| Total stockholder’s  deficit                                                                           |       | (154,490               | )          | (155,810              | )          |
| Total liabilities and stockholder’s deficit                                                            |       | $                      | 34,795     |                  | $          | 32,108 |   |

 

The accompanying notes are an integral part of thesecondensed financial statements.

29

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**B & B B, Inc. (doing businessas Virgin River Hotel/Casino/Bingo)**

**CondensedStatements of Operations (unaudited)**(in thousands)
| ** **                           | ** ** | **Three months ended** | ** ** | **Nine months ended** | ** ** |
|--------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                           | ** ** | **September 30,**           | ** ** | **September 30,**          | ** ** | **September 30,** | ** ** | **September 30,** | ** ** |
| ** **                           | ** ** | **2006**                         | ** ** | **2005**                        | ** ** | **2006** | ** ** | **2005** | ** ** |
| Revenues                             |       |                             |       |                            |       |   |   |   |   |
| Casino                               |       | $                                | 8,861      |                            | $          | 8,390 |   | $ | 27,660 |   | $ | 25,935 |   |
| Food and  beverage                   |       | 2,869                            |       | 2,757                           |       | 9,026 |   | 8,752 |   |
| Hotel                                |       | 2,108                            |       | 1,799                           |       | 7,437 |   | 6,481 |   |
| Other                                |       | 712                              |       | 695                             |       | 2,136 |   | 2,059 |   |
| Total revenues                       |       | 14,550                           |       | 13,641                          |       | 46,259 |   | 43,227 |   |
| Less—promotional  allowances    |       | (2,337                           | )          | (1,646                          | )          | (6,894 | ) | (5,547 | ) |
| Net revenues                         |       | 12,213                           |       | 11,995                          |       | 39,365 |   | 37,680 |   |
| Operating expenses:                  |       |                             |       |                            |       |   |   |   |   |
| Casino                               |       | 3,569                            |       | 3,450                           |       | 10,691 |   | 10,884 |   |
| Food and  beverage                   |       | 2,147                            |       | 1,908                           |       | 5,968 |   | 5,515 |   |
| Hotel                                |       | 434                              |       | 747                             |       | 1,687 |   | 2,233 |   |
| Other                                |       | 337                              |       | 336                             |       | 1,054 |   | 1,052 |   |
| Related company  rent                |       | 1,575                            |       | 1,575                           |       | 4,725 |   | 4,725 |   |
| General and  administrative          |       | 3,405                            |       | 3,303                           |       | 10,127 |   | 9,273 |   |
| Depreciation and  amortization       |       | 1,198                            |       | 629                             |       | 3,684 |   | 1,988 |   |
| Gain on sale and  disposal of assets |       | —                           |       | —                          |       | (16 | ) | (43 | ) |
| Total operating  expenses            |       | 12,665                           |       | 11,948                          |       | 37,920 |   | 35,627 |   |
| Operating (loss) income              |       | (452                             | )          | 47                              |       | 1,445 |   | 2,053 |   |
| Other expense:                       |       |                             |       |                            |       |   |   |   |   |
| Interest expense                     |       | (556                             | )          | (608                            | )          | (1,714 | ) | (1,752 | ) |
| Net (loss) income                    |       | $                                | (1,008     | )                               | $          | (561 | ) | $ | (269 | ) | $ | 301 |   |

 

The accompanying notes are an integral partof these condensed financial statements.

 

30

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**B & B B, Inc. (doing businessas Virgin River Hotel/Casino/Bingo)**

**CondensedStatements of Cash Flows (unaudited)**(in thousands)
| ** **                                                                         | ** ** | **Nine months ended** | ** ** |
|------------------------------------------------------------------------------------|------------|---------------------------------|------------|
| ** **                                                                         | ** ** | **September 30,**          | ** ** | **September 30,** | ** ** |
| ** **                                                                         | ** ** | **2006**                        | ** ** | **2005** | ** ** |
| Cash flows from  operating activities:                                             |       |                            |       |   |   |
| Net (loss) income                                                                  |       | $                               | (269       | ) | $ | 301 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities: |       |                            |       |   |   |
| Depreciation and  amortization                                                     |       | 3,684                           |       | 1,988 |   |
| Gain on sale and  disposal of assets                                               |       | (16                             | )          | (43 | ) |
| Amortization of  deferred financing fees                                           |       | 143                             |       | 137 |   |
| Interest expense  on gaming equipment financing                                    |       | 22                              |       | 172 |   |
| Change in  operating assets and liabilities:                                       |       |                            |       |   |   |
| Accounts and  related company receivables, net                                     |       | (5,618                          | )          | (390 | ) |
| Inventories                                                                        |       | (51                             | )          | 7 |   |
| Prepaid expenses                                                                   |       | (9                              | )          | (310 | ) |
| Accounts  payable, accrued liabilities and related company payables                |       | 4,159                           |       | 220 |   |
| Net cash provided by  operating activities                                         |       | 2,045                           |       | 2,082 |   |
| Cash flows from  investing activities:                                             |       |                            |       |   |   |
| Proceeds  received from sale of assets.                                            |       | 11                              |       | 110 |   |
| Capital  expenditures                                                              |       | (1,968                          | )          | (2,209 | ) |
| Net cash used in  investing activities                                             |       | (1,957                          | )          | (2,099 | ) |
| Cash flows from  financing activities:                                             |       |                            |       |   |   |
| Payment of long-term  debt                                                         |       | (174                            | )          | (140 | ) |
| Payment on  gaming equipment financing                                             |       | (1,186                          | )          | (381 | ) |
| Payment of  financing fees                                                         |       | -                               |       | (37 | ) |
| Change in other  assets                                                            |       | (49                             | )          | (5 | ) |
| Net cash used in  financing activities                                             |       | (1,409                          | )          | (563 | ) |
| Net decrease in cash  and cash equivalents                                         |       | (1,321                          | )          | (580 | ) |
| Cash and cash  equivalents at beginning of year                                    |       | 6,211                           |       | 5,918 |   |
| Cash and cash equivalents at end of period                                         |       | $                               | 4,890      |   | $ | 5,338 |   |

 

The accompanying notes are an integral part of thesecondensed financial statements.

31

----

**B & B B, Inc. (doing businessas Virgin River Hotel/Casino/Bingo)**

**CondensedStatements of Cash Flows (unaudited) (continued)****(in thousands)**

** **
| ** **                                             | ** ** | **Nine months ended** | ** ** |
|--------------------------------------------------------|------------|---------------------------------|------------|
| ** **                                             | ** ** | **September 30,**          | ** ** | **September 30,** | ** ** |
| ** **                                             | ** ** | **2006**                        | ** ** | **2005** | ** ** |
| Supplemental  cash flow disclosure:                    |       |                            |       |   |   |
| Cash paid for interest                                 |       | $                               | 1,536      |   | $ | 1,056 |   |
| Acquisition of  assets with gaming equipment financing |       | $                               | 118        |   | $ | 3,430 |   |

 

The accompanying notes are an integral part of thesecondensed financial statements.

32

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**B & B B, Inc. (doing businessas Virgin River Hotel/Casino/Bingo)**

**Notes to CondensedFinancial Statements (unaudited)**June 30, 2006

**1.             Basis of Presentation and Background**

B&BB, Inc. (the “Company” or “B&BB”) is aNevada corporation formed on December 7, 1989 for the purpose of operatingthe Virgin River Hotel/Casino/Bingo (“Virgin River”) located in Mesquite,Nevada. The Company’s shares are 100% owned by Randy Black, Sr. (“Mr. Black”).The hotel portion of the facility commenced operations on June 1, 1990,and the casino portion commenced operations on September 1, 1990. The landand buildings are owned by Virgin River Casino Corporation (“VRCC”), a Nevadacorporation which is also 100% owned by Mr. Black and leased to B&BB. VRCCowns 88.8% of RBG, LLC (“RBG”) and Casablanca Resorts, LLC (“Resorts LLC”). Mr.Black owns 9.28% of RBG individually and through another entity. Certainpersonal property including furniture and fixtures, leasehold improvementswithin the casino, and gaming equipment are owned by B&BB. VRCC, RBG andB&BB (collectively the “Companies”) are operated under common management.

***Interim Financial Statements***— The accompanying unaudited condensedconsolidated financial statements as of September 30, 2006 and for the threeand nine-month periods ended September 30, 2006 and 2005 are unaudited.  In the opinion of management, all adjustments(which include normal recurring adjustments) necessary for a fair presentationof the Company’s financial position and results of operations for such periods,have been included.  The accompanyingunaudited condensed financial statements should be read in conjunction with theCompany’s audited financial statements filed on Form 10-K for the year endedDecember 31, 2005.  The results for thethree and nine-month periods ended September 30, 2006 are not necessarilyindicative of the results that may be expected for the year ending December 31,2006, or for any other period.

***Reclassifications***— Certain previously reported amounts inthe condensed financial statements have been reclassified to conform to thecurrent period’s presentation.

**2.            Related Company Receivablesand Payables**

The related company receivable of the Company consistsof the following (in thousands):

 

|                              | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                   | ** ** | **2006**               | ** ** | **2005**              | ** ** |
| ** **                   | ** ** | **(unaudited)**        | ** ** | ** **            | ** ** |
| Virgin River  Casino Corp.   |       | $                      | 5,637      |                  | $          | 106 |   |
| RBG, LLC                     |       | —                 |       | 8                     |       |
| Casablanca  Resorts, LLC     |       | —                 |       | 8                     |       |
| Related company  receivables |       | $                      | 5,637      |                  | $          | 122 |   |

 

The related company payableof the Company consists of the following (in thousands):

|                            | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|----------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                 | ** ** | **2006**               | ** ** | **2005**              | ** ** |
| ** **                 | ** ** | **(unaudited)**        | ** ** | ** **            | ** ** |
| Virgin River  Casino Corp. |       | $                      | —     |                  | $          | 14 |   |
| RBG, LLC                   |       | 3,325                  |       | 271                   |       |
| Casablanca  Resorts, LLC   |       | 1,836                  |       | 133                   |       |
| Related company payable    |       | $                      | 5,161      |                  | $          | 418 |   |

 

33

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**B & B B, Inc. (doing businessas Virgin River Hotel/Casino/Bingo)**

### **Notes to Condensed Financial Statements(unaudited)**

**3.             Property and Equipment**

**The transactions between the Company and theentities above are based on informal arrangements.  At September 30, 2006 and December 31, 2005,there are no specific payment terms nor do any of the receivables require thepayment of any interest.**

Property andequipment consists of the following (in thousands):

|                                                      | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                           | ** ** | **2006**               | ** ** | **2005**              | ** ** |
| ** **                                           | ** ** | **(unaudited)**        | ** ** | ** **            | ** ** |
| Buildings                                            |       | $                      | 285        |                  | $          | 285 |   |
| Land and  leasehold improvements                     |       | 3,741                  |       | 3,741                 |       |
| Furniture,  fixtures and equipment                   |       | 28,961                 |       | 25,964                |       |
| Construction in  progress                            |       | —                 |       | 893                   |       |
|                                                 |       | 32,987                 |       | 30,883                |       |
| Less—accumulated  depreciation and amortization |       | (22,429                | )          | (19,728               | )          |
| Property and equipment,  net                         |       | $                      | 10,558     |                  | $          | 11,155 |   |

 

As a result of the third party business valuation thatwas conducted in the fourth quarter of 2005, the Company has re-evaluated theuseful lived of their slot machines (included in furniture, fixtures andequipment above) and effective January 1, 2006, changed that estimate fromseven years to five years. For the three and nine months ended September 30,2006, operating income of the Company decreased approximately $97,000 and$292,000, respectively, as a result of the change in the estimated lives.

**4.             Long-term Debt**

Long-term debtconsists of the following (in thousands): 
| ** **                                                                                                                                                                                                                                                                                  | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                                                                                                                                                                                                                                                                  | ** ** | **2006**               | ** ** | **2005**              | ** ** |
| ** **                                                                                                                                                                                                                                                                                  | ** ** | **(unaudited)**        | ** ** | ** **            | ** ** |
| Revolving credit  facility totaling $15 million with Wells Fargo Foothill, at a margin above  prime or LIBOR, as defined; collateralized by substantially all real and  personal property, leases, intangibles and other interests of the Companies  as defined.                            |       | $                      | —     |                  | $          | 2,000 |   |
| 9% senior  secured notes, interest payable semiannually, principal due January 15, 2012,  callable January 15, 2009                                                                                                                                                                         |       | 125,000                |       | 125,000               |       |
| 12 3⁄4% senior  subordinated notes, non-cash interest will accrue at an annual rate of 12 3⁄4%  in the form of increase accreted value until January 15, 2009. Beginning  January 15, 2009, interest payable semiannually, principal due January 15,  2013, callable January 15, 2009 |       | 49,737                 |       | 45,333                |       |
| Promissory note  payable to Wells Fargo Equipment Finance, Inc. payable in monthly  installments of $17 at an interest rate of 6.97%, due June 2006                                                                                                                                         |       | —                 |       | 174                   |       |
|                                                                                                                                                                                                                                                                                        |       | 174,737                |       | 172,507               |       |
| Less—current  portion                                                                                                                                                                                                                                                                  |       | —                 |       | (174                  | )          |
| Total long-term  debt                                                                                                                                                                                                                                                                       |       | $                      | 174,737    |                  | $          | 172,333 |   |

 

34

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**B & B B, Inc. (doing businessas Virgin River Hotel/Casino/Bingo)**

### **Notes to Condensed Financial Statements(unaudited)**

**4.             Long-term Debt (cont’d)**

***Foothill Facility***

The Wells Fargo Foothill, Inc. credit facility (“FoothillFacility’) is secured by substantially all the assets of the Companies. Duringthe life of the Foothill Facility, the Companies may borrow up to the lesser of(1) $15.0 million less the Letter of Credit Usage, as defined, lessthe Bank Product Reserve, as defined, or (2) the Borrowing Base, asdefined, less the Letter of Credit Usage. At September 30, 2006, no amounts were drawn on the FoothillFacility.  Accordingly, the availabilityunder the Foothill Facility at September 30, 2006 was $15.0 million. Under theterms of the Foothill Facility, interest accrues on the outstanding principalbalance at LIBOR plus the LIBOR Rate Margin, which is 3.5%, or the Base Rate,as defined, plus the Base Rate Margin, which is 2%.  LIBOR was approximately 5.32% at September30, 2006.  The Foothill Facility alsocontains certain financial and other covenants. These include a minimum trailing twelve-month Earnings before Interest,Taxes, Depreciation and Amortization (“EBITDA”) of $15,000,000 for theCompanies and limitations on other indebtedness and capital expenditures, asdefined.  The Companies were incompliance with these covenants at September 30, 2006 and December 31, 2005.

The outstanding balance on the Foothill Facility is ajoint and several obligation of the Companies. The condensed balance sheet ofthe Company reflects the full obligation of the Foothill Facility at September30, 2006 and December 31, 2005 with the amount recorded on the consolidatedbalance sheet of VRCC recognized as a deemed distribution to reflect the netobligation of the Foothill Facility on the balance sheet of the Company atSeptember 30, 2006. At September 30, 2006, the net amount of the FoothillFacility recorded on the Company’s balance sheet is $0.

***SeniorSecured and Senior Subordinated Notes***

In December 2004, as part of an ownership buyout (the “Buyout”),the VRCC, RBG and B&BB (the “Issuers”) issued $125.0 million of 9%senior secured notes (“Senior Notes”) due on January 15, 2012 and$39.9 million in gross proceeds of 123⁄4% senior subordinated notes (“SeniorSub Notes”) due January 15, 2013 (collectively the “Notes”).  The Notes are joint and several obligationsof the Issuers and all current and future subsidiaries of the Issuers.  Although the Notes are joint and severalobligations of the Issuers, the allocation of the balance of the Notes to theindividual balance sheets of B&BB, VRCC and RBG was according to the flowof funds at the date of the Buyout with the proceeds of the Senior Notesnecessary to purchase the interests of B&BB recorded on the balance sheetof B&BB and the remaining proceeds of the Senior Notes and Senior Sub Notesrecording on the balance sheet of VRCC. The condensed balance sheet of the Company reflects the full obligationof the Notes at September 30, 2006 with an amount that is recorded on theconsolidated balance sheet of VRCC recognized as a deemed distribution toreflect the net obligation of the Notes recorded on the balance sheet of theCompany at September 30, 2006. At September 30, 2006, the net amount of theNotes recorded on the Company’s balance sheet is $20.6 million.

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**B & BB, Inc. (doing business as Virgin River Hotel/Casino/Bingo)**

**Notesto Condensed Financial Statements (unaudited) (continued)**

**4.             Long-term Debt (cont’d)**

The Senior Notes pay interest semiannually while theSenior Sub Notes accrue interest in the form of increased accreted value untilJanuary 15, 2009, when the carrying book value of the Senior Sub Noteswill be $66.0 million.  At thatpoint the Senior Sub Notes will pay interest semiannually on the same dates asthe Senior Notes.

The indentures (the “Indentures”) governing theIssuers’ Notes contain certain customary financial and other covenants, whichlimit the Issuers’ ability to incur additional debt.  The Indentures provide that the Issuers maynot incur additional indebtedness, other than specified types of indebtedness,unless the Consolidated Coverage Ratio, as defined, on a pro-forma basis afterthe incurrence of the additional indebtedness is at least 2.00 to 1.00. As ofSeptember 30, 2006, the Issuers have incurred $0 of additional indebtedness asdefined.

The Indentures also containother covenants which limit the ability of the Issuers and Guarantors, asdefined, under the Indentures to pay dividends, redeem stock, or make otherdistributions, make investments, create certain liens, enter into certaintransactions with affiliates, utilize proceeds from asset sales, transfer or sellassets, issue or sell equity interests of subsidiaries and enter into certainmergers and consolidations, as defined in the Indentures.  There are no restrictions related to thetransfer of funds between the Issuers, Guarantors and their respective subsidiaries.  The Issuers were in compliance with thesecovenants at September 30, 2006 and December 31, 2005.

The Senior Notes are secured by substantially allexisting and future assets of the Issuers and the Guarantors, as defined, aswell as the equity interest of the Guarantors, the equity interests of Mr.Black  and his affiliate in theIssuers.  The Guarantors are all thewholly owned subsidiaries of the Issuers. The Senior Notes are subordinated to the security interests of theFoothill Facility.  The Senior Sub Notesare subordinate to the Senior Notes and all other indebtedness of theCompanies.

***InterestRate Swaps***

The Companies interest rateswaps terminated effective June 30, 2006.

**5.             Gaming Equipment Financing**

The Company from time to time enters into agreementswith gaming manufacturers to finance the purchase of gaming equipment.  Contractual terms of the agreements with thegaming manufactures consist of payment terms of less than one year to up tothree years without interest.  In theevent that an agreement with a gaming manufacturer extends past a year, theCompany will impute interest at a rate of 8%.

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**B & BB, Inc. (doing business as Virgin River Hotel/Casino/Bingo)**

**Notesto Condensed Financial Statements (unaudited) (continued)**

**5.             Gaming Equipment Financing (cont’d)**

Gaming equipmentfinancing consists of the following (in thousands): 
| ** **                                                                                                                                      | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                                                                                                                      | ** ** | **2006**               | ** ** | **2005**              | ** ** |
| ** **                                                                                                                                      | ** ** | **(unaudited)**        | ** ** | ** **            | ** ** |
| Gaming equipment  financing to purchase 273 games, no payments for one year and monthly payments  of $145 for 24 months beginning February 2006 |       | $                      | 2,192      |                  | $          | 3,183 |   |
| Gaming equipment  financing to purchase 20 games, monthly payments of $7 for 36 months  beginning April 2005                                    |       | 115                    |       | 167                   |       |
| Gaming equipment  financing to purchase 35 games, no payments for one year and monthly payments  of $8 for 24 months beginning January 2006     |       | 99                     |       | 176                   |       |
| Gaming equipment  financing to purchase 4 games, monthly payments of $1 for 36 months beginning  April 2005                                     |       | 21                     |       | 32                    |       |
| Gaming equipment  financing to purchase 20 games, monthly payments of $7 for 36 months  beginning April 2005                                    |       | 98                     |       | 152                   |       |
| Gaming equipment  financing , no payments for 18 months and monthly payments of $1 for 36  months beginning July 2006                           |       | 29                     |       | —                |       |
| Gaming equipment  financing , no payments for 36 months and a lump sum payment of $95 due  January 2008                                         |       | 89                     |       | —                |       |
|                                                                                                                                            |       | 2,643                  |       | 3,710                 |       |
| Less current  portion                                                                                                                           |       | (1,877                 | )          | (1,647                | )          |
| Gaming equipment  financing, long-term portion                                                                                                  |       | $                      | 766        |                  | $          | 2,063 |   |

**6.             RelatedParty Transactions**

Virgin River Foodmart, Inc. (“Foodmart”), aNevada corporation, is owned by Mr. Black and his siblings. Participants in theCompany’s slot club program are able to redeem their points for gasoline at theFoodmart.  Foodmart charges the Companythe retail amount of gas purchased with player points.  For the three and nine-month periods endedSeptember 30, 2006 and 2005, Foodmart has charged the Company $10,000, $36,000,$77,000 and $210,000, respectively, for gasoline purchased with points from theCompany’s slot club program.

Black, LoBello &Pitegoff is a law firm managed by the daughter of Mr. Black. The Company retains Black,LoBello & Pitegoff as outside legal counsel, and have paid legal feesfor legal services in the amount of $57,000, $71,000, $14,000 and $18,000 forthe three and nine-month periods ended September 30, 2006 and 2005,respectively.

Gaming Research is a consulting firm retained toperform marketing research for the Company. The principal of Gaming Research is the father of the Company’s chiefoperating officer.  Gaming Researchreceived consulting fees of $16,000, $59,000, $0 and $0 during the three andnine-months ended September 30, 2006 and 2005, respectively

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**B & BB, Inc. (doing business as Virgin River Hotel/Casino/Bingo)**

**Notesto Condensed Financial Statements (unaudited) (continued)**

**6.             RelatedParty Transactions (cont’d)**

Pursuant to the Indentures, Mr. Black is entitled to amanagement fee for his management of the Company’s business of up to 5% ofEBITDA, as defined.  The Company hasexpensed $110,000 and $329,000, $96,000 and $288,000 during the three andnine-month periods ended September 30, 2006 and 2005, respectively, associatedwith this management fee.

**7.             SubsequentEvents**

In October 2006, the Companies adopted the BlackGaming Long Term Incentive Plan (“LTIP”). LTIP is a long-term formula based compensation plan utilizing EBITDA, asdefined, Long-term Debt, as defined, cash and a fixed multiple to compensatesenior executives for increasing the operating performance and financialcondition of the Companies in the event the executive remains with theCompanies.  Future compensation, commencingin the fourth quarter of the year ended December 31, 2006, recognized inaccordance with LTIP will be accounted for using the intrinsic value methodallowed for nonpublic entities as defined and prescribed by SFAS 123(R) “ShareBased Payment”.

The Companies have commenced action to reorganize (the“Proposed Reorganization”) the entities, Virgin River Casino Corporation, RBG,LLC, and B & B B, Inc. under a single holding company, BlackGaming, LLC, a Nevada limited-liability company (“Black Gaming”). The Companiesare currently seeking the necessary approvals and licenses from appropriateparties, including but not limited to appropriate gaming authorities. While theCompanies hope the Proposed Reorganization will be effective prior toJanuary 1, 2007, no assurance can be given that the ProposedReorganization will be effective by that date, if ever. As currently proposed,when the Proposed Reorganization is completed, Black Gaming will guaranteepayment of the Companies’ 9% senior secured notes and 12 3/4% seniorsubordinated notes.

 

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**Item 2.**                          Management’sDiscussion and Analysis of Financial Condition and Results of Operations.

*You should read the following discussion and analysistogether with our unaudited consolidated financial statements and theaccompanying notes. This discussion contains forward-looking statements, withinthe meaning of Section 27A of Securities Act of 1933, as amended, Section 21Eof the Securities Exchange Act of 1934, as amended, and the Private SecuritiesLitigation Reform Act of 1995, including statements regarding our expectedfinancial position, business and financing plans. Some of the forward-lookingstatements 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 involveinherent risks and uncertainties which could cause actual results to differmaterially from those in the forward-looking statement, including thosediscussed herein and elsewhere in our Form 10-K for the year ended December 31,2005, particularly under the heading “Risk Factors.” We caution readersnot to place undue reliance upon any such forward-looking statements, whichspeak only as of the date made*.

***Overview***

We own and operate the CasaBlanca Hotel & Casino (the “Casablanca”),the Oasis Hotel and Casino (the “Oasis”) and the Virgin River Hotel &Casino (the “Virgin River”) in Mesquite, Nevada, which is located approximately80 miles north of Las Vegas. We own three of the four casinos operating inMesquite and collectively our properties have a dominant market share inMesquite. Our properties are well established, each having been in operationfor at least nine years, and serve as significant drive-in gaming and resortdestinations. Our properties collectively feature over 2,200 slot machines, 75table games, and 2,100 deluxe hotel rooms, and offer extensive amenities,including championship golf courses, full service spas, a bowling center, movietheaters, restaurants, and banquet and conference facilities. With each of ourproperties, we leverage our extensive value-oriented amenities andemphasis on slot play to target middle market gaming customers.

Our revenues are primarily derived from gaming revenues, which includerevenues from slot machines, table games, live keno, race and sports bookwagering and bingo. Gaming revenues are generally defined as gaming wins lessgaming losses. In addition, we derive a significant amount of revenue from ourhotel rooms and our food and beverage outlets. We also derive revenues from ourgolf courses, spa facilities, timeshare units, bowling center and otheramenities. Promotional allowances consist primarily of free hotel rooms or foodand beverages furnished gratuitously to customers. The retail value of suchservices is included in the respective revenue classifications and is thendeducted as promotional allowances. We calculate operating income as netrevenues less total operating costs and expenses. Operating income representsonly those amounts that relate to our operations and excludes interest income,interest expense, and other non-operating income and expenses.

Our entities are classified as “flow-through” entities under thepartnership or Subchapter S provisions of the Internal Revenue Code of 1986, asamended. Under those provisions, the owners of the companies pay or areresponsible for reporting our taxable income on their separate returns.Accordingly, a provision for income taxes is not included in our financial statements.

RBG, LLC, a Nevada limited-liability company, was formed inFebruary 1997 for the purpose of acquiring the assets of Player’s IslandResort in Mesquite, Nevada, currently operating as the CasaBlanca. RBG, LLCacquired the CasaBlanca for $30.5 million. In February 2001, RBG, LLCformed a subsidiary, Casablanca Resorts, LLC, a Nevada limited-liabilitycompany, in order to purchase the assets of the Oasis in Mesquite. RBG, LLCacquired the Oasis for $31.7 million. Currently, RBG, LLC directly ownsand operates the CasaBlanca, and through its wholly-owned subsidiary,owns and operates the Oasis. In 

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May 2001, Casablanca Resorts, LLC formed threesubsidiaries—Oasis Interval Ownership, LLC, a Nevada limited-liabilitycompany; Oasis Recreational Properties, Inc., a Nevada corporation; andOasis Interval Management, LLC, a Nevada limited-liability company. OasisInterval Ownership, LLC and Oasis Interval Management, LLC were formed inconnection with the operation and management of time share operations. OasisRecreational Properties, Inc. owns the recreational facility that isassociated with the Oasis.

B&BB, Inc., a Nevada corporation, was formed inDecember 1989 in connection with the construction and development of theVirgin River. B&BB, Inc. operates the hotel casino and owns certainpersonal property including furniture and fixtures, leasehold improvements andgaming equipment within the casino. Virgin River Casino Corporation, a Nevadacorporation, was formed in July 1988 in connection with the constructionof the Virgin River. Virgin River Casino Corporation currently owns the landand buildings associated with the Virgin River as well as the Virgin RiverConvention Center (formerly known as the Mesquite Star Hotel & Casino).Virgin River Casino Corporation generates income from rents received from B& B B, Inc., which operates the Virgin River.

The Virgin River Convention Center is currently a nonoperating casino,which we acquired out of bankruptcy for $6.3 million inNovember 2000. The Virgin River Convention Center has 12,000 square feetof gaming space and 210 hotel rooms. We are presently using the property as aspecial events facility and for overflow hotel traffic from our otherproperties. We believe that the Virgin River Convention Center gives us acompetitive advantage in the Mesquite market because it allows us theflexibility of opening the casino to meet market demand and to maintain ourmarket share in the future on a cost-effective basis.

In order to offer our customers attractiveand modern facilities, we plan to continue to renovate our facilities and addamenities. In particular, in the future we plan to (i) add convention andconcert space and redesign the center and pool bar at the Casablanca; (ii) addan additional restaurant and refurbish and remodel the casino interior, coffeeshop and lounge at the Virgin River; and (ii) expand and remodel the finedining restaurant and sports bar at the Oasis. We are currently in the designphase for each of the projects, therefore, budgets and timetables forcompletion for each have not been finalized. However, it is anticipated that the total cost for all projects will notexceed $21 million, the same amount previously allocated for our postponedhotel tower.

***Key Performance Indicators***

Our operating results are highly dependent on the volume of customersat our properties, which in turn impacts the price we can charge for our hotelrooms and other amenities. We generate a significant portion of our operatingincome from the gaming and hotel portions of our operations. Key performanceindicators in our gaming and hotel operations are as follows:

Gaming revenue indicators — table games drop and slot handle (volumeindicators); “win” or “hold” percentage, which is not fully controllable by us.Our normal table games win percentage is in the range of 15% to 18% of tablegames drop and our normal slot win percentage is in the range of 5% to 6% ofslot handle.

Hotel revenue indicators — hotel occupancy (volume indicator); averagedaily rate (“ADR,” price indicator); revenue per available room (“REVPAR”), asummary measure of hotel results, combining ADR and occupancy rate.

Most of our revenue is essentially cash-based, through customerswagering with cash or paying for non-gaming services with cash or credit cards.Our industry is capital intensive and we rely heavily on 

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the ability of our properties to generate operatingcash flow to repay debt financing, fund maintenance capital expenditures andprovide excess cash for future development.

Our results of operations tend to be seasonal in nature. Typically, 54%of our operating income is generated in the first quarter and 39% is generated in the second quarter with theremainder being generated during the final half of the year.

***Financial Highlights of Virgin River CasinoCorporation***

**For the Three-and Nine Months ended September 30, 2006and 2005 (unaudited) (in thousands)**
| ** **                           | ** ** | **Three-months ended   September 30,** | ** ** | **%**    | ** ** | **Nine months ended   September 30,** | ** ** | **%**    | ** ** |
|--------------------------------------|------------|-------------------------------------------------------|------------|----------|------------|-----------------------------------------------------------|------------|----------|------------|
| ** **                           | ** ** | **2006**                                              | ** ** | **2005** | ** ** | **Change**                                                | ** ** | **2006** | ** ** | **2005** | ** ** | **Change** | ** ** |
| Casino revenues                      |       | $                                                     | 16,410     |     | 14,283     |                                                      | 14.9       | %        | $          | 51,256 |   | $ | 45,861 |   | 11.8 | % |
| Casino expenses                      |       | 8,529                                                 |       | 7,711    |       | 10.6                                                      | %          | 25,078   |       | 22,729 |   | 10.3 | % |
| Profit margin                        |       | 48.0                                                  | %          | 46.0     | %          | —                                                    |       | 51.1     | %          | 50.4 | % | — |   |
|                                 |       |                                                  |       |     |       |                                                      |       |     |       |   |   |   |   |
| Food and  beverage revenues          |       | $                                                     | 7,543      |     | 7,104      |                                                      | 6.2        | %        | $          | 23,629 |   | $ | 22,994 |   | 2.8 | % |
| Food and  beverage expenses          |       | 4,243                                                 |       | 4,542    |       | (6.6                                                      | )%         | 13,529   |       | 14,413 |   | (6.1 | )% |
| Profit margin                        |       | 43.7                                                  | %          | 36.1     | %          | —                                                    |       | 42.7     | %          | 37.3 | % | — |   |
|                                 |       |                                                  |       |     |       |                                                      |       |     |       |   |   |   |   |
| Hotel revenues                       |       | $                                                     | 5,521      |     | 4,761      |                                                      | 16.0       | %        | $          | 18,998 |   | $ | 15,643 |   | 21.4 | % |
| Hotel expenses                       |       | 1,000                                                 |       | 1,723    |       | (42.0                                                     | )%         | 3,892    |       | 5,352 |   | (27.3 | )% |
| Profit margin                        |       | 81.9                                                  | %          | 63.8     | %          | —                                                    |       | 79.5     | %          | 65.8 | % | — |   |
|                                 |       |                                                  |       |     |       |                                                      |       |     |       |   |   |   |   |
| Other revenues                       |       | $                                                     | 3,277      |     | 3,092      |                                                      | 6.0        | %        | $          | 13,777 |   | $ | 13,924 |   | (1.1 | )% |
| Other expenses                       |       | 2,657                                                 |       | 2,513    |       | 5.7                                                       | %          | 8,565    |       | 9,110 |   | (6.0 | )% |
|                                 |       |                                                  |       |     |       |                                                      |       |     |       |   |   |   |   |
| Promotional  allowances              |       | $                                                     | 6,386      |     | 4,460      |                                                      | 43.2       | %        | $          | 19,520 |   | $ | 13,986 |   | 39.6 | % |
| Percent of gross  revenues           |       | 18.6                                                  | %          | 14.5     | %          | —                                                    |       | 17.4     | %          | 13.6 | % | — |   |
|                                 |       |                                                  |       |     |       |                                                      |       |     |       |   |   |   |   |
| General and  administrative expenses |       | $                                                     | 9,630      |     | 8,262      |                                                      | 16.6       | %        | $          | 26,390 |   | $ | 23,361 |   | 13.0 | % |
|                                 |       |                                                  |       |     |       |                                                      |       |     |       |   |   |   |   |
| Percent of net revenues              |       | 34.5                                                  | %          | 31.3     | %          | —                                                    |       | 28.4     | %          | 26.2 | % | — |   |

** **

**Three and nine-months endedSeptember 30, 2006 compared to the three and nine-months ended September 30,2005**

*ConsolidatedNet Revenues.* Consolidated net revenues increased by 6.0% to $28.0million for the three-months ended September 30, 2006 as compared to$26.4 million for the three-months ended September 30, 2005. The increasewas primarily due to a $2.1 million increase in casino revenues, a $0.8 millionincrease in hotel revenues and a $0.4 million increase in food and beveragerevenues and a $0.2 million increase in other revenues, offset by a $1.9million increase in promotional allowances.

Consolidated net revenues increased by 4.2%to $92.9 million for the nine-months ended September 30, 2006 as compared to$89.2 million for the nine-months ended September 30, 2005. The increasewas primarily due to a $5.4 million increase in casino revenues, a $3.4 millionincrease in hotel revenues and a $0.6 million increase in food and beveragerevenues, offset by a decrease in other revenue of $0.1 million and a $5.5million increase in promotional allowances.

*ConsolidatedOperating Income.* Consolidated operating loss increased to $1.1million for the three-months ended September 30, 2006 as compared to anoperating loss of $0.9 million for the three-months ended September 30,2005. In addition, our operating loss margin increased to 3.8% of net revenuesfor the three-months ended September 30, 2006 as compared to the loss margin of3.6% of net 

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revenues for thethree-months ended September 30, 2005. The main reason for the decrease in operating income was primarily dueto a $0.8 million increase in casino expenses, a $1.4 million increase ingeneral and administrative expenses and a $0.5 million increase in depreciationand amortization, offset by increases in revenues for the three months endedSeptember 30, 2006 as compared to the three months ended September 30, 2005.

Consolidated operating income decreased by 7.3%to $5.7 million for the nine-months ended September 30, 2006 as compared to$6.2 million for the nine-months ended September 30, 2005. In addition,our operating income margin decreased to 6.2% of net revenues for thenine-months ended September 30, 2006 as compared to 7.0% of net revenues forthe nine-months ended September 30, 2005. The main reason for the decrease was due to a $3.0 million increase in generaland administrative expenses in addition to an increase in depreciation andamortization of $2.1 million offset by reductions in hotel operating expensesand other expenses in the current period.

*Casino.* Casinorevenues increased 14.9% to $16.4 million for the three-months endedSeptember 30, 2006 as compared to $14.3 million for the three-months endedSeptember 30, 2005. The increase in casino revenues was due to the increase inslot revenues, which increased $2.2 million between periods as the holdpercentage increased for the three-months ended September 30, 2006  compared to the same period in the prior yearoffset by a decrease in coin-in.  Tablegames revenues remained relatively flat for the three months ended September30, 2006 as compared to the same period in the prior year on increased drop.  Casino profit margin increased to 48.0% forthe three-months ended September 30, 2006 as compared to 46.0% for three-monthsended September 30, 2005.  Casinoexpenses increased 10.6% to $8.5 million for the three months ended September30, 2006 as compared to $7.7 million for the three months ended September 30,2005. The increase was attributable to increased taxes and license fees whichincrease with increased gaming revenues in addition to additional expensesattributable to promotional allowances for highly rated players. 

Casino revenues increased 11.8% to$51.3 million for the nine-months ended September 30, 2006 as compared to$45.9 million for the nine-months ended September 30, 2005. The increasein casino revenues was due to the increase in slot revenues, which increased$5.0 million between periods on an increased overall hold for the nine-monthsended September 30, 2006 compared to the same period in the prior year. Table gamesrevenues increased $0.8 million for the nine months ended September 30, 2006 ascompared to the same period in the prior year on increased drop and hold.  Casino profit margin increased to 51.1% forthe nine-months ended September 30, 2006 as compared to 50.4% for thenine-months ended September 30, 2005. The increase in casino profit margin isprimarily due to most costs remaining relatively flat or decreasing, with theexception of gaming taxes and advertising and promotions for the nine-monthsended September 30, 2006 compared to the nine-months ended September 30, 2005.Casino expenses increased 10.3% to $25.1 million for the nine-months endedSeptember 30, 2006 compared to $22.7 million for the nine-months endedSeptember 30, 2005.

*Food andBeverage.* Food and beverage revenues increased by 6.2% to$7.5 million for the three-months ended September 30, 2006 as compared to $7.1million for the three-months ended September 30, 2005. Revenues increased dueto an increase in pricing.  Food andbeverage expenses decreased by 6.6% to $4.2 million for the three-months endedSeptember 30, 2006 as compared to $4.5 million for the three-months endedSeptember 30, 2005.  The decrease in foodand beverage expenses was mainly due to a reduction in covers for the quarter.  Food and beverage profit margin increased to43.7% for the three-months ended September 30, 2006 as compared to 36.1% forthe three-months ended September 30, 2005. The increase in food and beverage profit margin is primarily due to anincrease in revenue due to pricing on reduced covers.

Food and beverage revenues increased by 2.8%to $23.6 million for the nine-months ended September 30, 2006 as compared to$23.0 million for the nine-months ended September 30, 2005. Revenues increaseddue to an increase in pricing offset by fewer covers.  Food and beverage expenses 

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decreased 6.1% to $13.5million for the nine-month ended September 30, 2006 as compared to $14.4million for the nine-months ended September 30, 2005.  The decrease in expenses was primarily due toa reduction in covers. Food and beverage profit margin increased to 42.7% forthe nine-months ended September 30, 2006 as compared to 37.3% for thenine-months ended September 30, 2005. The increase in food and beverage profit margin is primarily due to anincrease in revenues due to pricing on reduced covers for the period.

*Hotel.* Hotel revenuesincreased 16.0% to $5.5 million for the three-months ended September 30, 2006as compared to $4.8 million for the three-months ended September 30, 2005.Hotel revenues increased due to increased occupied rooms on increases inADR.  Hotel expenses decreased 42.0% to$1.0 million for the three-months ended September 30, 2006 compared to $1.7million for the three-months ended September 30, 2005 due to reduced payrollcosts.  As a result, hotel profit marginincreased to 81.9% for the three-months ended September 30, 2006 from 63.8% inthe prior three-month period ended September 30, 2005.

Hotel revenues increased 21.4% to $19.0million for the nine-months ended September 30, 2006 as compared to$15.6 million for the nine-months ended September 30, 2005. Hotel revenuesincreased due to increased ADR offset by a decreased number of occupied rooms.Hotel expenses decreased 27.3% to $3.9 million for the nine-months endedSeptember 30, 2006 compared to $5.4 million for the nine-months ended September30, 2005 due to an overall decline in occupied rooms.  As a result, hotel profit margin increased to79.5% for the nine-months ended September 30, 2006 from 65.8% in the priornine-month period ended September 30, 2005.

*OtherRevenues.* Other revenues increased 6.0% to $3.3 million forthe three-months ended September 30, 2006 as compared to $3.1 million forthe three-months ended September 30, 2005 due to increases in spa, golf andgift shop revenues. These increases were due to the promotional golf and spapackage advertised during the third quarter.  Other expenses increased 5.7% to $2.7 million for the three-months endedSeptember 30, 2006 as compared to $2.5 million for the three-months endedSeptember 30, 2005.

Other revenues decreased 1.1% to $13.8million for the nine-months ended September 30, 2006 as compared to$13.9 million for the nine-months ended September 30, 2005.  The main reason for the reduction was due toa $0.4 million decrease in time share revenue, a $0.3 million decrease in golfrevenue, and a $0.3 million decrease in gift shop revenue all of which wasoffset by a $0.4 million increase in spa revenue and a $0.4 million increase inconcert and showroom revenue.   Otherexpenses decreased 6.0% to $8.6 million for the nine-months ended September 30,2006 as compared to $9.1 million for the nine-months ended September 30,2005.  The main reason for the decreaseis due to decreases in the cost associated with the time share operation offsetby increases in costs associated with the concert and showroom revenue.

*PromotionalAllowances.* Promotional allowances increased by 43.2% to$6.4 million for the three-months ended September 30, 2006 as compared to$4.5 million for the three-months ended September 30, 2005. As a percentof gross revenues, promotional allowances increased to 18.6% for the three-monthsended September 30, 2006 as compared to 14.5% for the three-months endedSeptember 30, 2005 as we focused our marketing attention on our better gamingcustomers.

Promotional allowances increased by 39.6% to$19.5 million for the nine-months ended September 30, 2006 as compared to$14.0 million for the nine-months ended September 30, 2005. As a percentof gross revenues, promotional allowances increased to 17.4% for the nine-monthsended September 30, 2006 as compared to 13.6% for the nine-months endedSeptember 30, 2005 as we focused our marketing attention on our better gamingcustomers.

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*Generaland Administrative (“G&A”).*  G&A expenses increased by 16.6% to$9.6 million for the three-months ended September 30, 2006 as compared to$8.3 million for the three-months ended September 30, 2005. As apercent of net revenues, G&A expenses increased to 34.5% for thethree-months ended September 30, 2006 as compared to 31.3% for the three-monthsended September 30, 2005. G&A expenses increased due to an increase insalaries and bonuses, professional fees, advertising, repair and maintenanceand utilities.

G&A expenses increased by 13.0% to$26.4 million for the nine-months ended September 30, 2006 as compared to$23.4 million for the nine-months ended September 30, 2005. As apercent of net revenues, G&A expenses increased to 28.4% for thenine-months ended September 30, 2006 as compared to 26.2% for the nine-monthsended September 30, 2005.  G&A expensesincreased due to an increase in salaries and bonuses, professional fees,advertising, repair and maintenance and utilities.

*Depreciationand Amortization.*  Depreciationand amortization expense increased to $2.9 million for the three-months ended September30, 2006 compared to $2.5 million for the three-months ended September 30, 2005due to the change in the estimated life of our gaming equipment which was madeeffective on January 1, 2006 and our purchase accounting adjustment, related tothe December 20, 2004 buyout, completed in the fourth quarter of 2005.

Depreciation and amortization increased to$9.4 million for the nine-months ended September 30, 2006 compared to$7.3 million for the nine-months ended September 30, 2005. The increasewas due to the purchase of additional gaming equipment and other capitalexpenditures in addition to a change in the estimated life of our gamingequipment which was made effective on January 1, 2006 and our purchaseaccounting adjustment, related to the December 20, 2004 buyout, completed inthe fourth quarter of 2005.

*InterestExpense.* Interest expense decreased to $4.4 million for thethree-months ended September 30, 2006 as compared to $4.6 million thethree-months ended September 30, 2005. The decrease was due to a decrease inoutstanding debt amounts.

Interest expense decreased to $13.2 millionfor the nine-months ended September 30, 2006 as compared to $13.3 million thenine-months ended September 30, 2005. The decrease was due to a decrease inoutstanding debt amounts.

*Changein Fair Value of Swaps.*The interest rate swaps terminated on June 30, 2006.  During the three-months ended September 30,2005 the change in fair value of swaps resulted in income of $0.4 million.

Change in fair value ofswaps decreased to income of $0.2 million during the nine-months endedSeptember 30, 2006 compared to income of $1.1 million in the same period of theprior year.  The decrease is due to thetermination of the swaps effective June 30, 2006 and the decreasing notional amountof the swaps during 2006.

*Cumulativeeffect of change in accounting principle.* We adopted the provisions of SFAS 152, “*Accounting for Real Estate Time-Sharing Transactions*.” Theadoption of SFAS 152 resulted in an increase in our allowance for possiblecredit losses of $0.2 million during the nine-months ended September 30, 2006compared to $0 in the same period in the prior year.

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**Liquidity and Capital Resources**

*Cash Flows and CreditFacility*

Our primary sources of liquidity and capital resourceshave been cash flow from operations and our credit facility with Wells FargoFoothill (the “Foothill Facility”).  Asof September 30, 2006 and December 31, 2005, cash and cash equivalents were$6.7 million and $9.4 million, respectively.

*Operating Activities*

Cash provided by operating activities for thenine-months ended September 30, 2006 was $8.1 million compared to$9.8 million for the nine-months ended September 30, 2005. The main reasonfor the $1.7 million decrease was primarily due to a $1.2 million increasein operating income (excluding depreciation and amortization expense and othernoncash charges), a $0.8 million increase in the return on investment with MDW,LLC, a $0.4 million reduction in cash paid for interest, a $0.3 millionincrease in payments for notes receivable and a $0.7 million increase inaccrued liabilities and accounts and related company payables all offset by a$5.7 million increase in accounts, related company and related partyreceivables during the nine-month period ended September 30, 2006 compared tothe same period in the prior year.

*InvestingActivities*

Cash used in investing activities for the nine-monthsended September 30, 2006 was $4.6 million compared to $10.3 millionfor the nine-months ended September 30, 2005. The majority of cash used for theperiod ended September 30, 2006 was due to the centralized laundry, remodel ofOasis pizza pub and remodel of the Casablanca sports book.

Cash used in investing activities for the nine-monthsended September 30, 2005 was $10.3 million. The majority of the cash used for these activities consisted of $2.1million related to gaming equipment purchases at the properties, $2.9 millionrelated to the room remodel at the Casablanca, $0.2 for the Casablanca spaexpansion, $0.3 for the fine dining expansion at the Casablanca, $0.4 millionfor the Casablanca tower and convention center, $0.3 for the Starbucks at theOasis, $0.4 million related to the Oasis hotel room remodel, $0.2 for thecasino remodel at the Oasis, $0.2 million for the buffet expansion at theVirgin River, $0.4 for laundry equipment and $1.8 million related to variousmaintenance capital expenditures.  Inaddition, $1.2 million of tax payments were made related to the prior ownersthat adjusted the purchase price of the Buyout.

*Financing Activities*

Cash used in financing activities for the nine-monthsended September 30, 2006 was $6.3 million compared to $3.8 millionfor the nine-months ended September 30, 2005. For the nine-months endedSeptember 30, 2006, $0.5 million represented a decrease in the bankoverdraft balance, $7.6 million related to payments on long-term debtassociated with the Foothill Facility, equipment financing and time sharefinancing and $1.9 million related to payments on gaming equipmentfinancing.  These financing outflows wereoffset by $5.0 million of borrowings on the Foothill Facility.  For the nine-months ended September 30,2005, $1.5 million represented a decrease in the bank overdraft balance,$1.3 million related to payments on long-term debt associated withequipment and time share financing, $1.8 million related to tax distributions,$0.6 million related to payments on gaming equipment financing, and$0.3 million related to payment of debt issuance costs associated with thenotes, and our new senior secured credit facility. These financing outflowswere offset by $1.7 million of borrowings associated with our time sharefinancing and Foothill Facility.

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***FinancialHighlights of RBG, LLC (doing business as CasaBlanca Resort/Casino/Golf/Spa),CasaBlanca Resorts, LLC (doing business as Oasis Resort & Casino) andsubsidiaries***

**For the Three andNine -Months Ended September 30, 2006 and 2005 (unaudited) (in thousands)**
| ** **                           | ** ** | **Three-months ended   September 30,** | ** ** | **%**    | ** ** | **Nine months ended   September 30,** | ** ** | **%**    | ** ** |
|--------------------------------------|------------|-------------------------------------------------------|------------|----------|------------|-----------------------------------------------------------|------------|----------|------------|
| ** **                           | ** ** | **2006**                                              | ** ** | **2005** | ** ** | **Change**                                                | ** ** | **2006** | ** ** | **2005** | ** ** | **Change** | ** ** |
| Casino revenues                      |       | $                                                     | 16,410     |     | $          | 14,283                                                    |       | 14.9     | %          | $ | 51,256 |   | $ | 45,861 |   | 11.8 | % |
| Casino expenses                      |       | 8,529                                                 |       | 7,711    |       | 10.6                                                      | %          | 25,078   |       | 22,729 |   | 10.3 | % |
| Profit margin                        |       | 48.0                                                  | %          | 46.0     | %          | —                                                    |       | 51.1     | %          | 50.4 | % | — |   |
|                                 |       |                                                  |       |     |       |                                                      |       |     |       |   |   |   |   |
| Food and  beverage revenues          |       | $                                                     | 7,543      |     | $          | 7,104                                                     |       | 6.2      | %          | $ | 23,629 |   | $ | 22,994 |   | 2.8 | % |
| Food and beverage  expenses          |       | 4,243                                                 |       | 4,542    |       | (6.6                                                      | )%         | 13,529   |       | 14,413 |   | (6.1 | )% |
| Profit margin                        |       | 43.7                                                  | %          | 36.1     | %          | —                                                    |       | 42.7     | %          | 37.3 | % | — |   |
|                                 |       |                                                  |       |     |       |                                                      |       |     |       |   |   |   |   |
| Hotel revenues                       |       | $                                                     | 5,521      |     | $          | 4,742                                                     |       | 16.4     | %          | $ | 18,653 |   | $ | 15,205 |   | 22.7 | % |
| Hotel expenses                       |       | 998                                                   |       | 1,633    |       | (38.9                                                     | )%         | 3,594    |       | 4,995 |   | (28.0 | )% |
| Profit margin                        |       | 81.9                                                  | %          | 65.6     | %          | —                                                    |       | 80.7     | %          | 67.1 | % | — |   |
|                                 |       |                                                  |       |     |       |                                                      |       |     |       |   |   |   |   |
| Other revenues                       |       | $                                                     | 3,200      |     | $          | 2,999                                                     |       | 6.7      | %          | $ | 13,552 |   | $ | 13,675 |   | (0.9 | )% |
| Other expenses                       |       | 2,657                                                 |       | 2,513    |       | 5.7                                                       | %          | 8,565    |       | 9,110 |   | (6.0 | )% |
|                                 |       |                                                  |       |     |       |                                                      |       |     |       |   |   |   |   |
| Promotional  allowances              |       | $                                                     | 6,386      |     | $          | 4,459                                                     |       | 43.2     | %          | $ | 19,445 |   | $ | 13,966 |   | 39.2 | % |
| Percent of gross  revenues           |       | 19.5                                                  | %          | 15.3     | %          | —                                                    |       | 18.2     | %          | 14.3 | % | — |   |
|                                 |       |                                                  |       |     |       |                                                      |       |     |       |   |   |   |   |
| General and  administrative expenses |       | $                                                     | 9,466      |     | $          | 8,195                                                     |       | 15.5     | %          | $ | 26,146 |   | $ | 23,116 |   | 13.1 | % |
|                                 |       |                                                  |       |     |       |                                                      |       |     |       |   |   |   |   |
| Percent of net revenues              |       | 36.0                                                  | %          | 33.2     | %          | —                                                    |       | 29.8     | %          | 27.6 | % | — |   |

** **

**Three and nine-months endedSeptember 30, 2006 compared to the three and nine-months ended September 30,2005**

*ConsolidatedNet Revenues.*  Consolidatednet revenues increased by 6.6% to $26.3 million for the three-months endedSeptember 30, 2006 as compared to $24.7 million for the three-months endedSeptember 30, 2005. The increase was primarily due to a $2.1 million increasein casino revenues, a $0.8 million increase in hotel revenues and a $0.4million increase in food and beverage revenues, a $0.2 million increase inother revenues offset by an  increase of $1.9million in promotional allowances.

Consolidated net revenues increased by 4.6%to $87.6 million for the nine-months ended September 30, 2006 as compared to $83.8 millionfor the nine-months ended September 30, 2005. The increase was primarily due toa $5.4 million increase in casino revenues, a $3.5 million increase in hotelrevenues and a $0.6 million increase in food and beverage revenues, offset by adecrease in other revenues of $0.5 and a $5.6 million increase in promotionalallowances.

*ConsolidatedOperating Income.*  Consolidatedoperating loss increased by 8.1% to $2.2 million for the three-months endedSeptember 30, 2006 as compared to an operating loss of $2.0 million forthe three-months ended September 30, 2005. In addition, our operating lossmargin increased to 8.2% of net revenues for the three-months ended September30, 2006 as compared to 8.1% of net revenues for the three-months endedSeptember 30, 2005.  The main reason forthe decrease was due to an increase in general and administrative expenses alongwith the increase in depreciation and amortization expense in the currentperiod.

 

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Consolidated operating income decreased by22.1% to $2.2 million for the nine-months ended September 30, 2006 as comparedto $2.8 million for the nine-months ended September 30, 2005. In addition,our operating income margin decreased to 2.5% of net revenues for thenine-months ended September 30, 2006 as compared to 3.4% of net revenues forthe nine-months ended September 30, 2005. The main reason for the decrease was due to an increase in general andadministrative expenses along with the increase in depreciation andamortization expense in the current period.

*Casino.* Casinorevenues increased 14.9% to $16.4 million for the three-months endedSeptember 30, 2006 as compared to $14.3 million for the three-months endedSeptember 30, 2005. The increase in casino revenues was due to the increase inslot revenues, which increased $2.2 million between periods as the holdpercentage for the three-months ended September 30, 2006 increased compared tothe same period in the prior year offset by a decrease in coin in.  Table games revenues remained flat for thethree months ended September 30, 2006 as compared to the same period in theprior year on increased drop amounts yielding a lower hold percentage for thethree months ended September 30, 2006 as compared to September 30, 2005.  Casino profit margin increased to 48.0% forthe three-months ended September 30, 2006 as compared to 46.0% for three-monthsended September 30, 2005.  Casinoexpenses increased 10.6% to $8.5 million for the three-months ended September30, 2006 as compared to $7.7 million for the three-months ended September30, 2005.  The increase was attributableto increased taxes and license fees which increase with increased gamingrevenues in addition to additional expenses attributable to promotionalallowances for high rated players.

Casino revenues increased 11.8% to$51.3 million for the nine-months ended September 30, 2006 as compared to$45.9 million for the nine-months ended September 30, 2005. The increasein casino revenues was due to the increase in slot revenues, which increased $5.0million between periods on an increased overall hold for the nine-months endedSeptember 30, 2006 compared to the same period in the prior year. Table gamesrevenues increased $0.8 million for the nine months ended September 30, 2006 ascompared to the same period in the prior year on increased drop and hold.  Casino profit margin increased to 51.1% forthe nine-months ended September 30, 2006 as compared to 50.4% for thenine-months ended September 30, 2005. The increase in casino profit margin isprimarily due to most costs remaining relatively flat or decreasing, with theexception of gaming taxes and advertising and promotions for the nine-monthsended September 30, 2006 compared to the nine-months ended September 30, 2005.Casino expenses increased 10.3% to $25.1 million for the nine-months endedSeptember 30, 2006 compared to $22.7 million for the nine-months endedSeptember 30, 2005. 

*Food andBeverage.* Food and beverage revenues increased by 6.2% to$7.5 million for the three-months ended September 30, 2006 as compared to $7.1million for the three-months ended September 30, 2005. Revenues increased dueto an increase in pricing.  Food andbeverage expenses decreased by 6.6% to $4.2 million for the three-months endedSeptember 30, 2006 as compared to $4.5 million for the three-months endedSeptember 30, 2005.  The decrease in foodand beverage expenses was mainly due to a reduction in covers.  Food and beverage profit margin increased to43.7% for the three-months ended September 30, 2006 as compared to 36.1% forthe three-months ended September 30, 2005. The increase in food and beverage profit margin is primarily due to anincrease in revenue due to pricing for the period offset by a reduction incovers.

Food and beverage revenues increased by 2.8%to $23.6 million for the nine-months ended September 30, 2006 as compared to$23.0 million for the nine-months ended September 30, 2005. Revenues increaseddue to an increase in pricing offset by fewer covers.  Food and beverage expenses 

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decreased 6.1% to $13.5million for the nine-month ended September 30, 2006 as compared to $14.4million for the nine-months ended September 30, 2005.  The decrease in expenses was primarily due toa reduction in covers during the quarter. Food and beverage profit marginincreased to 42.7% for the nine-months ended September 30, 2006 as compared to37.3% for the nine-months ended September 30, 2005.  The increase in food and beverage profitmargin is primarily due to an increase in revenue due to pricing and a decreasein costs due to a reduction in covers.

*Hotel.* Hotel revenuesincreased 16.4% to $5.5 million for the three-months ended September 30, 2006as compared to $4.7 million for the three-months ended September 30, 2005.Hotel revenues increased due to increased occupied rooms on increased ADR..  Hotel expenses decreased 38.9% to $1.0million for the three-months ended September 30, 2006 compared to $1.6 millionfor the three-months ended September 30, 2005 due to reduced payrollcosts.  As a result, hotel profit marginincreased to 81.9% for the three-months ended September 30, 2006 from 65.6% inthe prior three-month period ended September 30, 2005.

Hotel revenues increased 22.7% to $18.7million for the nine-months ended September 30, 2006 as compared to $15.2 millionfor the nine-months ended September 30, 2005. Hotel revenues increased due toincreased ADR offset by a decreased number of occupied rooms.  Hotel expenses decreased 28.0% to $3.6million for the nine-months ended September 30, 2006 compared to $5.0 millionfor the nine-months ended September 30, 2005 due to an overall decline inoccupied rooms.  As a result, hotelprofit margin increased to 80.7% for the nine-months ended September 30, 2006from 67.1% in the prior nine-month period ended September 30, 2005.

*OtherRevenues.* Other revenues increased 6.7% to $3.2 million forthe three-months ended September 30, 2006 as compared to $3.0 million forthe three-months ended September 30, 2005 due to increases in spa, golf andgift shop revenues. These increases were due to the promotional golf and spapackage advertised during the third quarter. Other expenses increased 5.7% to $2.7 million for the three-months endedSeptember 30, 2006 as compared to $2.5 million for the three-months endedSeptember 30, 2005.  Other expenses increasedas a result of the increased volume related to the golf and spa packagepromotion for the three-months ended September 30, 2006 compared to September30, 2005.

Other revenues decreased 0.9% to $13.6million for the nine-months ended September 30, 2006 as compared to $13.7 millionfor the nine-months ended September 30, 2005. The main reason for the reductionwas due to a $0.4 million decrease in time share revenue, a $0.3 milliondecrease in golf revenue, and a $0.3 million decrease in gift shop revenue allof which was offset by a $0.4 million increase in spa revenue and a $0.4million increase in concert and showroom revenue.  Other expenses decreased 6.0% to $8.6 millionfor the nine-months ended September 30, 2006 as compared to $9.1 million forthe nine-months ended September 30, 2005. The main reason for the decrease is due to decreases in the costassociated with the time share operation offset by increases in costs associatedwith the concert and showroom revenue

*PromotionalAllowances.* Promotional allowances increased by 43.2% to$6.4 million for the three-months ended September 30, 2006 as compared to$4.5 million for the three-months ended September 30, 2005. As a percentof gross revenues, promotional allowances increased to 19.5% for thethree-months ended September 30, 2006 as compared to 15.3% for the three-monthsended September 30, 2005 as we focused our marketing attention on our bettergaming customers.

Promotional allowances increased by 39.2% to$19.4 million for the nine-months ended September 30, 2006 as compared to$14.0 million for the nine-months ended September 30, 2005. As a percentof gross revenues, promotional allowances increased to 18.2% for thenine-months ended September 30, 2006 as compared to 14.3% for the nine-monthsended September 30, 2005 as we focused our marketing attention on our bettergaming customers.

*Generaland Administrative (“G&A”).*  G&A expenses increased by 15.5% to $9.5 millionfor the three-months ended September 30, 2006 as compared to $8.2 millionfor the three-months ended 

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September 30, 2005. Asa percent of net revenues, G&A expenses increased to 36.0% for thethree-months ended September 30, 2006 as compared to 33.2% for the three-monthsended September 30, 2005. G&A expenses increased due to an increase inrepairs and maintenance expenses and an increase in salaries and increases inbonuses and management fees.

G&A expenses increased by 13.1% to$26.1 million for the nine-months ended September 30, 2006 as compared to$23.1 million for the nine-months ended September 30, 2005. As apercent of net revenues, G&A expenses increased to 29.8% for thenine-months ended September 30, 2006 as compared to 27.6% for the nine-monthsended September 30, 2005.  G&Aexpenses increased due to increased advertising expenses, an increase insalaries and increases in bonuses and management fees in addition to increases inmedical expenses and repairs and maintenance expenses.

*Depreciationand Amortization.* Depreciation and amortization increased to$2.6 million for the three-months ended September 30, 2006 compared to$2.0 million for the three-months ended September 30, 2005. The increasewas due to the purchase of additional gaming equipment and other capitalexpenditures in addition to a change in the estimated life of our gamingequipment which was made effective January 1, 2006 and our purchase accountingadjustment, related to the December 20, 2004 buyout, completed in the fourthquarter of 2005.

Depreciation and amortization increased to$8.3 million for the nine-months ended September 30, 2006 compared to$5.9 million for the nine-months ended September 30, 2005. The increasewas due to the purchase of additional gaming equipment and other capitalexpenditures in addition to a change in the estimated life of our gamingequipment which was made effective January 1, 2006 and our purchase accountingadjustment, related to the December 20, 2004 buyout, completed in the fourthquarter of 2005.

*InterestExpense.* Interest expense decreased to $0.1 million for thethree months ended September 30, 2006 as compared to $0.4 million for thethree-months ended September 30, 2005. The decrease in interest expense was due to less outstanding debt in thecurrent three months ended September 30, 2006 compared to September 30, 2005.

Interest expense decreased to $0.4 millionfor the nine-months ended September 30, 2006 as compared to $1.0 million forthe nine-months ended September 30, 2005. The decrease in interest expense was due to less outstanding debt in thecurrent nine months ended September 30, 2006 compared to September 30, 2005.

*Changein Fair Value of Swaps.* The interest rate swaps terminated on June 30, 2006. During thethree months ended September 30, 2005, the change in fair value of swapsresulted in income of $0.3 million.

 Change in fair value of swaps decreased toincome of $0.1 million during the nine-months ended September 30, 2006 comparedto income of $0.8 million in the same period of the prior year.  The decrease in income is due to theexpiration of the swap agreements and the decreasing notional amount of theswaps during 2006.

*Cumulativeeffect of change in accounting principle.* We adopted the provisions of SFAS 152, “*Accounting for Real Estate Time-Sharing Transactions*.” Theadoption of SFAS 152 resulted in an increase in our allowance for possiblecredit losses of $0.2 million during the nine-months ended September 30,2006 compared to $0 in the same period in the prior year.

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**Liquidity and Capital Resources**

*Cash Flows and CreditFacility*

Our primary sources of liquidity and capital resourceshave been cash flow from operations and our Foothill Facility.  As of September 30, 2006 and December 31,2005, cash and cash equivalents were $6.4 million and $7.8 million,respectively.

*Operating Activities*

Cash provided by operating activities for thenine-months ended September 30, 2006 was $7.2 million compared to$9.8 million for the nine-months ended September 30, 2005. The$2.6 million decrease was primarily due to $5.3 million increase inaccounts, related company and related party receivables offset by a $1.3 millionincrease in operating income (excluding depreciation and amortization expenseand other noncash charges), a $0.6 million decrease in interest expenseand a $0.8 million increase in return on investment with MDW, LLC.

*Investing Activities*

Cash used in investing activities for the nine-monthsended September 30, 2006 was $4.3 million compared to $8.8 millionfor the nine-months ended September 30, 2005. The majority of cash used for theperiod ended September 30, 2006 was for the centralized laundry, remodel ofOasis pizza pub and remodel of the Casablanca sports book.

Cash used in investing activities for the nine-monthsended September 30, 2005 was $8.8 million. For the nine-months ended September 30, 2005, the majority of cash usedin investing activities consisted of $2.1 million related to gaming equipmentpurchases at the properties, $2.9 million related to the room remodel at theCasablanca, $0.2 million for the Casablanca spa expansion, $0.3 million for thefine dining expansion at the Casablanca, $0.4 million for the Casablanca towerand convention center, $0.3 million for the Starbucks at the Oasis, $0.4million related to the Oasis hotel room remodel, $0.2 million related to theOasis casino remodel, $0.4 for laundry equipment and the remainder for variousmaintenance capital expenditures.

*Financing Activities*

Cash used infinancing activities during the nine-months ended September 30, 2006 was$4.3 million compared to $3.0 million for the nine-months endedSeptember 30, 2005.  For the nine-monthsended September 30, 2006, $0.5 million represented a decrease in the bankoverdraft balance, $0.6 million related to payments on long-term debtassociated with equipment and time share financing and $1.9 million related topayments on gaming equipment financing. For the nine-months ended September 30, 2005, $1.5 millionrepresented a decrease in the bank overdraft balance, $1.1 million relatedto payments on long-term debt associated with equipment and time sharefinancing and $0.6 million related to payments on gaming equipmentfinancing.  These financing outflows wereoffset by $0.2 million of borrowings associated with our time sharefinancing.

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***FinancialHighlights of B & B B, Inc. (doing business as Virgin RiverHotel/Casino/Bingo)***

**For the Three andNine Months Ended September 30, 2006 and 2005 (unaudited) (in thousands)**
| ** **                           | ** ** | **Three-months ended   September 30,** | ** ** | **%**    | ** ** | **Nine months ended   September 30,** | ** ** | **%**    | ** ** |
|--------------------------------------|------------|-------------------------------------------------------|------------|----------|------------|-----------------------------------------------------------|------------|----------|------------|
| ** **                           | ** ** | **2006**                                              | ** ** | **2005** | ** ** | **Change**                                                | ** ** | **2006** | ** ** | **2005** | ** ** | **Change** | ** ** |
| Casino revenues                      |       | $                                                     | 8,861      |     | $          | 8,390                                                     |       | 5.6      | %          | $ | 27,660 |   | $ | 25,935 |   | 6.7 | % |
| Casino expenses                      |       | 3,569                                                 |       | 3,450    |       | 3.4                                                       | %          | 10,691   |       | 10,884 |   | (1.8 | %) |
| Profit margin                        |       | 59.7                                                  | %          | 58.9     | %          | —                                                    |       | 61.3     | %          | 58.0 | % | — |   |
|                                 |       |                                                  |       |     |       |                                                      |       |     |       |   |   |   |   |
| Food and  beverage revenues          |       | $                                                     | 2,869      |     | $          | 2,757                                                     |       | 4.1      | %          | $ | 9,026 |   | $ | 8,752 |   | 3.1 | % |
| Food and  beverage expenses          |       | 2,147                                                 |       | 1,908    |       | 12.5                                                      | %          | 5,968    |       | 5,515 |   | 8.2 | % |
| Profit margin                        |       | 25.2                                                  | %          | 30.8     | %          | —                                                    |       | 33.9     | %          | 37.0 | % | — |   |
|                                 |       |                                                  |       |     |       |                                                      |       |     |       |   |   |   |   |
| Hotel revenues                       |       | $                                                     | 2,108      |     | $          | 1,799                                                     |       | 17.2     | %          | $ | 7,437 |   | $ | 6,481 |   | 14.8 | % |
| Hotel expenses                       |       | 434                                                   |       | 747      |       | (41.9                                                     | %)         | 1,687    |       | 2,233 |   | (24.5 | %) |
| Profit margin                        |       | 79.4                                                  | %          | 58.5     | %          | —                                                    |       | 77.3     | %          | 65.5 | % | — |   |
|                                 |       |                                                  |       |     |       |                                                      |       |     |       |   |   |   |   |
| Other revenues                       |       | $                                                     | 712        |     | $          | 695                                                       |       | 2.4      | %          | $ | 2,136 |   | $ | 2,059 |   | 3.7 | % |
| Other expenses                       |       | 337                                                   |       | 336      |       | 0.3                                                       | %          | 1,054    |       | 1,052 |   | 0.2 | % |
|                                 |       |                                                  |       |     |       |                                                      |       |     |       |   |   |   |   |
| Promotional allowances               |       | $                                                     | 2,337      |     | $          | 1,646                                                     |       | 42.0     | %          | $ | 6,894 |   | $ | 5,547 |   | 24.3 | % |
| Percent of gross  revenues           |       | 16.1                                                  | %          | 12.1     | %          | —                                                    |       | 14.9     | %          | 12.8 | % | — |   |
|                                 |       |                                                  |       |     |       |                                                      |       |     |       |   |   |   |   |
| General and  administrative expenses |       | $                                                     | 3,405      |     | $          | 3,303                                                     |       | 3.1      | %          | $ | 10,127 |   | $ | 9,273 |   | 9.2 | % |
| Percent of net revenues              |       | 27.9                                                  | %          | 27.5     | %          | —                                                    |       | 25.7     | %          | 24.6 | % | — |   |

** **

**Three and nine-months endedSeptember 30, 2006 compared to the three and nine-months ended September 30,2005**

*NetRevenues.* Net revenues increased by 1.8% to $12.2 million forthe three-months ended September 30, 2006 as compared to $12.0 million forthe three-months ended September 30, 2005.****The increasewas primarily due to a $0.5 million increase in casino revenues, a $0.1 millionincrease in food and beverage revenues, a $0.3 million increase****in hotel revenues, and was offset by a $0.7 millionincrease in promotional allowances. Net revenues increased 4.5% to $39.4million for the nine months ended September 30, 2006 as compared to $37.7million for the nine months ended September 30, 2005.  The increase was primarily due to a $1.7million increase in casino revenues, a $0.3 million increase in food andbeverage revenues and a $1.0 million increase in hotel revenues, and was offsetby a $1.3 million increase in promotional allowances.

*Operating (Loss)Income.* Operating loss increased to $0.5 million for the three-months endedSeptember 30, 2006 as compared to operating income of $0.05 million forthe three-months ended September 30, 2005. In addition, our operating lossmargin was 3.7% of net revenues for the three-months ended September 30, 2006as compared to an operating income margin of 0.4% of net revenues for thethree-months ended September 30, 2005. Operating income decreased 29.6% to $1.4 million for the nine monthsended September 30, 2006 as compared to $2.1 million for the nine months endedSeptember 30, 2005.  In addition, ouroperating income margin decreased to 3.7% of net revenues for the nine-monthsended September 30, 2006 as compared to 5.5% of net revenues for thenine-months ended September 30, 2005.

*Casino.* Casinorevenues increased 5.6% to $8.9 million for the three-months endedSeptember 30, 2006 as compared to $8.4 million for the three-months endedSeptember 30, 2005. The increase in casino revenues was due to the increase inslot revenues, which increased $0.4 million between periods as the holdpercentage for the three-months ended September 30, 2006 increased compared tothe same period in the prior year. Table games revenues remained relativelyflat at $0.7 million while other gaming increased $0.1 million for the threemonths ended September 30, 2006 as compared to the same period in the prioryear. The decrease in table games revenue was due to a decrease in table gameshold percentages. Overall casino expenses increased 3.4% for the three-monthsended September 30, 2006 compared to the same period in the prior year duemainly to an increase in taxes and license fees on increased gaming revenuesand advertising and promotional costs. Casino profit margin increased to 59.7%for the three-months ended September 30, 2006 as compared to 58.9% forthree-months ended September 30, 2005.

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Casino revenues increased 6.7% to $27.7 millionfor the nine-months ended September 30, 2006 as compared to $25.9 millionfor the nine months ended September 30, 2005. The increase in casino revenueswas due to the increase in slot revenues, which increased $1.1 million betweenperiods as the hold percentage increased for the nine-months ended September30, 2006 compared to the same period in the prior year. Table games revenuesincreased slightly by $0.5 million during the nine months ended September 30,2006 as compared to the same period in the prior year. Overall casino expensesdecreased 1.8% for the nine-months ended September 30, 2006 compared to thesame period in the prior year due to most costs remaining relatively flat ordecreasing, with the exception of gaming taxes and advertising. Casino profitmargin increased to 61.3% for the nine-months ended September 30, 2006 ascompared to 58.0% for nine-months ended September 30, 2005.

*Food andBeverage.* Food and beverage revenues increased slightly to$2.9 million for the three-months ended September 30, 2006 as compared to$2.8 million for the three-months ended September 30, 2005. The increase infood and beverage revenues was due to an increase in pricing offset by adecreased number of covers.  Food andbeverage expenses increased by 12.5% to $2.1 million for the three-months endedSeptember 30, 2006 as compared to $1.9 million for the three-months endedSeptember 30, 2005.  Our food andbeverage profit margin decreased to 25.2% of net revenues for the three-monthsended September 30, 2006 as compared to 30.8% of net revenues for the sameperiod in the prior year as a result of increased expenses.

Food and beverage revenues increased by 3.1%to $9.0 million for the nine-months ended September 30, 2006 as comparedto $8.8 million for the nine-months ended September 30, 2005. Food and beverageexpenses increased to $6.0 million for the nine-months ended September 30, 2006as compared to $5.5 million for the nine-months ended September 30, 2005. Ourfood and beverage profit margin decreased to 33.9% of net revenues for thenine-months ended September 30, 2006 as compared to 37.0% of net revenues forthe same period in the prior year.

*Hotel.* Hotel revenuesincreased by 17.2% to $2.1 million for the three-months ended September30, 2006 as compared to $1.8 million for the three-months ended September30, 2005. The hotel revenues increased due to an increase in the average dailyrate on more occupied rooms during the three-months ended September 30, 2006compared to the same period in the prior year. Hotel expenses decreased 41.9% to $0.4 million for the three-monthsended September 30, 2006 as compared to $0.7 million for three months endedSeptember 30, 2005.  The decrease was dueto a decrease in room occupancy.  As aresult, hotel profit margin increased to 79.4% for the three-months endedSeptember 30, 2006 from 58.5% in the same period of the prior year.

Hotel revenues increased by 14.8% to$7.4 million for the nine-months ended September 30, 2006 as compared to$6.5 million for the nine-months ended September 30, 2005. The hotelrevenues increased due to an increase in the average daily rate offset by feweroccupied rooms during the nine-months ended September 30, 2006 compared to thesame period in the prior year.  Hotelexpenses decreased 24.5% to $1.7 million for the nine-months ended September30, 2006 as compared to $2.2 million for the nine months ended September 30,2005 due to the decrease in occupied rooms. As a result, hotel profit margin increased to 77.3% for the nine-monthsended September 30, 2006 from 65.5% in the same period of the prior year.

*OtherRevenues.* Other revenues remained relatively flat at $0.7million for the three-months ended September 30, 2006 as compared to the sameperiod in the prior year.  Other expensesremained relatively flat as well at $0.3 million for the three-months endedSeptember 30, 2006 and September 30, 2005.

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Other revenues remained consistent for thenine months ended September 30, 2006 as compared to the same period in theprior year at $2.1 million.  Otherexpenses were also consistent at $1.1 million for the nine-months endedSeptember 30, 2006 and September 30, 2005.

*PromotionalAllowances.* Promotional allowances increased by 42.0% to$2.3 million for the three-months ended September 30, 2006 as compared to$1.6 million for the three-months ended September 30, 2005. As a percentof gross revenues, promotional allowances increased to 16.1% of gross revenuesfor the three-months ended September 30, 2006 as compared to 12.1% for thethree months ended September 30, 2005 as we focused our marketing attention onour better gaming customers.

Promotional allowances increased by 24.3% to$6.9 million for the nine-months ended September 30, 2006 as compared to$5.5 million for the nine-months ended September 30, 2005. As a percent ofgross revenues, promotional allowances increased to 14.9% of gross revenues forthe nine-months ended September 30, 2006 as compared to 12.8% for the ninemonths ended September 30, 2005 as we focused our marketing attention on ourbetter gaming customers.

*Generaland Administrative.*  G&Aexpenses increased by 3.1% to $3.4 million for the three-months endedSeptember 30, 2006 as compared to $3.3 million for the three-months endedSeptember 30, 2005. As a percent of net revenues, G&A expenses were 27.9%for the three-months ended September 30, 2006 as compared to 27.5% for thethree-months ended September 30, 2005. The increase in G&A expenses is attributable to an increase inrepairs and maintenance and professional fees expenses in the current period.

 G&A expenses increased by 9.2% to $10.1 million for thenine-months ended September 30, 2006 as compared to $9.3 million for thenine-months ended September 30, 2005. As a percent of net revenues, G&Aexpenses increased to 25.7% for the nine-months ended September 30, 2006 ascompared to 24.6% for the nine-months ended September 30, 2005.

*Depreciationand Amortization.* Depreciation and amortization increased to$1.2 million for the three-months ended September 30, 2006 compared to$0.6 million for the three-months ended September 30, 2005. The increasewas due to the purchase of additional gaming equipment and other capitalexpenditures in addition to a change in the estimated life of our gamingequipment which was made effective January 1, 2006 and our purchase accountingadjustment, related to the December 20, 2004 buyout, completed in the fourthquarter of 2005.

Depreciation and amortization increased to$3.7 million for the nine-months ended September 30, 2006 compared to $2.0 millionfor the nine-months ended September 30, 2005. The increase was due to thepurchase of additional gaming equipment and other capital expenditures inaddition to a change in the estimated life of our gaming equipment which wasmade effective January 1, 2006 and our purchase accounting adjustment, relatedto the December 20, 2004 buyout, completed in the fourth quarter of 2005.

*InterestExpense.*  Interestexpense remained relatively flat at $0.6 million for the three-months endedSeptember 30, 2006 as compared to the same period in the prior year. Interestexpense decreased to $1.7 million for the nine months ended September 30, 2006as compared to the same period in the prior year when interest expense was $1.8million.

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**Liquidity and Capital Resources**

*Cash Flows and CreditFacility*

Our primary sources of liquidity and capital resourceshave been cash flow from operations and our credit facility.  As of September 30, 2006 and December 31,2005, cash and cash equivalents were $4.9 million and $6.2 million,respectively.

*Operating Activities*

Cash provided by operating activities for thenine-months ended September 30, 2006 was $2.0 million compared to$2.1 million for the nine-months ended September 30, 2005. The main reasonfor the $0.1 million decrease was primarily due to a $1.1 millionincrease in operating income (excluding depreciation and amortization expenseand other noncash charges) offset by an increase in the net related companyreceivables.

*Investing Activities*

Cash used in investingactivities for the nine-months ended September 30, 2006 was $2.0 millioncompared to $2.1 million for the nine-months ended September 30, 2005. Themajority of cash used in investing activities was related to capitalexpenditures for the property management and back office computer system. Forthe nine months ended September 30, 2005 the majority of cash used in investingactivities consisted of the following at the Virgin River: $0.7 million for theroom remodel, $0.3 million for the Starbucks, $0.5 million for gamingequipment, $0.1 million for the buffet expansion and $0.6 million formaintenance capital expenditures.

*Financing Activities*

Cashused in financing activities for the nine-months ended September 30, 2006 was$1.4 million compared to $0.6 million for the nine-months endedSeptember 30, 2005. For the nine-months ended September 30, 2006, $1.2 millionrepresented payments on gaming equipment financing and $0.2 million representedpayments on the long term debt.  For thenine-months ended September 30, 2005, $0.4 million represented  payments on gaming equipment financing and$0.1 million in payments on long term debt.

***Capital Expenditures for VirginRiver Casino Corporation, RBG, LLC and B & B B, Inc.***

We plan to continue torenovate our facilities and add amenities. In particular, during the remainderof 2006 and throughout 2007, we plan to (i) add convention and concertspace and redesign the center and pool bar at the Casablanca; (ii) add anadditional restaurant and refurbish and remodel the casino interior, coffeeshop and lounge at the Virgin River; and (iii) expand and remodel the finedining restaurant at the Oasis. We are currently in the design phase for eachof the projects therefore budgets and timetables for completion for each havenot been finalized; however, it is anticipated that the total cost for allprojects will not exceed what had been allocated for our postponed Casablancahotel tower which was $21 million. We believe that existing cash, cash flows fromoperations, equipment financing and available borrowings under the FoothillFacility will be adequate to satisfy our anticipated uses of capital during theremainder of 2006.

*Off Balance Sheet Arrangements forVirgin River Casino Corporation, RBG, LLC and B & B B, Inc.*

We have no off balance sheet arrangements at September 30, 2006 orDecember 31, 2005.

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*ContractualObligations and Commitments for Virgin River Casino Corporation, RBG, LLC and B& B B, Inc.*

A description of our contractual obligations and commitment for VirginRiver Casino Corporation, RBG, LLC and B & B B, Inc. can be found in item 7of our Form 10-K for the year ended December 31, 2005.

**CriticalAccounting Policies**for Virgin River Casino Corporation, RBG, LLC and B& B B, Inc.

In September 2006, the FASB issued SFAS No. 157, “Fair ValueMeasurements” (“SFAS 157”), which clarifies the definition of fair value,establishes guidelines for measuring fair value, and expands disclosures regardingfair value measurements. SFAS 157 does not require any new fair valuemeasurements and eliminates inconsistencies in guidance found in various prioraccounting pronouncements. SFAS 157 will be effective for the Company onJanuary 1, 2008. The Company is currently evaluating the impact ofadopting SFAS 157 on its financial position, cash flows, and results ofoperations.

In September 2006, the Securities and Exchange Commission (“SEC”) releasedStaff Accounting Bulletin No. 108, “Considering the Effects of Prior YearMisstatements when Qualifying Misstatements in Current Year FinancialStatements” (“SAB 108”). SAB 108 provides interpretive guidance onthe SEC’s views on how the effects of the carryover or reversal of prior yearmisstatements should be considered  inquantifying a current year misstatement. The provisions of SAB 108 will beeffective for the Company for the fiscal year ended December 31, 2006. TheCompany is currently evaluating the impact of applying SAB 108 but doesnot believe that the application of SAB 108 will have a material effect onits financial position, cash flows, and results of operations.

A description of our other critical accounting policies can be found inItem 7 of our Form 10-K for the year ended December 31, 2005.

**Item 3.**                          Quantitativeand Qualitative Disclosures About Market Risk.

The followingtable provides information about our long-term debt at September 30, 2006:

|                                       | ** ** | **Maturity  Date** | ** ** | **Face  Amount**        | ** ** | **Carrying  Value** | ** ** | **Estimated  Fair  Value** | ** ** |
|---------------------------------------|------------|--------------------|------------|-------------------------|------------|---------------------|------------|----------------------------|------------|
| ** **                            | ** ** | ** **         | ** ** | **(in thousands)** | ** ** |
| 9% senior  secured notes              |       | January 2012       |       | $                       | 125,000    |                | $          | 125,000                    |       | $ | 127,813 |   |
| 12 3⁄4% senior  subordinated notes |       | January 2013       |       | 66,000                  |       | 49,737              |       | 45,131                     |       |
| Note payable,  interest at 6.21%      |       | December 2006      |       | 574                     |       | 40                  |       | 40                         |       |
| Total                                 |       |               |       | $                       | 191,574    |                | $          | 174,777                    |       | $ | 172,984 |   |

 

The gaming equipment financings are agreements that because of theirlong-term nature are considered debt under generally accepted accountingprinciples. The estimated fair value of each gaming equipment financing is thesame as the carrying value.

We are also exposed to market risk in the form of fluctuations ininterest rates and their potential impact upon our debt. Historically, thismarket risk is managed by utilizing derivative financial instruments inaccordance with established policies and procedures. We evaluate our exposureto market risk by monitoring interest rates in the marketplace, and do notutilize derivative financial instruments for trading purposes. Our derivativefinancial instruments consist exclusively of interest rate swap agreements.Interest differentials resulting from these agreements are recorded on anaccrual basis as an adjustment to interest expense. As of June 30, 2006, theinterest rate swaps contracts ended.

The following table provides information about our financialinstruments that are sensitive to changes in interest rates:
| ** **                                   | ** ** | **As of September 30,** | ** ** |
|----------------------------------------------|------------|----------------------------------------|------------|
| ** **                                   | ** ** | **2006**                               | ** ** | **2007** | ** ** | **2008** | ** ** | **2009** | ** ** | **2010** | ** ** | **Thereafter** | ** ** | **Total** | ** ** |
| ** **                                   | ** ** | **(dollars in thousands)**   | ** ** |
| Long-term  debt (including current portion): |       |                                   |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Fixed-rate                                   |       | $                                      | 40         |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | 191,000 |   | $ | 191,040 |   |
| Average interest  rate                       |       | 10.04                                  | %          | 10.14 | % | 10.24 | % | 10.30 | % | 10.30 | % | 10.30 | % | 10.04 | % |
| Variable-rate                                |       | $                                      | —     |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   |
| Average interest rate                        |       | —                                 |       | — |   | — |   | — |   | — |   | — |   | — |   |

 

The gaming equipment financing are agreements that because of theirlong-term nature we impute interest expense for accounting purposes.  Contractually these agreements carry nointerest, therefore we believe that there is no exposure to interest rate riskand therefore have excluded those contracts from the presentation above.

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**Item 4.**                          Controlsand Procedures.

## ***Evaluation of Disclosure Controls***

We evaluated the effectiveness of our disclosurecontrols and procedures as of and for the three months ended September 30, 2006. This evaluation was done with the participation of our management,including our Chief Executive Officer and Chief Financial Officer.

Disclosure controls and procedures are controls andother procedures that are designed to ensure that information required to bedisclosed by us in the reports that we file or submit under the SecuritiesExchange Act of 1934 are recorded, processed, summarized and reported withinthe time periods specified in the Securities and Exchange Commission’s rulesand forms.  Disclosure controls andprocedures include, without limitation, controls and procedures designed toensure that information required to be disclosed by us in the reports that wefile under the Securities Exchange Act of 1934 is accumulated and communicatedto our  management, including our ChiefExecutive Officer and Chief Financial Officer, as appropriate to allow timelydecisions regarding required disclosure.

## ***Limitations on the Effectiveness of Controls***

Our management does not expect that our disclosurecontrols and procedures prevent all error and all fraud.  A control system, no matter how wellconceived and operated, can provide only reasonable, but not absolute,assurance that the objectives of a control system are met.  Further, any control system reflectslimitations on resources, and the benefits of a control system must beconsidered relative to its costs. Because of the inherent limitations in all control systems, noevaluation of controls can provide absolute assurance that all control issuesand instances of fraud, if any, within us have been detected.  These inherent limitations include therealities that judgments in decision-making can be faulty and that breakdownscan occur because of simple error or mistake. Additionally, controls can becircumvented by the individual acts of some persons, by collusion of two ormore people, or by management override of a control.  Because the design of a control system isbased upon certain assumptions about the likelihood of future events, there canbe no assurance that any design will succeed in achieving its stated goalsunder all potential future conditions as over time, controls may becomeinadequate because of changes in conditions, or the degree of compliance withthe policies or procedures may deteriorate. Because of the inherent limitationsin a cost-effective control system, misstatements due to error or fraud mayoccur and may not be detected.

## ***Conclusion****s*

Based on this evaluation, our management, with theparticipation of our Chief Executive Officer and Chief Financial Officer have evaluatedour disclosure controls and procedures (as defined in the Securities ExchangeAct of 1934 Rules 13a-15(e) and 15d-15(e)) as of September 30, 2006, and haveconcluded that they are effective.

## ***Changes in Internal Controls***

There were no changes in our internal controls over financial reportingthat occurred during our last fiscal quarter, *i.e.*,the quarter ended September 30, 2006, that have materially affected, or arereasonably likely to materially affect, our internal controls over financialreporting.

 

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**PART II — OTHERINFORMATION**

**Item 1.  Legal Proceedings.**

None.

**Item 1A.  Risk Factors.**

None.

**Item 2.  Unregistered Sales of Equity Securities andUse of Proceeds.**

None.

**Item 3.  Defaults Upon Senior Securities.**

None.

**Item 4.  Submission of Matters to a Vote of SecurityHolders.**

None.

**Item 5.  Other Information.**

The Companies have commenced action to reorganize (the “ProposedReorganization”) the entities, Virgin River Casino Corporation, RBG, LLC, andB & B B, Inc. under a single holding company, Black Gaming,LLC, a Nevada limited-liability company (“Black Gaming”). The Companies arecurrently seeking the necessary approvals and licenses from appropriateparties, including but not limited to appropriate gaming authorities. While theCompanies hope the Proposed Reorganization will be effective prior toJanuary 1, 2007, no assurance can be given that the ProposedReorganization will be effective by that date, if ever. As currently proposed,when the Proposed Reorganization is completed, Black Gaming will guaranteepayment of the Companies’ 9% senior secured notes and 12 3/4% seniorsubordinated notes.

**Item 6.  Exhibits.**
| Exhibits: | ** ** | ** **                                                                                   |
|-----------|------------|----------------------------------------------------------------------------------------------|
| 10.1      |       | Executive Employment  Agreement                                                              |
| 10.2      |       | Black Gaming Long Term  Incentive Plan                                                       |
| 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, Curt Mayer           |
| 32.1      |       | Certification pursuant  to §906 of the Sarbanes-Oxley Act of 2002, Robert R. Black, Sr. |
| 32.1      |       | Certification pursuant  to §906 of the Sarbanes-Oxley Act of 2002, Curt Mayer           |

 

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**SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934,the registrant has duly caused this report to be signed on its behalf by theundersigned thereunto duly authorized.

**VIRGIN RIVER CASINO CORPORATION**
| By:    | /s/ Curt Mayer                                                                 |     | November 14, 2006 |
|--------|--------------------------------------------------------------------------------|----------|-------------------|
|   | Curt Mayer                                                                     |     |              |
|   | *Chief Financial Officer  (Principal Financial and Chief  Accounting Officer)* | * * | * *          |

 

**RBG,LLC**
| By:    | /s/ Curt Mayer                                                                 |     | November 14, 2006 |
|--------|--------------------------------------------------------------------------------|----------|-------------------|
|   | Curt Mayer                                                                     |     |              |
|   | *Chief Financial Officer  (Principal Financial and Chief  Accounting Officer)* | * * | * *          |

 

**B & B B, INC.**
| By:    | /s/ Curt Mayer                                                                 |     | November 14, 2006 |
|--------|--------------------------------------------------------------------------------|----------|-------------------|
|   | Curt Mayer                                                                     |     |              |
|   | *Chief Financial Officer  (Principal Financial and Chief  Accounting Officer)* | * * | * *          |

 

**CASABLANCA RESORTS, LLC**
| By:    | /s/ Curt Mayer                                                                 |     | November 14, 2006 |
|--------|--------------------------------------------------------------------------------|----------|-------------------|
|   | Curt Mayer                                                                     |     |              |
|   | *Chief Financial Officer  (Principal Financial and Chief  Accounting Officer)* | * * | * *          |

 

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**OASIS INTERVAL OWNERSHIP, LLC**
| By:    | /s/ Curt Mayer                                                                 |     | November 14, 2006 |
|--------|--------------------------------------------------------------------------------|----------|-------------------|
|   | Curt Mayer                                                                     |     |              |
|   | *Chief Financial Officer  (Principal Financial and Chief  Accounting Officer)* | * * | * *          |

 

**OASIS INTERVAL MANAGEMENT, LLC**
| By:    | /s/ Curt Mayer                                                                 |     | November 14, 2006 |
|--------|--------------------------------------------------------------------------------|----------|-------------------|
|   | Curt Mayer                                                                     |     |              |
|   | *Chief Financial Officer  (Principal Financial and Chief  Accounting Officer)* | * * | * *          |

 

**OASIS RECREATIONAL PROPERTIES,INC.**
| By:    | /s/ Curt Mayer                                                                 |     | November 14, 2006 |
|--------|--------------------------------------------------------------------------------|----------|-------------------|
|   | Curt Mayer                                                                     |     |              |
|   | *Chief Financial Officer  (Principal Financial and Chief  Accounting Officer)* | * * | * *          |

 

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**EXHIBIT INDEX**
| Exhibit    | ** ** | ** **                                                                                                               | ** ** | **Page**   |
|------------|------------|--------------------------------------------------------------------------------------------------------------------------|------------|------------|
| **Number** | ** ** | **Description**                                                                                                          | ** ** | **Number** |
| 10.1       |       | Executive Employment Agreement                                                                                           |       |       |
| 10.2       |       | Black Gaming Long Term  Incentive Plan                                                                                   |       |       |
| 31.1       |       | Certification pursuant  to Section 302 of the Sarbanes-Oxley Act of 2002                                                 |       |       |
| 31.2       |       | Certification pursuant  to Section 302 of the Sarbanes-Oxley Act of 2002                                                 |       |       |
| 32.1       |       | Certification pursuant  to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002 | ** ** | ** ** |
| 32.2       |       | Certification pursuant  to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002 | ** ** | ** ** |

 

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