**UNITED STATES**

**SECURITIES AND EXCHANGECOMMISSION**

**WASHINGTON, D.C. 20549**

 

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**FORM 10-Q/A**

 

**(Mark One)**

| **ý** | **QUARTERLY REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                      |
|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|       | ** **                                                                                                                                                                                                                                  |
| ** ** | **For the quarterly period ended  September 30, 2005**                                                                                                                                                                                 |
|       |                                                                                                                                                                                                                                        |
| ** ** | **OR**                                                                                                                                                                                                                                      |
| ** ** | ** **                                                                                                                                                                                                                                  |
| **o**      | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                     |
|       | ** **                                                                                                                                                                                                                                  |
| ** ** | **For the transition  period from                    to                  ** |

 

**Commission File Number 333-123179**

 

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**VirginRiver Casino Corporation**

**RBG, LLC**

**B &B B, Inc.**

(Exact Name of Registrant as Specified in itsCharter)

 
| **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, IncludingArea Code)

 

**Indicate by check markwhether the Registrant (1) has filed all reports required by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the Registrant was required to filesuch reports) and (2) has been subject to such filing requirements for thepast 90 days.    Yes **ý  No o

** **

Indicateby check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2of the Securities Exchange Act of 1934). Yes o No ý

 

Indicateby check mark whether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act).  Yes oNo ý

 

 

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**EXPLANATORY NOTE**

 

ThisForm 10-Q/A amends our previously filed Quarterly Report on Form 10-Qfor the quarter ended September 30, 2005 (the “Quarterly Report”) and isbeing filed solely to make revisions to the following sections in “Item 1 –Financial Statements,” “Item 2 – Management’s Discussion and Analysis ofFinancial Condition and Results of Operations” (the “MD&A”) and “Item 3 –Quantitative and Qualitative Disclosures About Market Risk” set forth in theQuarterly Report:

 

(i)                                     “Cash paid for interest” in the Statements of Cash Flows (unaudited) in eachof the financial statements for Virgin River Casino Corporation, RGB, LLC andB&BB, Inc. in “Item 1- Financial Statements”;

 

(ii)                                  The paragraph captioned “Casino” under theheading “Financial Highlights of Virgin River Casino Corporation For the Threeand Nine Months Ended September 30, 2005 and 2004” in the MD&A;

 

(iii)                               The second paragraph under the caption “CashFlows” under the heading “Liquidity and Capital Resources for Virgin RiverCasino Corporation” in the MD&A;

 

(iv)                              The paragraph captioned “Casino” under theheading “Financial Highlights of RGB, LLC For the Three and Nine Months Ended September 30,2005 and 2004” in the MD&A;

 

(v)                                 The second paragraph under the caption “CashFlows” under the heading “Liquidity and Capital Resources for RGB, LLC” in theMD&A;

 

(vi)                              The paragraph captioned “Casino” under theheading “Financial Highlights of B&BB, Inc. for the Three and NineMonths Ended September 30, 2005 and 2004” in the MD&A;

 

(vii)                           The interest rates of the revolving creditfacility and the Hypothecation Note in the table disclosing long-term debt at September 30,2005 in “Item 3 – Quantitative and Qualitative Disclosures About Market Risk”;and

 

(viii)                        The total “Long-term debt (including currentportion): Fixed-rate” in the table disclosing information about financialinstruments that are sensitive to change in interest rates in “Item 3 –Quantitative and Qualitative Disclosures About Market Risk”.

 

Allother information in the previously filed Quarterly Report remains unchanged.

 

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| **PART I – FINANCIAL  INFORMATION**                                                                                               | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------|------------|
| ** **                                                                                                                                  | ** ** |
| ITEM 1. FINANCIAL STATEMENTS                                                                                                                |       |
| ***Virgin  River Casino Corporation Condensed Consolidated Financial Statements  (unaudited)***                                             | * *   |
| *Condensed  Consolidated Balance Sheets - September 30, 2005 (unaudited) and  December 31, 2004*                                  | * *   |
| *Condensed  Consolidated Statements of Operations (unaudited) For the Three Months and  Nine Months Ended September 30, 2005 and 2004* | * *   |
| *Condensed  Consolidated Statements of Cash Flows (unaudited) For the Nine Months Ended  September 30, 2005 and 2004*                  | * *   |
| *Notes  to Condensed Consolidated Financial Statements (unaudited)*                                                                         | * *   |
| ***RBG, LLC Condensed  Consolidated Financial Statements (unaudited)***                                                                     | * *   |
| *Condensed  Consolidated Balance Sheets - September 30, 2005 (unaudited) and  December 31, 2004*                                  | * *   |
| *Condensed  Consolidated Statements of Operations (unaudited) For the Three Months and  Nine Months Ended September 30, 2005 and 2004* | * *   |
| *Condensed  Consolidated Statements of Cash Flows (unaudited) For the Nine Months Ended  September 30, 2005 and 2004*                  | * *   |
| *Notes to Condensed  Consolidated Financial Statements (unaudited)*                                                                         | * *   |
| ***B &  B B, Inc. (doing business as Virgin River Casino Hotel/Casino/Bingo)  Condensed Financial Statements (unaudited)***   | * *   |
| *Condensed  Balance Sheets - September 30, 2005 and December 31, 2004*                                                            | * *   |
| *Condensed  Statements of Operations (unaudited) For the Three Months and Nine Months  Ended September 30, 2005 and 2004*              | * *   |
| *Condensed  Statements of Cash Flows (unaudited) For the Nine Months Ended  September 30, 2005 and 2004*                               | * *   |
| *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                                                                         |       |
|                                                                                                                                        |       |
| **PART II – OTHER INFORMATION**                                                                                                   | ** ** |
| ** **                                                                                                                                  | ** ** |
| ITEM 6. EXHIBITS                                                                                                                            |       |
|                                                                                                                                        |       |
| **SIGNATURES**                                                                                                                              | ** ** |

 

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# **PART I – FINANCIAL INFORMATION**

# ** **

## **Item1.  Financial Statements.**

## ** **

**Virgin River Casino Corporation**

 

### **Condensed ConsolidatedBalance SheetsSeptember 30, 2005 and December 31, 2004**

**(inthousands)**

 
| ** **                                                                                                  | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|-------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                                                                                  | ** ** | **2005**               | ** ** | **2004**              | ** ** |
| ** **                                                                                                  | ** ** | **(unaudited)**        | ** ** | ** **            | ** ** |
| **Assets**                                                                                                  |       |                   |       |                  |       |
| Current assets:                                                                                             |       |                   |       |                  |       |
| Cash and cash  equivalents                                                                                  |       | $                      | 6,858      |                  | $          | 11,114 |   |
| Accounts  receivable, net                                                                                   |       | 673                    |       | 809                   |       |
| Related party  receivables                                                                                  |       | 156                    |       | 213                   |       |
| Related company  receivables                                                                                |       | 99                     |       | 1,250                 |       |
| Inventories                                                                                                 |       | 1,681                  |       | 1,680                 |       |
| Property held  for vacation interval sales                                                                  |       | 380                    |       | 461                   |       |
| Prepaid expenses                                                                                            |       | 3,486                  |       | 2,911                 |       |
| Current portion  of notes receivable                                                                        |       | 388                    |       | 414                   |       |
| Total current assets                                                                                        |       | 13,721                 |       | 18,852                |       |
| Property and equipment, net                                                                                 |       | 121,244                |       | 114,142               |       |
| Notes receivable, less current portion                                                                      |       | 2,209                  |       | 2,487                 |       |
| Other assets                                                                                                |       | 407                    |       | 413                   |       |
| Deferred financing fees                                                                                     |       | 8,451                  |       | 9,173                 |       |
| Goodwill and other intangible assets, net                                                                   |       | 35,267                 |       | 34,084                |       |
| Total assets                                                                                                |       | $                      | 181,299    |                  | $          | 179,151 |   |
|                                                                                                        |       |                   |       |                  |       |
| **Liabilities and Stockholder’s Deficit**                                                              |       |                   |       |                  |       |
| Current liabilities:                                                                                        |       |                   |       |                  |       |
| Bank overdraft                                                                                              |       | $                      | —     |                  | $          | 1,480 |   |
| Current portion  of obligation under capital lease                                                          |       | 5                      |       | 18                    |       |
| Current portion  of gaming equipment financing                                                              |       | 2,006                  |       | 582                   |       |
| Current portion  of long-term debt                                                                          |       | 917                    |       | 1,353                 |       |
| Accounts payable                                                                                            |       | 2,991                  |       | 3,271                 |       |
| Accrued  liabilities                                                                                        |       | 12,960                 |       | 9,297                 |       |
| Related company  payable                                                                                    |       | 1,400                  |       | 758                   |       |
| Total current liabilities                                                                                   |       | 20,279                 |       | 16,759                |       |
| Gaming equipment financing, less current portion                                                            |       | 3,891                  |       | 189                   |       |
| Long-term debt, less current portion                                                                        |       | 170,106                |       | 165,588               |       |
| Fair value of interest rate swaps                                                                           |       | 391                    |       | 1,493                 |       |
| Commitments and contingencies                                                                               |       |                   |       |                  |       |
| Minority interest                                                                                           |       | 16,295                 |       | 16,040                |       |
| 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                                                                                        |       | (21,102                | )          | (20,672               | )          |
| Accumulated  deficit                                                                                        |       | (11,729                | )          | (3,414                | )          |
| Total stockholder’s deficit                                                                            |       | (29,663                | )          | (20,918               | )          |
| Total liabilities and stockholder’s deficit                                                            |       | $                      | 181,299    |                  | $          | 179,151 |   |

 

Theaccompanying notes are an integral part of these condensed consolidatedfinancial statements.

 

1

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**VirginRiver Casino Corporation**

 

### **Condensed ConsolidatedStatements of Ope**rations(unaudited)For the Three Months and Nine Months Ended September 30, 2005 and 2004

**(inthousands)**

** **
| ** **                                                                    | ** ** | **Three months ended** | ** ** | **Nine Months ended**  | ** ** |
|-------------------------------------------------------------------------------|------------|------------------------|------------|------------------------|------------|
| ** **                                                                    | ** ** | **September 30,** | ** ** | **September 30,** | ** ** | **September 30,** | ** ** | **September 30,** | ** ** |
| ** **                                                                    | ** ** | **2005**               | ** ** | **2004**               | ** ** | **2005** | ** ** | **2004** | ** ** |
|                                                                          |       |                   |       |                   |       |   |   |   |   |
| Revenues                                                                      |       |                   |       |                   |       |   |   |   |   |
| Casino                                                                        |       | $                      | 14,283     |                   | $          | 13,770 |   | $ | 45,861 |   | $ | 43,207 |   |
| Food and  beverage                                                            |       | 7,149                  |       | 7,187                  |       | 22,986 |   | 23,072 |   |
| Hotel                                                                         |       | 4,744                  |       | 4,138                  |       | 15,563 |   | 14,695 |   |
| Related company  rental income                                                |       | 1,575                  |       | 1,575                  |       | 4,725 |   | 4,725 |   |
| Other                                                                         |       | 3,471                  |       | 4,073                  |       | 14,303 |   | 15,769 |   |
| Total revenues                                                                |       | 31,222                 |       | 30,743                 |       | 103,438 |   | 101,468 |   |
| Less—promotional  allowances                                             |       | (4,315                 | )          | (3,920                 | )          | (13,822 | ) | (12,921 | ) |
| Net revenues                                                                  |       | 26,907                 |       | 26,823                 |       | 89,616 |   | 88,547 |   |
| Operating expenses:                                                           |       |                   |       |                   |       |   |   |   |   |
| Casino                                                                        |       | 7,712                  |       | 7,020                  |       | 22,730 |   | 21,564 |   |
| Food and  beverage                                                            |       | 4,589                  |       | 4,642                  |       | 14,407 |   | 14,241 |   |
| Hotel                                                                         |       | 1,617                  |       | 1,902                  |       | 5,039 |   | 5,555 |   |
| Other                                                                         |       | 3,448                  |       | 3,481                  |       | 10,817 |   | 10,962 |   |
| General and  administrative                                                   |       | 7,937                  |       | 6,726                  |       | 22,427 |   | 21,214 |   |
| Depreciation and  amortization                                                |       | 2,465                  |       | 1,686                  |       | 7,270 |   | 5,396 |   |
| Loss on sale and  disposal of assets                                          |       | 79                     |       | 2                      |       | 729 |   | 22 |   |
| Total operating expenses                                                      |       | 27,847                 |       | 25,459                 |       | 83,419 |   | 78,954 |   |
| Operating (loss) income                                                       |       | (940                   | )          | 1,364                  |       | 6,197 |   | 9,593 |   |
| Other income (expense):                                                       |       |                   |       |                   |       |   |   |   |   |
| Interest expense                                                              |       | (4,571                 | )          | (1,768                 | )          | (13,287 | ) | (5,383 | ) |
| Related party  interest expense                                               |       | —                 |       | (75                    | )          | — |   | (75 | ) |
| Change in fair  value of interest rate swaps                                  |       | 366                    |       | (336                   | )          | 1,102 |   | 2,683 |   |
| Other                                                                         |       | (113                   | )          | —                 |       | (288 | ) | — |   |
| (Loss) income before minority interest                                        |       | (5,258                 | )          | (815                   | )          | (6,276 | ) | 6,818 |   |
| Minority  interest in loss (income) from RBG, LLC and Casablanca Resorts, LLC |       | 248                    |       | 635                    |       | (254 | ) | (1,110 | ) |
| Net (loss) income                                                             |       | $                      | (5,010     | )                      | $          | (180 | ) | $ | (6,530 | ) | $ | 5,708 |   |

 

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

 

2

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**VirginRiver Casino Corporation**

 

### **Condensed ConsolidatedStatements of Cas**hFlows (unaudited)For the Nine Months Ended September 30, 2005 and 2004

**(inthousands)**

 
| ** **                                                                                | ** ** | **Nine months ended**  | ** ** |
|-------------------------------------------------------------------------------------------|------------|------------------------|------------|
| ** **                                                                                | ** ** | **September 30,** | ** ** | **September 30,** | ** ** |
| ** **                                                                                | ** ** | **2005**               | ** ** | **2004** | ** ** |
| Cash flows from operating activities:                                                     |       |                   |       |   |   |
| Net (loss)  income                                                                        |       | $                      | (6,530     | ) | $ | 5,708 |   |
| Adjustments to  reconcile net (loss) income to net cash provided by operating activities: |       |                   |       |   |   |
| Depreciation and  amortization                                                            |       | 7,270                  |       | 5,396 |   |
| Minority  interest in income from RBG, LLC and Casablanca Resorts, LLC                    |       | 254                    |       | 1,110 |   |
| Change in fair  value of interest rate swaps                                              |       | (1,102                 | )          | (2,683 | ) |
| Loss on sale and  disposal of assets                                                      |       | 729                    |       | 22 |   |
| Amortization of  deferred financing fees                                                  |       | 1,030                  |       | 207 |   |
| Accretion of  senior subordinated notes                                                   |       | 3,721                  |       | — |   |
| Interest expense  on gaming equipment financing                                           |       | 232                    |       | — |   |
| Cost of vacation  intervals sales                                                         |       | 81                     |       | 348 |   |
| Change in  operating assets and liabilities:                                              |       |                   |       |   |   |
| Accounts,  related company and related party receivables, net                             |       | 1,395                  |       | 654 |   |
| Inventories                                                                               |       | (1                     | )          | 123 |   |
| Prepaid expenses                                                                          |       | (575                   | )          | (481 | ) |
| Accounts payable  and accrued liabilities                                                 |       | 3,019                  |       | 1,627 |   |
| Net cash provided by operating activities                                                 |       | 9,523                  |       | 12,031 |   |
|                                                                                      |       |                   |       |   |   |
| Cash flows from investing activities:                                                     |       |                   |       |   |   |
| Proceeds  received from sale of assets                                                    |       | 145                    |       | 6 |   |
| Capital  expenditures                                                                     |       | (9,197                 | )          | (1,774 | ) |
| Purchase price  adjustment                                                                |       | (1,218                 | )          | — |   |
| Decrease in  notes receivable                                                             |       | 304                    |       | 118 |   |
| Net cash used in investing activities                                                     |       | (9,966                 | )          | (1,650 | ) |
|                                                                                      |       |                   |       |   |   |
| Cash flows from financing activities:                                                     |       |                   |       |   |   |
| Proceeds from  issuance of long-term debt                                                 |       | 1,666                  |       | 2,284 |   |
| Decrease in bank  overdraft                                                               |       | (1,480                 | )          | (1,264 | ) |
| Payment of  long-term debt                                                                |       | (1,306                 | )          | (11,255 | ) |
| Payment on  gaming equipment financing                                                    |       | (619                   | )          | (587 | ) |
| Payment of  obligations under capital lease                                               |       | (13                    | )          | (22 | ) |
| Payment of  financing fees                                                                |       | (307                   | )          | — |   |
| Change in other  assets                                                                   |       | 29                     |       | (37 | ) |
| Tax  distributions paid                                                                   |       | (1,783                 | )          | (880 | ) |
| Capital  contributions                                                                    |       | —                 |       | 27 |   |
| Net cash used in financing activities                                                     |       | (3,813                 | )          | (11,734 | ) |
| Net decrease in cash and cash equivalents                                                 |       | (4,256                 | )          | (1,353 | ) |
| Cash and cash equivalents at beginning of year                                            |       | 11,114                 |       | 8,884 |   |
| Cash and cash equivalents at end of period                                                |       | $                      | 6,858      |   | $ | 7,531 |   |

 

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

 

3

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**VirginRiver Casino Corporation**

 

**Condensed Consolidated Statements of Cash Flows(unaudited)**

**For the NineMonths Ended September 30, 2005 and 2004**

**(inthousands) (Restated)**

** **
| ** **                                             | ** ** | **Nine months ended**  | ** ** |
|--------------------------------------------------------|------------|------------------------|------------|
| ** **                                             | ** ** | **September 30,** | ** ** | **September 30,** | ** ** |
| ** **                                             | ** ** | **2005**               | ** ** | **2004** | ** ** |
|                                                   |       | **(restated)**         |       |   |   |
| Supplemental cash flow disclosure:                     |       |                   |       |   |   |
|                                                   |       |                   |       |   |   |
| Cash paid for  interest                                |       | $                      | 6,494      |   | $ | 4,872 |   |
|                                                   |       |                   |       |   |   |
| Acquisition of assets with gaming equipment  financing |       | $                      | 5,202      |   | $ | 385 |   |

 

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

 

4

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**VirginRiver Casino Corporation**

 

### **Notes to Condensed ConsolidatedFinancia**lStatements (unaudited)

**September 30, 2005**

** **

**1.**                                      Basis ofPresentation and Background

** **

The accompanying are the condensedconsolidated financial statements of Virgin River Casino Corporation, whichincludes the accounts of RBG, LLC (doing business as CasaBlancaResort/Casino/Golf/Spa) and its wholly owned subsidiary Casablanca Resorts, LLC(doing business as Oasis Resort & Casino) (collectively the “Company”).Virgin River Casino Corporation (“VRCC”) owned 61.54% of RBG, LLC (“RBG”) andCasablanca Resorts, LLC (“Resorts LLC”) prior to December 20, 2004. Foursiblings owned 100% of the shares of VRCC and owned 8.47% of the membershipinterests in RBG individually. Those same four siblings also owned 93.28% ofB&BB, 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.

 

On December 20, 2004,the Companies entered into a series of transactions whereby they issued$125.0 million aggregate principal amount of Senior Secured Notes due 2012and $66.0 million aggregate principal amount at maturity($39.9 million in gross proceeds) of Senior Subordinated Notes due 2013,and received a $16.0 million equity contribution from Mr. Black andR. Black, Inc. The Companies used the proceeds from the above offering topurchase the interests held by certain affiliated and unaffiliated shareholders(collectively known as the “Buyout”) for $101.4 million pursuant to theAgreement for Purchase and Sale or Redemption of Equity Interests (“Agreementfor Purchase of Equity Interests”) between James A. Black GamingProperties Trust, Gary W. Black Gaming Properties Trust, Michael T.Black Gaming Properties Trust, Jorco, Inc., Marcus A. Hall, JamesRitchie and Barry Moore as Sellers and Robert R. Black, VRCC, and B&BBas Purchasers (see Note 3).  As a resultof the Buyout, Mr. Black obtained the remaining 80.97% interest inB&BB and 75.0% interest in VRCC. VRCC along with R. Black, Inc.obtained 32.69% of the membership interest in RBG that was being purchased. Theremaining proceeds were utilized to repay $64.0 million owed under theCredit Agreement and the $2.0 million promissory note payable to a sellingshareholder. Five days prior to the Buyout, RBG terminated the lease with MDW(see Note 6) and the Companies disposed of certain assets. As a result ofthese transactions, Mr. Black and R. Black, Inc. control VRCC, RBGand B&BB. In addition, VRCC, RBG and B&BB are co-issuers on theCompanies’ Senior Secured and Senior Subordinated Notes and all three entitiesare jointly managed and share resources (see Note 4).

 

***InterimFinancial Statements***– The accompanying unaudited condensed consolidated financialstatements for the three and nine-month periods ended September 30, 2005and September 30, 2004 are unaudited. In the opinion of management, all adjustments (which include normalrecurring adjustments) necessary for a fair presentation of the Company’sfinancial position and results of operations for such periods, have beenincluded.  The accompanying unauditedcondensed consolidated financial statements should be read in conjunction withthe Company’s audited financial statements for the year ended December 31,2004 included in its registration statement on Form S-4/A filed September 22,2005.  The results for the three and nine-monthperiods ended September 30, 2005 are not necessarily indicative of theresults that may be expected for the year ending December 31, 2005, or forany other period.

 

5

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**2.**                                      Property andEquipment

** **

Property and equipmentconsists of the following (in thousands):

 

| ** **                                          | ** ** | **September  30,** | ** ** | **December 31,** | ** ** |
|-----------------------------------------------------|------------|-------------------------|------------|-----------------------|------------|
| ** **                                          | ** ** | **2005**                | ** ** | **2004**              | ** ** |
| ** **                                          | ** ** | **(unaudited)**         | ** ** | ** **            | ** ** |
| Land                                                |       | $                       | 30,636     |                  | $          | 30,630 |   |
| Buildings                                           |       | 68,450                  |       | 65,588                |       |
| Land and leasehold improvements                     |       | 21,792                  |       | 21,566                |       |
| Furniture, fixtures and equipment                   |       | 39,592                  |       | 31,420                |       |
| Construction in progress                            |       | 1,008                   |       | 397                   |       |
|                                                |       | 161,478                 |       | 149,601               |       |
| Less—accumulated depreciation and amortization |       | (40,234                 | )          | (35,459               | )          |
| Property and equipment, net                         |       | $                       | 121,244    |                  | $          | 114,142 |   |

** **

**3.**                                      Purchase of Equity Interests

** **

On December 20,2004, pursuant to the Agreement for Purchase of Equity Interests described in Note 1,Mr. Black and R. Black, Inc. acquired certain interests in B&BB,VRCC and RBG for $101.4 million. In addition, the Companies incurredapproximately $10.3 million in capitalized deferred financing fees, $9.0million of which is recorded in the accompanying consolidated balance sheet,related to the issuance of the Notes as well as $274,000 in costs associatedwith the Agreement for Purchase of Equity Interests which were charged toequity in the accompanying consolidated balance sheet. Management valued theassets acquired in the transaction as follows. Current assets and liabilities were recorded at book value, whichapproximated their estimated market values at the date of acquisition.  Land, buildings and building improvementswere valued based upon comparable values of recent sales in the Mesquite,Nevada market and 3rd party market valuations of comparable assetsin Mesquite, Nevada.  For equipment,management recorded these assets at book value, which was deemed to be fairvalue, considering the relative age and working condition of theequipment.  Intangible assets,representing the Companies’ customer list and slot club program, were recordedat fair value, which was calculated based upon comparable customer lists andslot programs with other casinos operating in the Las Vegas and surroundingmarket.  In accordance with theprovisions of SFAS No. 141, the remainder of the purchase price wasallocated to goodwill. Management believes that the goodwill arose from theCompanies’ dominance in and the growing Mesquite, Nevada market, the value ofthe existing workforce and the existing accounting and operatinginfrastructure.

 

The following table summarizes the estimated fairvalues of the assets acquired and liabilities assumed by the Companies at thedate of acquisition. The purchase price allocation is in process and will becompleted within one year of the acquisition; thus, the allocation of thepurchase price is subject to refinement.

 

6

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| ** **                 | ** ** | **At   December 20,  2004** | ** ** |
|----------------------------|------------|----------------------------------|------------|
|                       |       |                             |       |
| Current assets             |       | $                                | 15,600     |   |
| Property and equipment     |       | 100,200                          |       |
| Other non-current assets   |       | 3,300                            |       |
| Intangibles                |       | 4,600                            |       |
| Goodwill                   |       | 43,000                           |       |
| Total assets  acquired     |       | 166,700                          |       |
|                       |       |                             |       |
| Current liabilities        |       | 12,800                           |       |
| Long-term liabilities      |       | 1,200                            |       |
| Long-term debt assumed     |       | 53,300                           |       |
| Total  liabilities assumed |       | 67,300                           |       |
|                       |       |                             |       |
| Net assets  acquired       |       | $                                | 99,400     |   |

** **

Thefollowing table summarizes the estimated fair values of the assets acquired andliabilities assumed related to the Company at the date of acquisition.  

 

| ** **                 | ** ** | **At   December 20,  2004** | ** ** |
|----------------------------|------------|----------------------------------|------------|
|                       |       |                             |       |
| Current assets             |       | $                                | 10,000     |   |
| Property and equipment     |       | 100,200                          |       |
| Other non-current assets   |       | 3,300                            |       |
| Intangibles                |       | 2,300                            |       |
| Goodwill                   |       | 31,800                           |       |
| Total assets  acquired     |       | 147,600                          |       |
| Current liabilities        |       | 10,200                           |       |
| Long-term liabilities      |       | 1,200                            |       |
| Long-term debt assumed     |       | 53,200                           |       |
| Total  liabilities assumed |       | 64,600                           |       |
|                       |       |                             |       |
| Net assets  acquired       |       | $                                | 83,000     |   |

 

7

----

 

**4.**                                      Long-term Debt

** **

Long-term debt consistsof the following (in thousands): 

 
| ** **                                                                                                                                                                                                                                                                                                      | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                                                                                                                                                                                                                                                                                      | ** ** | **2005**               | ** ** | **2004**              | ** ** |
| ** **                                                                                                                                                                                                                                                                                                      | ** ** | **(unaudited)**        | ** ** | ** **            | ** ** |
| 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 |       | 43,788                 |       | 40,068                |       |
| 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.                                                |       | 1,277                  |       | —                |       |
| 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                                                                                                                                                   |       | 464                    |       | 757                   |       |
| Hypothecation  Note at prime plus 3.0% (9.75% at September 30, 2005), collateralized by  certain notes receivable as defined; guaranteed by one of the Initial  Members, due April 2004                                                                                                               |       | 252                    |       | 572                   |       |
| Promissory note  payable to Wells Fargo Equipment Finance, Inc. payable in monthly  installments of $24 at an interest rate of 7.00%, due November 2005                                                                                                                                               |       | 47                     |       | 251                   |       |
| 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                                                                                                                                               |       | 195                    |       | 293                   |       |
|                                                                                                                                                                                                                                                                                                            |       | 171,023                |       | 166,941               |       |
| Less—current  portion                                                                                                                                                                                                                                                                                      |       | (917                   | )          | (1,353                | )          |
| Total long-term  debt                                                                                                                                                                                                                                                                                           |       | $                      | 170,106    |                  | $          | 165,588 |   |

*** ***

***NewRevolving Facility***

** **

The Wells Fargo Foothillcredit facility (“Foothill Facility’) is secured by substantially all theassets of the Companies. During the life of the Foothill Facility, theCompanies may borrow up to the lesser of (1) $15.0 million less theLetter of Credit Usage, as defined, less the Bank Product Reserve, as defined,or (2) the Borrowing Base, as defined, less the Letter of CreditUsage.  At September 30, 2005, theBank Product Reserve was approximately $359,000 and is based on the fair marketvalue at September 30, 2005 of the interest rate swap owed to Wells FargoFoothill, Inc.  Accordingly, theavailability under the Foothill Facility at September 30, 2005 was limitedto $13.4 million.

 

Under the terms of theFoothill Facility, interest accrues on the outstanding principal balance atLIBOR 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 4.4% at September 30, 2005.  The Foothill Facility also

 

8

----

 

contains certainfinancial and other covenants.  Theseinclude a minimum trailing twelve-month Earnings before Interest, Taxes,Depreciation and Amortization (“EBITDA”) of $15,000,000 for the Companies andlimitations on other indebtedness and capital expenditures, as defined.  The Companies were in compliance with thesecovenants at September 30, 2005. The outstanding balance on the Foothill Facility is a joint and severalobligation of the Companies. The condensed consolidated balance sheet of theCompany reflects the full obligation of the Foothill Facility at September 30,2005.

 

***Senior Secured and Senior Subordinated Notes***

 

In December 2004, aspart of 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(“Senior Sub 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 condensed consolidated balance sheet ofthe Company reflects the full obligation of the Notes at September 30,2005, with the amount recorded on the balance sheet of B&BB recognized as adeemed distribution to reflect the net obligation of the Notes recorded on thecondensed consolidated balance sheet of the Company at September 30, 2005.At September 30, 2005, the net amount of the Notes recorded on the Company’scondensed consolidated balance sheet is $148.2 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 the Companies’ Notes contain certain customary financial and othercovenants, which limit the Companies’ ability to incur additional debt.  The Indentures provide that the Companies maynot incur additional indebtedness, other than specified types of indebtedness,unless the Consolidated Coverage Ratio, on a pro-forma basis after the incurrenceof the additional indebtedness is at least 2.00 to 1.00. As of September 30,2005, the Companies have incurred $0 of additional indebtedness as defined.

 

TheIndentures also contain other covenants which limit the ability of the Issuersand Guarantors, as defined, to pay dividends, redeem stock, or make otherdistributions, make investments, create certain liens, enter into certaintransactions with affiliates, utilize proceeds from asset sales, transfer orsell assets, issue or sell equity interests of subsidiaries and enter intocertain mergers 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, 2005.

 

9

----

 

The Senior Notes aresecured by substantially all existing and future assets of the Issuers and theGuarantors, as defined, as well as the equity interest of the Guarantors, theequity interests of the Mr. Black and his affiliate in the Issuers.  The Guarantors are all the wholly ownedsubsidiaries of the Issuers.

 

The Senior Notes aresubordinated to the security interests of the Foothill Facility.  The Senior Sub Notes are subordinate to theSenior Notes and all other indebtedness of the Companies.

 

**5.****                                     ****GamingEquipment Financing**

 

The Company from time totime enters into agreements with gaming manufacturers to finance the purchaseof gaming equipment.  Contractual termsof the agreements with the gaming manufactures consist of payment terms of lessthan one year to up to three years without interest.  In the event that an agreement with a gamingmanufacturer extends past a year, the Company will impute interest at a rate of8%.

 

Gaming equipmentfinancing consists of the following (in thousands): 

 
| ** **                                                                                                                                           | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                                                                                                                           | ** ** | **2005**               | ** ** | **2004**              | ** ** |
| ** **                                                                                                                                           | ** ** | **(unaudited)**        | ** ** | ** **            | ** ** |
| Gaming equipment  financing to purchase 205 games, no payments for one year and monthly  payments of $106 for 24 months beginning February 2006 |       | $                      | 2,274      |                  | $          | — |   |
| Gaming equipment  financing to purchase 68 games, no payments for one year and monthly payments  of $43 for 24 months beginning January 2006    |       | 926                    |       | —                |       |
| Gaming equipment  financing to purchase 70 games, no payments for one year and monthly payments  of $39 for 24 months beginning March 2006      |       | 822                    |       | —                |       |
| Gaming equipment  financing to purchase 60 games, monthly payments of $20 for 36 months  beginning April 2005                                   |       | 565                    |       | —                |       |
| Gaming equipment  financing to purchase 64 games, no payments for one year and monthly payments  of $26 for 24 months beginning February 2006   |       | 566                    |       | —                |       |
| Gaming equipment  financing to purchase 38 games, monthly payments of $13 for 36 months  beginning April 2005                                   |       | 344                    |       | —                |       |
| Gaming equipment  financing to purchase 20 games, no payments for one year and monthly payments  of $8 for 24 months beginning January 2006     |       | 171                    |       | 189                   |       |
| Gaming equipment  financing, monthly payments of $3 for 36 months beginning January 2005                                                        |       | 69                     |       | —                |       |
| Gaming equipment  financing with terms of less than 12 months                                                                                        |       | 160                    |       | 582                   |       |
|                                                                                                                                                 |       | 5,897                  |       | 771                   |       |
| Less current  portion                                                                                                                                |       | (2,006                 | )          | (582                  | )          |
| Gaming equipment  financing, long-term portion                                                                                                       |       | $                      | 3,891      |                  | $          | 189 |   |

 

10

----

 

**6.****                                     ****Related Party Transactions**

 

Wingnuts, Inc. is acompany that owns an airplane used by the Company.  Wingnuts, Inc. is owned by Mr. Blackalong with various former stockholders of the Companies.  Wingnuts, Inc. charges the Company forbusiness usage of the airplane using hourly rates for actual air time.  Total charges for the three and nine-month periodsended September 30, 2005 and 2004 were $0, $12,000, $0 and $38,000,respectively.

 

MJB Development is a realestate construction company owned by a former shareholder of the Companies whichprovided construction and storage services associated with hotel facilities ofthe Company.  When performingconstruction services, the actual costs of construction, overhead charges, anda profit are charged to the Company.  Inaddition to construction services, MJB Development has also leased containersfor storage to the Company.  Totalcharges for construction and leasing of storage containers totaled $0, $6,000, $2,000and $17,000 during the three and nine-month periods ended September 30,2005 and 2004, respectively, and are included in the accompanying consolidatedstatements of operations.  In addition,during the nine months ended September 30, 2005, the Company paid MJBDevelopment $68,000 to purchase previously leased storage containers.

 

MDW is a Nevada limited-liabilitycompany in which Mr. Black has an interest.  MDW owns a condominium complex located inMesquite, Nevada. The Company had entered into a lease agreement with MDWwhereby MDW gave the members of the CasaBlanca Vacation Club (the timeshareclub associated with the CasaBlanca) the right to use and occupy the timeshareunits located on the leasehold property. The remaining units at the condominium complex were utilized by theCasaBlanca for hotel and apartment purposes. On December 15, 2004, pursuant to a termination agreement, theCompany terminated its lease with MDW. The rent payments paid by the Company to MDW during the three and nine-monthperiods ended September 30, 2005 and 2004 totaled $0, $185,000, $0 and $554,000,respectively, and are included in the condensed consolidated statements ofoperations.  The Company did not recordany revenue related to the condominium sales during the nine months ended September 30,2005. In addition, pursuant to the lease termination agreement, the Companyowes MDW $86,000 at September 30, 2005 for money owed to MDW during the ninemonths ended September 30, 2005.

 

Virgin River Foodmart, Inc.,a Nevada corporation, (“Foodmart”) is owned by Mr. Black and formershareholders of VRCC.  Pursuant to alease agreement, VRCC leases to Virgin River Foodmart, Inc. certain realproperty and the structures and improvements contained thereon for the purposesof operating the Virgin River Food Mart. Pursuant to the Buyout, the real property, structures and improvementspreviously leased to the Virgin River Foodmart, Inc. were not acquired by Mr. Black,but were distributed to the shareholders of VRCC; therefore the lease betweenVRCC and Virgin River Foodmart, Inc. was terminated.  Lease payments made to VRCC were $0, $56,000,$0 and $167,000 for the three and nine-month periods ended September 30,2005 and 2004, respectively, and are included in the accompanying condensedconsolidated statements of operations.

 

In addition, participantsin the Company’s slot club program are able to redeem their points for gasolineat the Foodmart.  Foodmart charges theCompany the retail amount of gas purchased with player points.  Chargesassociated with the point redemption for gasoline at the Foodmart were $30,000,$35,000, $106,000 and $112,000 for the three and nine-month periods ended September 30,2005 and 2004, respectively.

 

11

----

 

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 incurred legal fees for legalservices in the amount of $68,000, $22,000, $112,000 and $91,000 for the threeand nine-month periods ended September 30, 2005 and 2004, respectively.

 

Pursuant to theIndenture, Mr. Black is entitled to a management fee for his management ofthe Company business of up to 5% of EBITDA, as defined.  The Company has recorded an estimatedliability of $576,000 associated with this management fee at September 30,2005.

 

Resorts LLC providedmanagement and other services to two related parties that manage and operatethe home owners associations of the vacation intervals sold at theproperty.  Included in the accompanyingcondensed consolidated balance sheet at September 30, 2005 is a receivablefor $99,000 related to amounts owed for those services.

 

**7.****                                     ****Commitments and Contingencies**

 

In September 2005,the Companies entered into an agreement with Agilysys NV, LLC to purchase a newproperty management system for the three properties.  Implementation is expected to begin in December 2005with a completion date expected to occur before the end of the second quarter2006.  The estimated cost of this projectis approximately $1.7 million.

 

In September 2005,the Companies entered into an agreement with Infinium Software, Inc. topurchase a new financial management system. Implementation is expected to begin in December 2005 with ancompletion date expected to occur before the end of the second quarter in 2006.The estimated cost of this project is approximately $615,000.

 

In May 2005, theCompanies entered into a lease arrangement with Dell Financial Services tolease desktop computers and servers.  Theterm of the lease is 18 months at a rate of approximately $29,000 a month.  The lease also provides for a renewal periodof an additional 18 months at approximately $6,000 a month.  The Companies are accounting for the lease asan operating lease.

 

**8.****                                     ****Subsequent Events**

 

In October 2005,pursuant to the Agreement for Purchase of Equity Interests, the Company made afinal tax distribution of $525,000 to the previous shareholders of the Companytoward their 2004 tax liability.  As of September 30,2005, the Company recognized an additional liability and adjusted goodwill andother intangible assets for this amount to reflect the change in the purchaseprice of the Buyout that was consummated on December 20, 2004.

 

In October 2005, theCompanies entered into an agreement with Wells Fargo Financial Leasing to leasegolf maintenance equipment totaling approximately $1.3 million.  The term of the lease is 36 months at a rateof $29,000.  The Companies are accountingfor the lease as an operating lease.

 

12

----

 

**RGB, LLC**

 

**Condensed Consolidated Balance Sheets**

**September 30,2005 and December 31, 2004**

**(inthousands)**

 
| ** **                                         | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|----------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                         | ** ** | **2005**               | ** ** | **2004**              | ** ** |
| ** **                                         | ** ** | **(unaudited)**        | ** ** | ** **            | ** ** |
| **Assets**                                         |       |                   |       |                  |       |
| Current assets:                                    |       |                   |       |                  |       |
| Cash and cash  equivalents                         |       | $                      | 5,493      |                  | $          | 7,544 |   |
| Accounts  receivable, net                          |       | 673                    |       | 799                   |       |
| Related party  receivables                         |       | 342                    |       | 213                   |       |
| Related company  receivables                       |       | 99                     |       | 205                   |       |
| Inventories                                        |       | 1,681                  |       | 1,680                 |       |
| Property held  for vacation interval sales         |       | 380                    |       | 461                   |       |
| Prepaid expenses                                   |       | 3,393                  |       | 2,823                 |       |
| Current portion  of notes receivable               |       | 388                    |       | 414                   |       |
| Total current assets                               |       | 12,449                 |       | 14,139                |       |
| Property and equipment, net                        |       | 77,398                 |       | 69,137                |       |
| Notes receivable, less current portion             |       | 2,209                  |       | 2,487                 |       |
| Other assets                                       |       | 407                    |       | 399                   |       |
| Goodwill and other intangible assets, net          |       | 33,524                 |       | 34,084                |       |
| Total assets                                       |       | $                      | 125,987    |                  | $          | 120,246 |   |
|                                               |       |                   |       |                  |       |
| **Liabilities and Members’ Deficit**          |       |                   |       |                  |       |
| Current liabilities:                               |       |                   |       |                  |       |
| Bank overdraft                                     |       | $                      | —     |                  | $          | 1,480 |   |
| Current portion  of obligation under capital lease |       | 5                      |       | 18                    |       |
| Current portion  of gaming equipment financing     |       | 2,006                  |       | 582                   |       |
| Current portion  of long-term debt                 |       | 917                    |       | 1,353                 |       |
| Accounts payable                                   |       | 2,961                  |       | 3,154                 |       |
| Accrued  liabilities                               |       | 12,380                 |       | 8,645                 |       |
| Related company  payable                           |       | 252                    |       | 200                   |       |
| Total current liabilities                          |       | 18,521                 |       | 15,432                |       |
| Gaming equipment financing, less current portion   |       | 3,891                  |       | 189                   |       |
| Long-term debt, less current portion               |       | 170,106                |       | 165,588               |       |
| Fair value of interest rate swaps                  |       | 391                    |       | 1,493                 |       |
| Commitments and contingencies                      |       |                   |       |                  |       |
| Members’ deficit:                             |       |                   |       |                  |       |
| Members’  contributions                       |       | 116,391                |       | 116,391               |       |
| Deemed  distribution                               |       | (172,568               | )          | (165,831              | )          |
| Accumulated  deficit                               |       | (10,745                | )          | (13,016               | )          |
| Total members’ deficit                        |       | (66,922                | )          | (62,456               | )          |
| Total liabilities and members’ deficit        |       | $                      | 125,987    |                  | $          | 120,246 |   |

 

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

 

13

----

 

**RGB, LLC**

 

**Condensed****Consolidated Statements ofOpe****rations (unaudited)**

**For theThree Months and Nine Months Ended September 30, 2005 and 2004**

**(inthousands)**

** **
| ** **                                   | ** ** | **Three months ended** | ** ** | **Nine Months ended**  | ** ** |
|----------------------------------------------|------------|------------------------|------------|------------------------|------------|
| ** **                                   | ** ** | **September 30,** | ** ** | **September 30,** | ** ** | **September 30,** | ** ** | **September 30,** | ** ** |
| ** **                                   | ** ** | **2005**               | ** ** | **2004**               | ** ** | **2005** | ** ** | **2004** | ** ** |
|                                         |       |                   |       |                   |       |   |   |   |   |
| Revenues                                     |       |                   |       |                   |       |   |   |   |   |
| Casino                                       |       | $                      | 14,283     |                   | $          | 13,770 |   | $ | 45,861 |   | $ | 43,207 |   |
| Food and  beverage                           |       | 7,149                  |       | 7,187                  |       | 22,986 |   | 23,072 |   |
| Hotel                                        |       | 4,725                  |       | 4,070                  |       | 15,125 |   | 14,237 |   |
| Other                                        |       | 3,378                  |       | 3,913                  |       | 14,054 |   | 15,319 |   |
| Total revenues                               |       | 29,535                 |       | 28,940                 |       | 98,026 |   | 95,835 |   |
| Less—promotional  allowances            |       | (4,295                 | )          | (3,912                 | )          | (13,802 | ) | (12,913 | ) |
| Net revenues                                 |       | 25,240                 |       | 25,028                 |       | 84,224 |   | 82,922 |   |
| Operating expenses:                          |       |                   |       |                   |       |   |   |   |   |
| Casino                                       |       | 7,712                  |       | 7,020                  |       | 22,730 |   | 21,564 |   |
| Food and  beverage                           |       | 4,589                  |       | 4,642                  |       | 14,407 |   | 14,241 |   |
| Hotel                                        |       | 1,546                  |       | 1,620                  |       | 4,682 |   | 5,020 |   |
| Other                                        |       | 3,448                  |       | 3,481                  |       | 10,817 |   | 10,962 |   |
| General and  administrative                  |       | 7,870                  |       | 6,751                  |       | 22,182 |   | 21,052 |   |
| Depreciation and  amortization               |       | 1,994                  |       | 1,398                  |       | 5,859 |   | 4,542 |   |
| Loss on sale and  disposal of assets         |       | 79                     |       | 2                      |       | 729 |   | 22 |   |
| Total operating expenses                     |       | 27,238                 |       | 24,914                 |       | 81,406 |   | 77,403 |   |
| Operating (loss) income                      |       | (1,998                 | )          | 114                    |       | 2,818 |   | 5,519 |   |
| Other income (expense):                      |       |                   |       |                   |       |   |   |   |   |
| Interest expense                             |       | (357                   | )          | (1,483                 | )          | (1,048 | ) | (4,512 | ) |
| Related party  interest expense              |       | —                 |       | (41                    | )          | — |   | (41 | ) |
| Change in fair  value of interest rate swaps |       | 262                    |       | (241                   | )          | 789 |   | 1,921 |   |
| Other                                        |       | (113                   | )          | —                 |       | (288 | ) | — |   |
| Net (loss) income                            |       | $                      | (2,206     | )                      | $          | (1,651 | ) | $ | 2,271 |   | $ | 2,887 |   |

 

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

 

14

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**RGB, LLC**

 

**Condensed Consolidated Statements of Cas****h Flows (unaudited)**

**For theNine Months Ended September 30, 2005 and 2004**

**(inthousands)**

 
| ** **                                                                         | ** ** | **Nine months ended**  | ** ** |
|------------------------------------------------------------------------------------|------------|------------------------|------------|
| ** **                                                                         | ** ** | **September 30,** | ** ** | **September 30,** | ** ** |
| ** **                                                                         | ** ** | **2005**               | ** ** | **2004** | ** ** |
|                                                                               |       |                   |       |   |   |
| Cash flows from operating activities:                                              |       |                   |       |   |   |
| Net income                                                                         |       | $                      | 2,271      |   | $ | 2,887 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities: |       |                   |       |   |   |
| Depreciation and  amortization                                                     |       | 5,859                  |       | 4,542 |   |
| Change in fair  value of interest rate swaps                                       |       | (789                   | )          | (1,921 | ) |
| Loss on sale and  disposal of assets                                               |       | 729                    |       | 22 |   |
| Amortization of  deferred financing fees                                           |       | —                 |       | 158 |   |
| Interest expense  on gaming equipment financing                                    |       | 232                    |       | — |   |
| Cost of vacation  intervals sales                                                  |       | 81                     |       | 348 |   |
| Change in  operating assets and liabilities:                                       |       |                   |       |   |   |
| Accounts,  related company and related party receivables, net                      |       | 103                    |       | 660 |   |
| Inventories                                                                        |       | (1                     | )          | 123 |   |
| Prepaid expenses                                                                   |       | (570                   | )          | (473 | ) |
| Accounts payable  and accrued liabilities                                          |       | 1,542                  |       | (43 | ) |
| Net cash provided by operating activities                                          |       | 9,457                  |       | 6,303 |   |
|                                                                               |       |                   |       |   |   |
| Cash flows from investing activities:                                              |       |                   |       |   |   |
| Proceeds received  from sale of assets                                             |       | 145                    |       | 6 |   |
| Capital  expenditures                                                              |       | (8,944                 | )          | (1,748 | ) |
| Decrease in  notes receivable                                                      |       | 304                    |       | 118 |   |
| Net cash used in investing activities                                              |       | (8,495                 | )          | (1,624 | ) |
|                                                                               |       |                   |       |   |   |
| Cash flows from financing activities:                                              |       |                   |       |   |   |
| Proceeds from  issuance of long-term debt                                          |       | 209                    |       | 284 |   |
| Decrease in bank  overdraft                                                        |       | (1,480                 | )          | (1,264 | ) |
| Payment of  long-term debt                                                         |       | (1,126                 | )          | (3,005 | ) |
| Payment on  gaming equipment financing                                             |       | (619                   | )          | (587 | ) |
| Payment of  obligations under capital lease                                        |       | (13                    | )          | (22 | ) |
| Change in other  assets                                                            |       | 16                     |       | (37 | ) |
| Net cash used in financing activities                                              |       | (3,013                 | )          | (4,631 | ) |
| Net (decrease) increase in cash and cash equivalents                               |       | (2,051                 | )          | 48 |   |
| Cash and cash equivalents at beginning of year                                     |       | 7,544                  |       | 7,429 |   |
| Cash and cash equivalents at end of period                                         |       | $                      | 5,493      |   | $ | 7,477 |   |

 

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

 

15

----

 

**RGB, LLC**

 

**CondensedConsolidated Statements of Cash Flows (unaudited)**

**For theNine Months Ended September 30, 2005 and 2004**

**(inthousands) (Restated)**

** **

| ** **                                             | ** ** | **Nine months ended**  | ** ** |
|--------------------------------------------------------|------------|------------------------|------------|
| ** **                                             | ** ** | **September 30,** | ** ** | **September 30,** | ** ** |
| ** **                                             | ** ** | **2005**               | ** ** | **2004** | ** ** |
|                                                   |       | **(restated)**         |       |   |   |
| Supplemental cash flow disclosure:                     |       |                   |       |   |   |
|                                                   |       |                   |       |   |   |
| Cash paid for  interest                                |       | $                      | 817        |   | $ | 4,091 |   |
|                                                   |       |                   |       |   |   |
| Acquisition of assets with gaming equipment  financing |       | $                      | 5,513      |   | $ | 385 |   |

 

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

 

16

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**RGB, LLC**

 

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

**September 30, 2005**

** **

**1.**                                      Basis ofPresentation 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”). Prior to December 20, 2004, RBG, LLC (“RBG”) was a61.54% owned subsidiary of Virgin River Casino Corp. (“VRCC”).  Four siblings owned 100% of the shares ofVRCC and owned 8.47% of the membership interests in RBG individually. Thosesame four siblings owned 93.28% of B & B B, Inc. (doingbusiness as Virgin River Hotel/Casino/Bingo) (“B&BB”).  VRCC, RBG and B&BB (collectively the “Companies”)are operated under common management.

 

On December 20,2004, the Companies entered into a series of transactions whereby they issued$125.0 million aggregate principal amount of Senior Secured Notes due 2012and $66.0 million aggregate principal amount at maturity ($39.9 millionin gross proceeds) of Senior Subordinated Notes due 2013, and received a$16.0 million equity contribution from Mr. Black and R. Black, Inc.The Companies used the proceeds from the above offering to purchase theinterests held by certain affiliated and unaffiliated shareholders(collectively known as the “Buyout”) for $101.4 million pursuant to theAgreement for Purchase and Sale or Redemption of Equity Interests (“Agreementfor Purchase of Equity Interests”) between James A. Black GamingProperties Trust, Gary W. Black Gaming Properties Trust, Michael T.Black Gaming Properties Trust, Jorco, Inc., Marcus A. Hall, JamesRitchie and Barry Moore as Sellers and Robert R. Black, VRCC and B&BBas Purchasers (see Note 3).  As a resultof the Buyout, Mr. Black obtained the remaining 80.97% interest inB&BB and 75.0% interest in VRCC. VRCC along with R. Black, Inc.obtained 32.69% of the membership interest in RBG that was being purchased. Theremaining proceeds were utilized to repay $64.0 million owed under theCredit Agreement and the $2.0 million promissory note payable to a sellingshareholder. Five days prior to the Buyout, RBG terminated the lease with MDW(see Note 6) and the Companies disposed of certain assets. As a result ofthese transactions, Mr. Black and R. Black, Inc. control VRCC, RBGand B&BB. In addition, VRCC, RBG, and B&BB are co-issuers on theCompanies’ Senior Secured and Senior Subordinated Notes and all three entitiesare jointly managed and share resources (see Note 4).

 

***InterimFinancial Statements***– The accompanying unaudited condensed consolidated financialstatements for the three and nine-month periods ended September 30, 2005and 2004 are unaudited.  In the opinionof management, all adjustments (which include normal recurring adjustments)necessary for a fair presentation of RBG’s financial position and results ofoperations for such periods, have been included.  The accompanying unaudited condensedconsolidated financial statements should be read in conjunction with RBG’saudited financial statements for the year ended December 31, 2004 includedin RBG’s registration statement on Form S-4/A filed on September 22,2005.  The results for the three andnine-month periods ended September 30, 2005 are not necessarily indicativeof the results that may be expected for the year ending December 31, 2005,or for any other period.

 

17

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**2.**                                      Property and Equipment

 

Property and equipmentconsists of the following (in thousands):

 
| ** **                                           | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                           | ** ** | **2005**               | ** ** | **2004**              | ** ** |
| ** **                                           | ** ** | **(unaudited)**        | ** ** | ** **            | ** ** |
| Land                                                 |       | $                      | 16,690     |                  | $          | 16,684 |   |
| Buildings                                            |       | 31,947                 |       | 29,257                |       |
| Land and  leasehold improvements                     |       | 18,032                 |       | 17,806                |       |
| Furniture,  fixtures and equipment                   |       | 38,423                 |       | 30,269                |       |
| Construction in  progress                            |       | 901                    |       | 353                   |       |
|                                                 |       | 105,993                |       | 94,369                |       |
| Less—accumulated  depreciation and amortization |       | (28,595                | )          | (25,232               | )          |
| Property and  equipment, net                         |       | $                      | 77,398     |                  | $          | 69,137 |   |

 

**3.**                                      Purchase of Equity Interests

 

On December 20,2004, pursuant to the Agreement for Purchase of Equity Interests described inNote 1, Mr. Black and R. Black, Inc. acquired certain interestsin B&BB, VRCC and RBG for $101.4 million. In addition, the Companiesincurred approximately $10.3 million in capitalized deferred financingfees related to the issuance of the Notes all of which was recorded to theconsolidated balance sheet of VRCC and balance sheet of B&BB. Managementvalued the assets acquired in the transaction as follows.  Current assets and liabilities were recordedat book value, which approximated their estimated market values at the date ofacquisition.  Land, buildings and buildingimprovements were valued based upon comparable values of recent sales in theMesquite, Nevada market and 3rd party market valuations ofcomparable assets in Mesquite, Nevada. For equipment, management recorded these assets at book value, which wasdeemed to be fair value, considering the relative age and working condition ofthe equipment.  Intangible assets,representing the Companies’ customer list and slot club program, were recordedat fair value, which was calculated based upon comparable customer lists andslot programs with other casinos operating in the Las Vegas and surroundingmarket.  In accordance with theprovisions of SFAS No. 141, the remainder of the purchase price wasallocated to goodwill. Management believes that the goodwill arose from theCompanies’ dominance in and the growing Mesquite, Nevada market, the value ofthe existing workforce and existing accounting and operating infrastructure.

 

The following table summarizes the estimated fairvalues of the assets acquired and liabilities assumed by the Companies at thedate of acquisition. The purchase price allocation is in process and will becompleted within one year of the acquisition; thus, the allocation of thepurchase price is subject to refinement.

 

18

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| ** **                | ** ** | **At   December 20,  2004** | ** ** |
|---------------------------|------------|----------------------------------|------------|
|                      |       |                             |       |
| Current assets            |       | $                                | 15,600     |   |
| Property and  equipment   |       | 100,200                          |       |
| Other  non-current assets |       | 3,300                            |       |
| Intangibles               |       | 4,600                            |       |
| Goodwill                  |       | 43,000                           |       |
| Total assets acquired     |       | 166,700                          |       |
|                           |            |                                  |            |  |

 
| ** **                | ** ** | **At   December 20,  2004** | ** ** |
|---------------------------|------------|----------------------------------|------------|
|                      |       |                             |       |
| Current  liabilities      |       | 12,800                           |       |
| Long-term  liabilities    |       | 1,200                            |       |
| Long-term debt  assumed   |       | 53,300                           |       |
| Total liabilities assumed |       | 67,300                           |       |
|                      |       |                             |       |
| Net assets acquired       |       | $                                | 99,400     |   |
|                           |            |                                  |            |  |

 

Thefollowing table summarizes the estimated fair values of the assets acquired andliabilities assumed related to RBG at the date of acquisition.

 
| ** **                | ** ** | **At   December 20,  2004** | ** ** |
|---------------------------|------------|----------------------------------|------------|
|                      |       |                             |       |
| Current assets            |       | $                                | 9,800      |   |
| Property and  equipment   |       | 57,600                           |       |
| Other non-current  assets |       | 2,800                            |       |
| Intangibles               |       | 2,300                            |       |
| Goodwill                  |       | 31,800                           |       |
| Total assets acquired     |       | 104,300                          |       |
| Current  liabilities      |       | 11,800                           |       |
| Long-term  liabilities    |       | 900                              |       |
| Long-term debt  assumed   |       | 46,600                           |       |
| Total liabilities assumed |       | 59,300                           |       |
|                      |       |                             |       |
| Net assets acquired       |       | $                                | 45,000     |   |

 

19

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**4.**                                      Long-term Debt

 

Long-term debt consists ofthe following (in thousands):

 
| ** **                                                                                                                                                                                                                                                                                                      | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                                                                                                                                                                                                                                                                                      | ** ** | **2005**               | ** ** | **2004**              | ** ** |
| ** **                                                                                                                                                                                                                                                                                                      | ** ** | **(unaudited)**        | ** ** | ** **            | ** ** |
| 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 |       | 43,788                 |       | 40,068                |       |
| 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.                                                 |       | 1,277                  |       | —                |       |
| 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                                                                                                                                                   |       | 464                    |       | 757                   |       |
| Hypothecation Note at prime plus 3.0% (9.75% at September 30,  2005), collateralized by certain notes receivable  as defined; guaranteed by one of the Initial Members, due April 2004                                                                                                           |       | 252                    |       | 572                   |       |
| Promissory note payable to Wells Fargo Equipment  Finance, Inc. payable in monthly installments of $24 at an interest rate  of 7.00%, due November 2005                                                                                                                                               |       | 47                     |       | 251                   |       |
| 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                                                                                                                                               |       | 195                    |       | 293                   |       |
|                                                                                                                                                                                                                                                                                                            |       | 171,023                |       | 166,941               |       |
| Less—current  portion                                                                                                                                                                                                                                                                                      |       | (917                   | )          | (1,353                | )          |
| Total long-term  debt                                                                                                                                                                                                                                                                                           |       | $                      | 170,106    |                  | $          | 165,588 |   |

 

***NewRevolving Facility***

 

The Wells Fargo Foothillcredit facility (“Foothill Facility’) is secured by substantially all theassets of the Companies. During the life of the Foothill Facility, theCompanies may borrow up to the lesser of (1) $15.0 million less theLetter of Credit Usage, as defined, less the Bank Product Reserve, as defined,or (2) the Borrowing Base, as defined, less the Letter of CreditUsage.  At September 30, 2005, theBank Product Reserve was approximately $359,000 and is based on the fair marketvalue at September 30, 2005 of the interest rate swap owed to Wells FargoFoothill, Inc.  Accordingly, theavailability under the Foothill Facility at September 30, 2005 was limitedto $13.4 million.

 

Under the terms of theFoothill Facility, interest accrues on the outstanding principal balance atLIBOR 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 4.4% at September 30, 2005.  The Foothill Facility also contains certainfinancial and other covenants.  Theseinclude a minimum trailing twelve-month Earnings before Interest, Taxes,Depreciation and Amortization (“EBITDA”) of $15,000,000 for the Companies andlimitations on other indebtedness and capital expenditures, as defined.  The Companies were in compliance with thesecovenants at September 30, 2005.

 

20

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The outstanding balanceon the Foothill Facility is a joint and several obligation of the Companies.The condensed consolidated balance sheet of RBG reflects the full obligation ofthe Foothill Facility at September 30, 2005 with the amount recorded onthe consolidated 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, 2005. At September 30, 2005, the netamount of the Foothill Facility recorded on RBG’s consolidated balance sheet is$0.

 

***SeniorSecured and Senior Subordinated Notes***

 

In December 2004, aspart of 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(“Senior Sub 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, 2005 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, 2005. 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 the Companies’ Notes contain certain customary financial and othercovenants, which limit the Companies’ ability to incur additional debt.  The Indentures provide that the Companies maynot incur additional indebtedness, other than specified types of indebtedness,unless the Consolidated Coverage Ratio, on a pro-forma basis after theincurrence of the additional indebtedness is at least 2.00 to 1.00. As of September 30,2005, the Companies have incurred $0 of additional indebtedness as defined.

 

TheIndentures also contain other covenants which limit the ability of the Issuersand Guarantors, as defined, to pay dividends, redeem stock, or make otherdistributions, make investments, create certain liens, enter into certaintransactions with affiliates, utilize proceeds from asset sales, transfer orsell assets, issue or sell equity interests of subsidiaries and enter intocertain mergers and consolidations, as defined in the Indentures.  There are no restrictions related to thetransfer of funds between the Issuers, Guarantors and their respectivesubsidiaries.  The Issuers were incompliance with these covenants at September 30, 2005.

 

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The Senior Notes aresecured by substantially all existing and future assets of the Issuers and theGuarantors, as defined, as well as the equity interest of the Guarantors, theequity interests of the Acquiring Shareholder and his affiliate in theIssuers.  The Guarantors are all the whollyowned subsidiaries of the Issuers.  TheSenior Notes are subordinated to the security interests of the FoothillFacility.  The Senior Sub Notes aresubordinate to the Senior Notes and all other indebtedness of the Companies.

 

**5.****                                     ****GamingEquipment Financing**

 

RBG from time to timeenters into agreements with gaming manufacturers to finance the purchase ofgaming equipment.  Contractual terms ofthe agreements with the gaming manufactures consist of payment terms of lessthan one year to up to three years without interest.  In the event that an agreement with a gamingmanufacturer extends past a year, RBG will impute interest at a rate of 8%.

 

Gaming equipmentfinancing for RBG consists of the following (in thousands):

 
| ** **                                                                                                                                          | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                                                                                                                          | ** ** | **2005**               | ** ** | **2004**              | ** ** |
| ** **                                                                                                                                          | ** ** | **(unaudited)**        | ** ** | ** **            | ** ** |
| Gaming equipment financing to purchase 205 games, no  payments for one year and monthly payments of $106 for 24 months beginning February 2006 |       | $                      | 2,274      |                  | $          | — |   |
| Gaming equipment financing to purchase 68 games, no  payments for one year and monthly payments of $43 for 24 months beginning January 2006    |       | 926                    |       | —                |       |
| Gaming equipment financing to purchase 70 games, no  payments for one year and monthly payments of $39 for 24 months beginning March 2006      |       | 822                    |       | —                |       |
| Gaming equipment financing to purchase 60 games,  monthly payments of $20 for 36 months beginning April 2005                                   |       | 565                    |       | —                |       |
| Gaming equipment financing to purchase 64 games, no  payments for one year and monthly payments of $26 for 24 months beginning February 2006   |       | 566                    |       | —                |       |
| Gaming equipment financing to purchase 38 games, monthly  payments of $13 for 36 months beginning April 2005                                   |       | 344                    |       | —                |       |
| Gaming equipment financing to purchase 20 games, no  payments for one year and monthly payments of $8 for 24 months beginning January 2006     |       | 171                    |       | 189                   |       |
| Gaming equipment financing, monthly payments of $3  for 36 months beginning January 2005                                                       |       | 69                     |       | —                |       |
| Gaming equipment financing with terms of less than  12 months                                                                                       |       | 160                    |       | 582                   |       |
|                                                                                                                                                |       | 5,897                  |       | 771                   |       |
| Less current  portion                                                                                                                               |       | (2,006                 | )          | (582                  | )          |
| Gaming equipment  financing, long-term portion                                                                                                      |       | $                      | 3,891      |                  | $          | 189 |   |

 

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**6.****                                     ****Related Party Transactions**

 

Wingnuts, Inc. is acompany that owns an airplane used by RBG. Wingnuts, Inc. is owned by Mr. Black along with various formerstockholders of the Companies.  Wingnuts, Inc.charges RBG for business usage of the airplane using hourly rates for actualair time.  Total charges for the threeand nine-month periods ended September 30, 2005 and 2004 were $0, $12,000,$0 and $26,000, respectively.

 

MJB Development is a realestate construction company owned by a former shareholder of the Companieswhich provided construction and storage services associated with hotelfacilities of RBG.  When performingconstruction services, the actual costs of construction, overhead charges, anda profit are charged to RBG.  In additionto construction services, MJB Development has also leased containers forstorage to RBG.  Total charges forconstruction and leasing of storage containers totaled $0, $6,000, $2,000 and$11,000 during the three and nine-month periods ended September 30, 2005and 2004, respectively, and are included in the accompanying consolidatedstatements of operations.  In addition,during the nine months ended September 30, 2005, RBG paid MJB Development$68,000 to purchase previously leased storage containers.

 

MDW is a Nevada limited-liabilitycompany in which Mr. Black has an interest.  MDW owns a condominium complex located inMesquite, Nevada. RBG had entered into a lease agreement with MDW whereby MDWgave the members of the CasaBlanca Vacation Club (the timeshare club associatedwith the CasaBlanca) the right to use and occupy the timeshare units located onthe leasehold property.  The remainingunits at the condominium complex were utilized by the CasaBlanca for hotel andapartment purposes.  On December 15,2004, pursuant to a termination agreement, RBG terminated its lease withMDW.  The rent payments paid by RBG toMDW during the three and nine-month periods ended September 30, 2005 and2004 totaled $0, $185,000, $0 and $554,000, respectively, and are included inthe condensed consolidated statements of operations.  RBG did not record any revenue related to thecondominium sales during the nine months ended September 30, 2005. Inaddition, pursuant to the lease termination agreement, RBG owes MDW $86,000 at September 30,2005 for money owed to MDW during the nine months ended September 30,2005.

 

Virgin River Foodmart, Inc.(“Foodmart”), a Nevada corporation, is owned by Mr. Black and formershareholders of B&BB and VRCC. Participants in RBG’s slot club program areable to redeem their points for gasoline at the Foodmart.  Foodmart charges RBG the retail amount of gaspurchased with player points.  Charges associated with the point redemptionfor gasoline at the Virgin River Food Mart, Inc. were $30,000, $35,000, $106,000and $112,000 for the three and nine-month periods ended September 30, 2005and 2004, respectively.

 

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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 incurred legal fees for legalservices in the amount of $60,000, $22,000, $87,000 and $84,000 for the threeand nine-month periods ended September 30, 2005 and 2004, respectively.

 

Pursuant to theIndenture, Mr. Black is entitled to a management fee for his management ofRBG’s business of up to 5% of EBITDA, as defined.  RBG has recorded an estimated liability of$576,000 associated with this management fee at September 30, 2005.

 

Resorts LLC providedmanagement and other services to two related parties that manage and operatethe home owners associations of the vacation intervals sold at theproperty.  Included in the accompanyingcondensed consolidated balance sheet at September 30, 2005 is a receivablefor $99,000 related to amounts owed for those services.

 

**7.****                                     ****Commitments and Contingencies**

 

In October 2005, theCompanies entered into an agreement with Wells Fargo Financial Leasing to leasegolf maintenance equipment totaling approximately $1.3 million.  The term of the lease is 36 months at a rateof $29,000.  The Companies are accountingfor the lease as an operating lease.

 

In September 2005,the Companies entered into an agreement with Agilysys NV, LLC to purchase a newproperty management system for the three properties.  Implementation is expected to begin in December 2005with a completion date expected to occur before the end of the second quarter2006.  The estimated cost of this projectis approximately $1.7 million.

 

In September 2005,the Companies entered into an agreement with Infinium Software, Inc. topurchase a new financial management system. Implementation is expected to begin in December 2005 with ancompletion date expected to occur before the end of the second quarter in 2006.The estimated cost of this project is approximately $615,000.

 

In May 2005, theCompanies entered into a lease arrangement with Dell Financial Services tolease desktop computers and servers.  Theterm of the lease is 18 months at a rate of approximately $29,000 a month.  The lease also provides for a renewal periodof an additional 18 months at approximately $6,000 a month.  The Companies are accounting for the lease asan operating lease.

 

**8.**                                      **Consolidating CondensedFinancial Information**

 

CasablancaResorts, LLC, Oasis Recreational Properties, Inc., Oasis IntervalManagement, LLC and Oasis Interval Ownership, LLC (together the “GuarantorSubsidiaries”) have fully and unconditionally guaranteed, on a joint andseveral basis, payment of the Notes. Separate condensed financial statementinformation for RBG and its Guarantor Subsidiaries as of September 30,2005 (unaudited) and December 31, 2004 and for the three and nine monthsended September 30, 2005 and 2004 (in thousands) (unaudited) is asfollows:

 

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| ** **                                                   | ** ** | **RBG** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total  Consolidated** | ** ** |
|--------------------------------------------------------------|------------|---------|------------|-----------------------------|------------|------------------|------------|-------------------------|------------|
| **As of  and for the year ended September 30, 2005**    |       |    |       |                        |       |             |       |                    |       |
| **BALANCE  SHEET:**                                          |       |    |       |                        |       |             |       |                    |       |
| Current Assets, including intercompany accounts              |       | $       | 15,700     |                        | $          | 5,971            |       | $                       | (9,222     | ) | $ | 12,449 |   |
| Property and Equipment, net                                  |       | 49,585  |       | 27,813                      |       | —           |       | 77,398                  |       |
| Goodwill and Other Intangibles                               |       | 33,524  |       | —                      |       | —           |       | 33,524                  |       |
| Other assets (liabilities), including intercompany  accounts |       | 17,958  |       | 813                         |       | (16,155          | )          | 2,616                   |       |
|                                                         |       | $       | 116,767    |                        | $          | 34,597           |       | $                       | (25,377    | ) | $ | 125,987 |   |
|                                                         |       |    |       |                        |       |             |       |                    |       |
| Current Liabilities                                          |       | $       | 10,969     |                        | $          | 16,774           |       | $                       | (9,222     | ) | $ | 18,521 |   |
| Long-term debt, less current portion                         |       | 170,066 |       | 40                          |       | —           |       | 170,106                 |       |
| Gaming equipment financing, less current portion             |       | 2,460   |       | 1,431                       |       | —           |       | 3,891                   |       |
| Fair value of interest rate swaps                            |       | 194     |       | 197                         |       | —           |       | 391                     |       |
| Members’ (Deficit)Equity                                |       | (66,922 | )          | 16,155                      |       | (16,155          | )          | (66,922                 | )          |
|                                                         |       | $       | 116,767    |                        | $          | 34,597           |       | $                       | (25,377    | ) | $ | 125,987 |   |
|                                                         |       |    |       |                        |       |             |       |                    |       |
| **As of  and for the year ended December 31, 2004**     |       |    |       |                        |       |             |       |                    |       |
| **BALANCE  SHEET:**                                          |       |    |       |                        |       |             |       |                    |       |
| Current Assets, including intercompany accounts              |       | $       | 17,596     |                        | $          | 5,982            |       | $                       | (9,439     | ) | $ | 14,139 |   |
| Property and Equipment, net                                  |       | 43,884  |       | 25,253                      |       | —           |       | 69,137                  |       |
| Goodwill and Other Intangibles                               |       | 34,084  |       | —                      |       | —           |       | 34,084                  |       |
| Other Assets (liabilities), including intercompany  accounts |       | 16,305  |       | 755                         |       | (14,174          | )          | 2,886                   |       |
|                                                         |       | $       | 111,869    |                        | $          | 31,990           |       | $                       | (23,613    | ) | $ | 120,246 |   |

 

25

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| ** **                                               | ** ** | **RBG** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total  Consolidated** | ** ** |
|----------------------------------------------------------|------------|---------|------------|-----------------------------|------------|------------------|------------|-------------------------|------------|
| **As of  and for the year ended December 31, 2004** |       |    |       |                        |       |             |       |                    |       |
| **BALANCE  SHEET:**                                      |       |    |       |                        |       |             |       |                    |       |
|                                                     |       |    |       |                        |       |             |       |                    |       |
| Current Liabilities                                      |       | $       | 8,353      |                        | $          | 16,518           |       | $                       | (9,439     | ) | $ | 15,432 |   |
| Long-term debt, less current portion                     |       | 165,232 |       | 356                         |       | —           |       | 165,588                 |       |
|                                                     |       |    |       |                        |       |             |       |                    |       |
| Gaming equipment financing, less current portion         |       | —  |       | 189                         |       | —           |       | 189                     |       |
| Fair value of interest rate swaps                        |       | 740     |       | 753                         |       | —           |       | 1,493                   |       |
| Members’ (Deficit)Equity                            |       | (62,456 | )          | 14,174                      |       | (14,174          | )          | (62,456                 | )          |
|                                                     |       | $       | 111,869    |                        | $          | 31,990           |       | $                       | (23,613    | ) | $ | 120,246 |   |
|                                                     |       |    |       |                        |       |             |       |                    |       |
| **For the  three-months ended September 30, 2005**  |       |    |       |                        |       |             |       |                    |       |
| **STATEMENT  OF OPERATIONS**                             |       |    |       |                        |       |             |       |                    |       |
| Net Revenues                                             |       | $       | 13,446     |                        | $          | 11,794           |       | $                       | —     |   | $ | 25,240 |   |
| Operating  Expenses:                                     |       |    |       |                        |       |             |       |                    |       |
| Casino                                                   |       | 4,166   |       | 3,546                       |       | —           |       | 7,712                   |       |
| Food and beverage                                        |       | 2,290   |       | 2,299                       |       | —           |       | 4,589                   |       |
| Hotel                                                    |       | 677     |       | 869                         |       | —           |       | 1,546                   |       |
| Other                                                    |       | 2,098   |       | 1,350                       |       | —           |       | 3,448                   |       |
| General and administrative                               |       | 4,060   |       | 3,810                       |       | —           |       | 7,870                   |       |
| Depreciation and amortization                            |       | 1,172   |       | 822                         |       | —           |       | 1,994                   |       |
| Loss on sale of assets                                   |       | 16      |       | 63                          |       | —           |       | 79                      |       |
|                                                     |       | 14,479  |       | 12,759                      |       | —           |       | 27,238                  |       |
| Operating income                                         |       | (1,033  | )          | (965                        | )          | —           |       | (1,998                  | )          |
| Income from investment in subsidiary                     |       | (990    | )          | —                      |       | 990              |       | —                  |       |
| Change in fair value of swap                             |       | 77      |       | 185                         |       | —           |       | 262                     |       |
| Other                                                    |       | (113    | )          | —                      |       | —           |       | (113                    | )          |
| Interest expense                                         |       | (147    | )          | (210                        | )          | —           |       | (357                    | )          |
| Total other  income (expense)                            |       | (1,173  | )          | (25                         | )          | 990              |       | (208                    | )          |
| Net (loss)  income                                       |       | $       | (2,206     | )                           | $          | (990             | )          | $                       | 990        |   | $ | (2,206 | ) |

 

26

----

 
| **For the  three-months ended September 30, 2004** |       |       |       |       |       |       |       |       |       |
|---------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|
| **STATEMENT  OF OPERATIONS**                            |       |       |       |       |       |       |       |       |       |
| Net Revenues                                            |       | $          | 13,565     |       | $          | 11,463     |       | $          | —     |   | $ | 25,028 |   |
| Operating  Expenses:                                    |       |       |       |       |       |       |       |       |       |
| Casino                                                  |       | 3,605      |       | 3,415      |       | —     |       | 7,020      |       |
| Food and beverage                                       |       | 2,444      |       | 2,198      |       | —     |       | 4,642      |       |
| Hotel                                                   |       | 782        |       | 838        |       | —     |       | 1,620      |       |
| Other                                                   |       | 2,167      |       | 1,314      |       | —     |       | 3,481      |       |
| General and administrative                              |       | 3,182      |       | 3,569      |       | —     |       | 6,751      |       |
| Depreciation and amortization                           |       | 643        |       | 755        |       | —     |       | 1,398      |       |
| Loss on sale of assets                                  |       | 2          |       | —     |       | —     |       | 2          |       |
|                                                    |       | 12,825     |       | 12,089     |       | —     |       | 24,914     |       |
| Operating income                                        |       | 740        |       | (626       | )          | —     |       | 114        |       |
| Income from investment in subsidiary                    |       | (1,980     | )          | —     |       | 1,980      |       | —     |       |
| Change in fair value of swap                            |       | (70        | )          | (171       | )          | —     |       | (241       | )          |
| Related party interest income (expense)                 |       | 133        |       | (143       | )          | —     |       | (10        | )          |
| Interest expense                                        |       | (474       | )          | (1,040     | )          | —     |       | (1,514     | )          |
|                                                    |       |       |       |       |       |       |       |       |       |
| Total other  income (expense)                           |       | (2,391     | )          | (1,354     | )          | 1,980      |       | (1,765     | )          |
| Net (loss)  income                                      |       | $          | (1,651     | )          | $          | (1,980     | )          | $          | (1,980     | ) | $ | (1,651 | ) |
|                                                    |       |       |       |       |       |       |       |       |       |
| **For the  nine months ended September 30, 2005**  |       |       |       |       |       |       |       |       |       |
| **STATEMENT  OF OPERATIONS**                            | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net Revenues                                            |       | $          | 43,292     |       | $          | 40,932     |       | $          | —     |   | $ | 84,224 |   |
| Operating  Expenses:                                    |       |       |       |       |       |       |       |       |       |
| Casino                                                  |       | 12,295     |       | 10,435     |       | —     |       | 22,730     |       |
| Food and beverage                                       |       | 7,411      |       | 6,996      |       | —     |       | 14,407     |       |
| Hotel                                                   |       | 2,107      |       | 2,575      |       | —     |       | 4,682      |       |
| Other                                                   |       | 6,137      |       | 4,680      |       | —     |       | 10,817     |       |
| General and administrative                              |       | 11,173     |       | 11,009     |       | —     |       | 22,182     |       |
| Depreciation and amortization                           |       | 3,376      |       | 2,483      |       | —     |       | 5,859      |       |
| Loss on sale of assets                                  |       | 33         |       | 696        |       | —     |       | 729        |       |
|                                                    |       | 42,532     |       | 38,874     |       | —     |       | 81,406     |       |
| 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        |       |
| Other                                                   |       | (288       | )          | —     |       | —     |       | (288       | )          |
| Interest expense                                        |       | (415       | )          | (633       | )          | —     |       | (1,048     | )          |
| Total other  income (expense)                           |       | 1,511      |       | (77        | )          | (1,981     | )          | (547       | )          |
| Net income                                              |       | $          | 2,271      |       | $          | 1,981      |       | $          | (1,981     | ) | $ | 2,271 |   |

 

27

----

 
| **For the  nine months ended September 30, 2005** |   |   |   |   |   |   |   |   |   |
|--------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| **STATEMENT  OF CASH FLOWS**                           |   |   |   |   |   |   |   |   |   |
| Net cash  provided by operating activities             |   | $      | 4,196  |   | $      | 5,261  |   | $      | — |   | $ | 9,457 |   |
| Net cash used in  investing activities                 |   | (4,731 | )      | (3,764 | )      | — |   | (8,495 | )      |
| Net cash used in  financing activities                 |   | (1,384 | )      | (1,629 | )      | — |   | (3,013 | )      |
|                                                   |   |   |   |   |   |   |   |   |   |
| **For the  nine months ended September 30, 2004** |   |   |   |   |   |   |   |   |   |
| **STATEMENT  OF OPERATIONS**                           |   |   |   |   |   |   |   |   |   |
| Net Revenues                                           |   | $      | 43,478 |   | $      | 39,444 |   | $      | — |   | $ | 82,922 |   |
| Operating  Expenses:                                   |   |   |   |   |   |   |   |   |   |
| Casino                                                 |   | 11,154 |   | 10,410 |   | — |   | 21,564 |   |
| Food and beverage                                      |   | 7,391  |   | 6,850  |   | — |   | 14,241 |   |
| Hotel                                                  |   | 2,408  |   | 2,612  |   | — |   | 5,020  |   |
| Other                                                  |   | 6,218  |   | 4,744  |   | — |   | 10,962 |   |
| General and administrative                             |   | 10,040 |   | 11,012 |   | — |   | 21,052 |   |
| Depreciation and amortization                          |   | 2,074  |   | 2,468  |   | — |   | 4,542  |   |
| Loss on sale of assets                                 |   | 22     |   | — |   | — |   | 22     |   |
|                                                   |   | 39,307 |   | 38,096 |   | — |   | 77,403 |   |
|                                                   |   |   |   |   |   |   |   |   |   |
| Operating income                                       |   | 4,171  |   | 1,348  |   | — |   | 5,519  |   |
| Loss from investment in subsidiary                     |   | (812   | )      | — |   | 812    |   | — |   |
| Change in fair value of swap                           |   | 569    |   | 1,352  |   | — |   | 1,921  |   |
| Related party interest income (expense)                |   | 388    |   | (429   | )      | — |   | (41    | )      |
| Interest expense                                       |   | (1,429 | )      | (3,083 | )      | — |   | (4,512 | )      |
| Total other  income (expense)                          |   | (1,284 | )      | (2,160 | )      | 812    |   | (2,632 | )      |
| Net income  (loss)                                     |   | $      | 2,887  |   | $      | (812   | )      | $      | 812    |   | $ | 2,887 |   |
|                                                   |   |   |   |   |   |   |   |   |   |
| **STATEMENT  OF CASH FLOWS**                           |   |   |   |   |   |   |   |   |   |
| Net cash  provided by operating activities             |   | $      | 4,371  |   | $      | 1,932  |   | $      | — |   | $ | 6,303 |   |
| Net cash used in  investing activities                 |   | (644   | )      | (980   | )      | — |   | (1,624 | )      |
| Net cash used in  financing activities                 |   | (3,011 | )      | (1,620 | )      | — |   | (4,631 | )      |

 

28

----

 

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

 

### **Condensed BalanceSheetsSeptember 30, 2005 and December 31, 2004**

**(inthousands)**

 
| ** **                                                                                                  | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|-------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                                                                                  | ** ** | **2005**               | ** ** | **2004**              | ** ** |
| ** **                                                                                                  | ** ** | **(unaudited)**        | ** ** | ** **            | ** ** |
| **Assets**                                                                                                  |       |                   |       |                  |       |
| Current assets:                                                                                             |       |                   |       |                  |       |
| Cash and cash equivalents                                                                                   |       | $                      | 5,338      |                  | $          | 5,918 |   |
| Accounts receivable, net                                                                                    |       | 144                    |       | 255                   |       |
| Related company receivables                                                                                 |       | 1,259                  |       | 758                   |       |
| Inventories                                                                                                 |       | 390                    |       | 397                   |       |
| Prepaid expenses                                                                                            |       | 1,517                  |       | 1,207                 |       |
| Total current  assets                                                                                       |       | 8,648                  |       | 8,535                 |       |
| Property and  equipment, net                                                                                |       | 9,386                  |       | 5,242                 |       |
| Goodwill and  other intangible assets, net                                                                  |       | 12,874                 |       | 13,453                |       |
| Deferred  financing fees                                                                                    |       | 1,143                  |       | 1,244                 |       |
| Other assets                                                                                                |       | 14                     |       | 12                    |       |
| Total assets                                                                                                |       | $                      | 32,065     |                  | $          | 28,486 |   |
|                                                                                                        |       |                   |       |                  |       |
| **Liabilities  and Stockholder’s Deficit**                                                             |       |                   |       |                  |       |
| Current  liabilities:                                                                                       |       |                   |       |                  |       |
| Current portion of long-term debt                                                                           |       | $                      | 222        |                  | $          | 189 |   |
| Current portion of gaming equipment financing                                                               |       | 1,237                  |       | 280                   |       |
| Accounts payable                                                                                            |       | 1,038                  |       | 934                   |       |
| Accrued liabilities                                                                                         |       | 6,481                  |       | 3,505                 |       |
| Related company payable                                                                                     |       | 15                     |       | 1,250                 |       |
| Total current  liabilities                                                                                  |       | 8,993                  |       | 6,158                 |       |
| Gaming equipment  financing, less current portion                                                           |       | 2,431                  |       | 191                   |       |
| Long-term debt,  less current portion                                                                       |       | 170,065                |       | 165,242               |       |
| Fair value of  interest rate swaps                                                                          |       | 391                    |       | 1,493                 |       |
| Commitments and  contingencies                                                                              |       |                   |       |                  |       |
| Stockholder’s  deficit:                                                                                |       |                   |       |                  |       |
| Common stock, no par value; authorized 2,500 shares,  100 shares issued and 88 shares outstanding |       | —                 |       | —                |       |
| Retained earnings                                                                                           |       | 2,631                  |       | 2,330                 |       |
| Treasury stock, at cost                                                                                     |       | (700                   | )          | (700                  | )          |
| Deemed Distribution                                                                                         |       | (151,746               | )          | (146,228              | )          |
| Total  stockholder’s deficit                                                                           |       | (149,815               | )          | (144,598              | )          |
| Total  liabilities and stockholder’s deficit                                                           |       | $                      | 32,065     |                  | $          | 28,486 |   |

 

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

 

29

----

 

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

 

### **Condensed Statementsof Operations (unaudited)For the Three Months and Nine Months Ended September 30, 2005 and 2004**

**(inthousands)**

 
| ** **                           | ** ** | **Three months ended** | ** ** | **Nine Months ended**  | ** ** |
|--------------------------------------|------------|------------------------|------------|------------------------|------------|
| ** **                           | ** ** | **September 30,** | ** ** | **September 30,** | ** ** | **September 30,** | ** ** | **September 30,** | ** ** |
| ** **                           | ** ** | **2005**               | ** ** | **2004**               | ** ** | **2005** | ** ** | **2004** | ** ** |
|                                 |       |                   |       |                   |       |   |   |   |   |
| Revenues                             |       |                   |       |                   |       |   |   |   |   |
| Casino                               |       | $                      | 8,390      |                   | $          | 7,958 |   | $ | 25,935 |   | $ | 23,839 |   |
| Food and beverage                    |       | 2,757                  |       | 2,769                  |       | 8,752 |   | 8,517 |   |
| Hotel                                |       | 1,789                  |       | 1,612                  |       | 6,444 |   | 5,669 |   |
| Other                                |       | 709                    |       | 699                    |       | 2,107 |   | 2,105 |   |
| Total revenues                       |       | 13,645                 |       | 13,038                 |       | 43,238 |   | 40,130 |   |
| Less—promotional allowances     |       | (1,646                 | )          | (1,745                 | )          | (5,547 | ) | (5,315 | ) |
| Net revenues                         |       | 11,999                 |       | 11,293                 |       | 37,691 |   | 34,815 |   |
| Operating  expenses:                 |       |                   |       |                   |       |   |   |   |   |
| Casino                               |       | 3,450                  |       | 3,605                  |       | 10,884 |   | 10,826 |   |
| Food and beverage                    |       | 1,852                  |       | 1,694                  |       | 5,509 |   | 5,239 |   |
| Hotel                                |       | 590                    |       | 720                    |       | 1,969 |   | 2,213 |   |
| Other                                |       | 350                    |       | 365                    |       | 1,100 |   | 1,087 |   |
| Related company rent                 |       | 1,575                  |       | 1,575                  |       | 4,725 |   | 4,725 |   |
| General and administrative           |       | 3,506                  |       | 2,997                  |       | 9,506 |   | 8,306 |   |
| Depreciation and amortization        |       | 629                    |       | 335                    |       | 1,988 |   | 1,020 |   |
| Gain on sale and  disposal of assets |       | —                 |       | (72                    | )          | (43 | ) | (72 | ) |
| Total operating  expenses            |       | 11,952                 |       | 11,219                 |       | 35,638 |   | 33,344 |   |
| Operating income                     |       | 47                     |       | 74                     |       | 2,053 |   | 1,471 |   |
| Other income  (expense):             |       |                   |       |                   |       |   |   |   |   |
| Interest expense                     |       | (608                   | )          | (38                    | )          | (1,752 | ) | (27 | ) |
| Related party interest  income       |       | —                 |       | 75                     |       | — |   | 75 |   |
| Other (expense)  income              |       | (608                   | )          | 37                     |       | (1,752 | ) | 48 |   |
| Net (loss)  income                   |       | $                      | (561       | )                      | $          | 111 |   | $ | 301 |   | $ | 1,519 |   |

 

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

 

30

----

 

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

 

### **Condensed Statementsof Cash Flows (unaudited)For the Nine Months Ended September 30, 2005 and 2004**

**(inthousands)**

 
| ** **                                                                         | ** ** | **Nine months ended**  | ** ** |
|------------------------------------------------------------------------------------|------------|------------------------|------------|
| ** **                                                                         | ** ** | **September 30,** | ** ** | **September 30,** | ** ** |
| ** **                                                                         | ** ** | **2005**               | ** ** | **2004** | ** ** |
|                                                                               |       |                   |       |   |   |
| Cash flows from  operating activities:                                             |       |                   |       |   |   |
| Net income                                                                         |       | $                      | 301        |   | $ | 1,519 |   |
| Adjustments to reconcile net income to net cash  provided by operating activities: |       |                   |       |   |   |
| Depreciation and amortization                                                      |       | 1,988                  |       | 1,020 |   |
| Gain on sale and disposal of assets                                                |       | (43                    | )          | (72 | ) |
| Amortization of deferred financing fees                                            |       | 137                    |       | — |   |
| Interest expense on gaming equipment financing                                     |       | 172                    |       | — |   |
| Change in operating assets and liabilities:                                        |       |                   |       |   |   |
| Accounts and related company receivables, net                                      |       | (390                   | )          | (680 | ) |
| Inventories                                                                        |       | 7                      |       | 7 |   |
| Prepaid expenses                                                                   |       | (310                   | )          | (209 | ) |
| Accounts payable and accrued liabilities                                           |       | 220                    |       | 283 |   |
| Net cash  provided by operating activities                                         |       | 2,082                  |       | 1,868 |   |
|                                                                               |       |                   |       |   |   |
| Cash flows from  investing activities:                                             |       |                   |       |   |   |
| Proceeds received from sale of assets                                              |       | 110                    |       | — |   |
| Capital expenditures                                                               |       | (2,209                 | )          | (914 | ) |
| Net cash used in  investing activities                                             |       | (2,099                 | )          | (914 | ) |
|                                                                               |       |                   |       |   |   |
| Cash flows from  financing activities:                                             |       |                   |       |   |   |
| Payment of long-term debt                                                          |       | (140                   | )          | (131 | ) |
| Payment on gaming equipment financing                                              |       | (381                   | )          | (565 | ) |
| Payment of financing fees                                                          |       | (37                    | )          | — |   |
| Change in other assets                                                             |       | (5                     | )          | 18 |   |
| Net cash used in  financing activities                                             |       | (563                   | )          | (678 | ) |
| Net (decrease)  increase in cash and cash equivalents                              |       | (580                   | )          | 276 |   |
| Cash and cash  equivalents at beginning of year                                    |       | 5,918                  |       | 4,058 |   |
| Cash and cash  equivalents at end of period                                        |       | $                      | 5,338      |   | $ | 4,334 |   |

 

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

 

31

----

 

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

 

**CondensedStatements of Cash Flows (unaudited)**

**For theNine Months Ended September 30, 2005 and 2004**

**(inthousands) (Restated)**

 
| ** **                                             | ** ** | **Nine months ended** | ** ** |
|--------------------------------------------------------|------------|-----------------------|------------|
| ** **                                             | ** ** | **September 30,**     | ** ** | **September 30,** | ** ** |
| ** **                                             | ** ** | **2005**              | ** ** | **2004** | ** ** |
|                                                   |       | **(restated)**        |       |   |   |
| Supplemental  cash flow disclosure:                    |       |                  |       |   |   |
|                                                   |       |                  |       |   |   |
| Cash paid for interest                                 |       | $                     | 1,093      |   | $ | 27 |   |
|                                                   |       |                  |       |   |   |
| Acquisition of assets with gaming equipment  financing |       | $                     | 3,430      |   | $ | 69 |   |

 

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

 

32

----

 

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

 

### **Notes to CondensedFinancial Statements (unaudited)**

**September 30, 2005**

 

**1.**                                      Basis ofPresentation and Background

 

B & B B, Inc.(the “Company” or “B&BB”) is a Nevada corporation formed on December 7,1989 for the purpose of operating the Virgin River Hotel/Casino/Bingo (“VirginRiver”) located in Mesquite, Nevada. The Company’s shares are 93.28% owned byRandy Black, Sr. (“Mr. Black”) and his three siblings. The hotelportion of the facility commenced operations on June 1, 1990, and thecasino portion commenced operations on September 1, 1990. The land andbuildings are owned by Virgin River Casino Corporation (“VRCC”), a Nevadacorporation which is 100% owned by Mr. Black and his three siblings, andleased to B&BB. Certain personal property including furniture and fixtures,leasehold improvements within the casino, and gaming equipment are owned byB&BB.

 

On December 20,2004, the Company, VRCC and its subsidiary RBG, LLC (“RBG”) and its subsidiaryCasablanca Resorts, LLC (“Resorts LLC”) (collectively, the “Companies”),entered into a series of transactions whereby they collectively co-issued$125.0 million aggregate principal amount of Senior Secured Notes due 2012and $66.0 million aggregate principal amount at maturity($39.9 million in gross proceeds) of Senior Subordinated Notes due 2013and received a $16.0 million equity contribution from Mr. Black and R.Black, Inc. The Companies used the proceeds from the above offering topurchase the interests held by Mr. Black’s siblings and unaffiliatedshareholders (collectively known as the “Buyout”) for $101.4 millionpursuant to the Agreement for Purchase and Sale or Redemption of EquityInterests (“Agreement for Purchase of Equity Interests”) between James A.Black Gaming Properties Trust, Gary W. Black Gaming Properties Trust,Michael T. Black Gaming Properties Trust, Jorco, Inc., Marcus A.Hall, James Ritchie and Barry Moore as Sellers and Robert R. Black, VRCCand B&BB as Purchasers (see Note 3). As a result of the Buyout, Mr. Black obtained the remaining 80.97%interest in B&BB and 75.0% interest in VRCC. VRCC along with R. Black, Inc.obtained 32.69% of the membership interest in RBG that was being purchased. Theremaining proceeds were utilized to repay $64.0 million owed under theCredit Agreement by the Companies and the $2.0 million promissory notepayable to a selling shareholder by VRCC. As a result of these transactions, Mr. Blackand R. Black, Inc. control VRCC, RBG and B&BB. In addition, VRCC, RBG,and B&BB are co-issuers on the Companies’ Senior Secured and SeniorSubordinated Notes and all three entities are jointly managed and shareresources (see Note 4) .

 

***InterimFinancial Statements***– The accompanying unaudited condensed financial statements for thethree and nine-month periods ended September 30, 2005 and 2004 areunaudited.  In the opinion of management,all adjustments (which include normal recurring adjustments) necessary for afair presentation of the Company’s financial position and results of operationsfor such periods, have been included. The accompanying unaudited condensed financial statements should be readin conjunction with the Company’s audited financial statements for the yearended December 31, 2004 included in the Company’s registration statementfiled on Form S-4/A on September 22, 2005.  The results for the three and nine-monthperiods ended September 30, 2005 are not necessarily indicative of theresults that may be expected for the year ending December 31, 2005, or forany other period.

 

33

----

 

**2.**                                      Property andEquipment

 

Property and equipmentconsists of the following (in thousands):

 
| ** **                                           | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                           | ** ** | **2005**               | ** ** | **2004**              | ** ** |
| ** **                                           | ** ** | **(unaudited)**        | ** ** | ** **            | ** ** |
| Buildings                                            |       | 285                    |       | 285                   |       |
| Land and  leasehold improvements                     |       | 3,741                  |       | 3,424                 |       |
| Furniture,  fixtures and equipment                   |       | 24,015                 |       | 20,984                |       |
| Construction in  progress                            |       | 546                    |       | —                |       |
|                                                 |       | 28,587                 |       | 24,693                |       |
| Less—accumulated  depreciation and amortization |       | (19,201                | )          | (19,451               | )          |
| Property and equipment,  net                         |       | $                      | 9,386      |                  | $          | 5,242 |   |
|                                                      |            |                        |            |                       |            |  |  |

 

**3.**                                      Purchase of Equity Interests

 

On December 20,2004, pursuant to the Agreement for Purchase of Equity Interests described inNote 1, Mr. Black and R. Black, Inc. acquired certain interestsin B&BB, VRCC and RBG for $101.4 million. In addition, the Companiesincurred approximately $10.3 million in capitalized deferred financingfees related to the issuance of the Notes, $1.3 million of which was recordedon the balance sheet of the Company. Management valued the assets acquired inthe transaction as follows.  Currentassets and liabilities were recorded at book value, which approximated theirestimated market values at the date of acquisition.  Land, buildings and building improvementswere valued based upon comparable values of recent sales in the Mesquite,Nevada market and 3rd party market valuations of comparable assetsin Mesquite, Nevada.  For equipment,management recorded these assets at book value, which was deemed to be fairvalue, considering the relative age and working condition of theequipment.  Intangible assets,representing the Companies’ customer list and slot club program, were recordedat fair value, which was calculated based upon comparable customer lists andslot programs with other casinos operating in the Las Vegas and surroundingmarket.  In accordance with theprovisions of SFAS No. 141, the remainder of the purchase price wasallocated to goodwill. Management believes that the goodwill arose from theCompanies’ dominance in and the growing Mesquite, Nevada market, the value ofthe existing workforce and existing accounting and operating infrastructure.

 

Thefollowing table summarizes the estimated fair values of the assets acquired andliabilities assumed of the Companies at the date of acquisition. The purchaseprice allocation is in process and will be completed within one year of theacquisition; thus, the allocation of the purchase price is subject to refinement.

 
| ** **                 | ** ** | **At   December 20,  2004** | ** ** |
|----------------------------|------------|----------------------------------|------------|
| Current assets             |       | $                                | 15,600     |   |
| Property and  equipment    |       | 100,200                          |       |
| Other  non-current assets  |       | 3,300                            |       |
| Intangibles                |       | 4,600                            |       |
| Goodwill                   |       | 43,000                           |       |
| Total assets  acquired     |       | 166,700                          |       |
| Current  liabilities       |       | 12,800                           |       |
| Long-term  liabilities     |       | 1,200                            |       |
| Long-term debt  assumed    |       | 53,300                           |       |
| Total  liabilities assumed |       | 67,300                           |       |
|                       |       |                             |       |
| Net assets  acquired       |       | $                                | 99,400     |   |

 

34

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Thefollowing table summarizes the estimated fair values of the assets acquired andliabilities assumed related to the Company at the date of acquisition.

 
| ** **                | ** ** | **At   December 20,  2004** | ** ** |
|---------------------------|------------|----------------------------------|------------|
|                      |       |                             |       |
| Current assets            |       | $                                | 6,200      |   |
| Property and  equipment   |       | 4,200                            |       |
| Intangibles               |       | 2,300                            |       |
| Goodwill                  |       | 11,100                           |       |
| Total assets acquired     |       | 23,800                           |       |
| Current  liabilities      |       | 3,700                            |       |
| Long-term debt  assumed   |       | 100                              |       |
| Total liabilities assumed |       | 3,800                            |       |
|                      |       |                             |       |
| Net assets acquired       |       | $                                | 20,000     |   |

 

**4.**                                      Long-term Debt

 

Long-term debt consists ofthe following (in thousands):

 
| ** **                                                                                                                                                                                                                                                                                                      | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                                                                                                                                                                                                                                                                                      | ** ** | **2005**               | ** ** | **2004**              | ** ** |
| ** **                                                                                                                                                                                                                                                                                                      | ** ** | **(unaudited)**        | ** ** | ** **            | ** ** |
| 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 |       | 43,788                 |       | 40,068                |       |
| 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                                                  |       | 1,277                  |       | —                |       |
| 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                                                                                                                                                   |       | 222                    |       | 363                   |       |
|                                                                                                                                                                                                                                                                                                            |       | 170,287                |       | 165,431               |       |
| Less—current  portion                                                                                                                                                                                                                                                                                      |       | (222                   | )          | (189                  | )          |
| Total long-term  debt                                                                                                                                                                                                                                                                                           |       | $                      | 170,065    |                  | $          | 165,242 |   |

 

35

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***NewRevolving Facility***

 

The Wells Fargo Foothillcredit facility (“Foothill Facility’) is secured by substantially all theassets of the Companies. During the life of the Foothill Facility, theCompanies may borrow up to the lesser of (1) $15.0 million less theLetter of Credit Usage, as defined, less the Bank Product Reserve, as defined,or (2) the Borrowing Base, as defined, less the Letter of CreditUsage.  At September 30, 2005, theBank Product Reserve was approximately $359,000 and is based on the fair marketvalue at September 30, 2005 of the interest rate swap owed to Wells FargoFoothill, Inc.  Accordingly, theavailability under the Foothill Facility at September 30, 2005 was limitedto $13.4 million.

 

Under the terms of theFoothill Facility, interest accrues on the outstanding principal balance atLIBOR 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 4.4% at September 30, 2005.  The Foothill Facility also contains certainfinancial and other covenants.  Theseinclude a minimum trailing twelve-month Earnings before Interest, Taxes,Depreciation and Amortization (“EBITDA”) of $15,000,000 for the Companies andlimitations on other indebtedness and capital expenditures, as defined.  The Companies were in compliance with thesecovenants at September 30, 2005.

 

The outstanding balanceon the Foothill Facility is a joint and several obligation of the Companies.The condensed balance sheet of the Company reflects the full obligation of theFoothill Facility at September 30, 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 balance sheet of theCompany at September 30, 2005. At September 30, 2005, the net amountof the Foothill Facility recorded on the Company’s balance sheet is $0.

 

***SeniorSecured and Senior Subordinated Notes***

 

In December 2004, aspart of 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(“Senior Sub 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

 

36

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sheet of the Companyreflects the full obligation of the Notes at September 30, 2005 with anamount that is recorded on the consolidated balance sheet of VRCC recognized asa deemed distribution to reflect the net obligation of the Notes recorded onthe balance sheet of the Company at September 30, 2005. At September 30,2005, the net amount of the Notes recorded on the Company’s balance sheet is$20.6 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 the Companies’ Notes contain certain customary financial and othercovenants, which limit the Companies’ ability to incur additional debt.  The Indentures provide that the Companies maynot incur additional indebtedness, other than specified types of indebtedness,unless the Consolidated Coverage Ratio, on a pro-forma basis after theincurrence of the additional indebtedness is at least 2.00 to 1.00. As of September 30,2005, the Companies have incurred $0 of additional indebtedness as defined.

 

TheIndentures also contain other covenants which limit the ability of the Issuersand Guarantors, as defined, to pay dividends, redeem stock, or make otherdistributions, make investments, create certain liens, enter into certaintransactions with affiliates, utilize proceeds from asset sales, transfer orsell assets, issue or sell equity interests of subsidiaries and enter intocertain mergers and consolidations, as defined in the Indentures.  There are no restrictions related to thetransfer of funds between the Issuers, Guarantors and their respectivesubsidiaries.  The Issuers were incompliance with these covenants at September 30, 2005.

 

The Senior Notes aresecured by substantially all existing and future assets of the Issuers and theGuarantors, as defined, as well as the equity interest of the Guarantors, theequity interests of the Acquiring Shareholder and his affiliate in theIssuers.  The Guarantors are all the whollyowned subsidiaries of the Issuers.  TheSenior Notes are subordinated to the security interests of the FoothillFacility.  The Senior Sub Notes aresubordinate to the Senior Notes and all other indebtedness of the Companies.

 

**5.****                                     ****GamingEquipment Financing**

 

The Company from time totime enters into agreements with gaming manufacturers to finance the purchaseof gaming equipment.  Contractual termsof the agreements with the gaming manufactures consist of payment terms of lessthan one year to up to three years without interest.  In the event that an agreement with a gamingmanufacturer extends past a year, the Company will impute interest at a rate of8%.

 

37

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Gaming equipmentfinancing consists of the following (in thousands): 

 
| ** **                                                                                                                                          | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                                                                                                                          | ** ** | **2005**               | ** ** | **2004**              | ** ** |
| ** **                                                                                                                                          | ** ** | **(unaudited)**        | ** ** | ** **            | ** ** |
| Gaming equipment financing to purchase 273 games, no  payments for one year and monthly payments of $145 for 24 months beginning February 2006 |       | $                      | 3,119      |                  | $          | — |   |
| Gaming equipment financing to purchase 20 games,  monthly payments of $7 for 36 months beginning April 2005                                    |       | 208                    |       | —                |       |
| Gaming equipment financing to purchase 35 games, no  payments for one year and monthly payments of $8 for 24 months beginning January 2006     |       | 173                    |       | 191                   |       |
| Gaming equipment financing to purchase 4 games,  monthly payments of $1 for 36 months beginning April 2005                                     |       | 2                      |       | —                |       |
| Gaming equipment financing to purchase 20 games,  monthly payments of $7 for 36 months beginning April 2005                                    |       | 166                    |       | —                |       |
| Gaming equipment financing with terms of less than  12 months                                                                                       |       | —                 |       | 280                   |       |
|                                                                                                                                                |       | 3,668                  |       | 471                   |       |
| Less current portion                                                                                                                                |       | (1,237                 | )          | (280                  | )          |
| Gaming equipment financing, long-term portion                                                                                                       |       | $                      | 2,439      |                  | $          | 191 |   |

 

**6.****                                     ****Related Party Transactions**

 

Wingnuts, Inc. is acompany that owns an airplane used by the Company.  Wingnuts, Inc. is owned by Mr. Blackalong with various former stockholders of the Company.  Wingnuts, Inc. charges the Company forbusiness usage of the airplane using hourly rates for actual air time.  Total charges for the three and nine-monthperiods ended September 30, 2005 and 2004 were $0, $6,000, $0 and $18,000,respectively.

 

Virgin River Foodmart, Inc.(“Foodmart”), a Nevada corporation, is owned by Mr. Black and former shareholdersof the Company and VRCC. Participants in the Company’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. For the three and nine-month periods ended September 30, 2005 and2004, Foodmart has charged the Company $77,000, $95,000, $210,000 and $252,000,respectively, for gasoline purchased with points from the Company’s slot clubprogram.

 

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 incurred legal fees for legalservices in the amount of $14,000, $0, $18,000 and $24,000 for the three and nine-monthperiods ended September 30, 2005 and 2004, respectively.

 

Pursuant to theindenture, Mr. Black is entitled to a management fee for his management ofthe Company’s business of up to 5% of EBITDA, as defined.  The Company has recorded an estimatedliability of $288,000 associated with this management fee at September 30,2005.

 

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**7.****                                     ****Commitments and Contingencies**

 

In October 2005, theCompanies entered into an agreement with Wells Fargo Financial Leasing to leasegolf maintenance equipment totaling approximately $1.3 million.  The term of the lease is 36 months at a rateof $29,000.  The Companies are accountingfor the lease as an operating lease.

 

In September 2005,the Companies entered into an agreement with Agilysys NV, LLC to purchase a newproperty management system for the three properties.  Implementation is expected to begin in December 2005with a completion date expected to occur before the end of the second quarter2006.  The estimated cost of this projectis approximately $1.7 million.

 

In September 2005,the Companies entered into an agreement with Infinium Software, Inc. topurchase a new financial management system. Implementation is expected to begin in December 2005 with acompletion date expected to occur before the end of the second quarter in 2006.The estimated cost of this project is approximately $615,000.

 

In May 2005, theCompanies entered into a lease arrangement with Dell Financial Services tolease desktop computers and servers.  Theterm of the lease is 18 months at a rate of approximately $29,000 a month.  The lease also provides for a renewal periodof an additional 18 months at approximately $6,000 a month.  The Companies are accounting for the lease asan operating lease.

 

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## **Item 2.  Management’s Discussion and Analysis ofFinancial Condition and Results of Operations.**

## ** **

**Overview**

** **

We own and operate theCasaBlanca, the Oasis and the Virgin River in Mesquite, Nevada, which islocated approximately 80 miles north of Las Vegas. We own three of the fourcasinos operating in Mesquite and our properties have a dominant market sharein Mesquite. 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 and emphasis onslot play to target middle market gaming customers.

 

Our revenues areprimarily derived from gaming revenues, which include revenues from slotmachines, table games, live keno, race and sports book wagering and bingo.Gaming revenues are generally defined as gaming wins less gaming losses. Inaddition, we derive a significant amount of revenue from our hotel rooms andour food and beverage outlets. We also derive revenues from our golf courses,spa facilities, timeshare units, bowling center and other amenities.Promotional allowances consist primarily of food and beverages furnishedgratuitously to customers. The retail value of such services is included in therespective revenue classifications and is then deducted as promotionalallowances. We calculate operating income as net revenues less total operatingcosts and expenses. Operating income represents only those amounts that relateto our operations and excludes interest income, interest expense, and othernon-operating income and expenses.

 

Our entities areclassified as “flow-through” entities under the partnership or Subchapter Sprovisions of the Internal Revenue Code of 1986, as amended. Under thoseprovisions, the owners of the companies pay or are responsible for reportingour taxable income on their separate returns. Accordingly, a provision forincome taxes is not included in our financial data.

 

RBG, LLC, a Nevadalimited-liability company, was formed in February 1997 for the purpose ofacquiring the assets of Player’s Island Resort in Mesquite, Nevada, currentlyoperating as the CasaBlanca. RBG, LLC acquired the CasaBlanca for$30.5 million. In February 2001, RBG, LLC formed a subsidiary,Casablanca Resorts, LLC, a Nevada limited-liability company, in order topurchase the assets of the Oasis in Mesquite. RBG, LLC acquired the Oasis for$31.7 million. Currently, RBG, LLC directly owns and operates theCasaBlanca, and through its wholly-owned subsidiary, owns and operates theOasis. In May 2001, Casablanca Resorts, LLC formed threesubsidiaries—Oasis Interval Ownership, LLC, a Nevada limited-liability company;Oasis Recreational Properties, Inc., a Nevada corporation; and OasisInterval Management, LLC, a Nevada limited-liability company. Oasis IntervalOwnership, LLC and Oasis Interval Management, LLC were formed in connectionwith the operation and management of time share operations. Oasis RecreationalProperties, Inc. owns the recreational facility that is associated withthe Oasis.

 

B & B B, Inc.,a Nevada corporation, was formed in December 1989 in connection with theconstruction and development of the Virgin River Hotel & Casino. B &B B, Inc. operates the hotel casino and owns certain personal propertyincluding furniture and fixtures, leasehold improvements and gaming equipmentwithin the casino. Virgin River Casino Corporation, a Nevada corporation, wasformed in July 1988 in connection with the construction of the VirginRiver. Virgin River Casino Corporation currently owns the land and buildingsassociated with the Virgin River as well as the Mesquite Star. Virgin RiverCasino Corporation generates income from rents received from B & B B, Inc.,which operates the Virgin River.

 

39

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The Mesquite Star iscurrently a nonoperating casino, which we acquired out of bankruptcy for$6.3 million in November 2000. The Mesquite Star has 12,000 squarefeet of gaming space and 210 hotel rooms. We are presently using the propertyas a special events facility and for overflow hotel traffic from our otherproperties. We believe that the Mesquite Star gives us a competitive advantagein the Mesquite market because it allows us the flexibility of opening thecasino to meet market demand and to maintain our market share in the future ona cost-effective basis.

 

In order to offer ourcustomers attractive and modern facilities, we plan to continue to renovate ourfacilities, add amenities and remodel and expand some of our restaurants andspa facilities. In particular, we plan to (i) add a steakhouse, aStarbucks® and an additional movie theater, remodel the buffet restaurant andthe coffee shop, and refurbish the hotel rooms at the Virgin River, (ii) adda Starbucks® and a convention facility, expand and remodel the spa facility,recondition the parking lot, and refurbish the hotel rooms at the Oasis, and (iii) addan additional restaurant, expand and remodel the spa facility, remodel the finedining restaurant, and refurbish the hotel rooms at the CasaBlanca. Inaddition, to offer a greater variety of slot machines and increase our slotrevenue and profitability, we are in the process of converting our slot machinesto coinless slot technology or to slot machines with advanced electronic games.As of September 30, 2005, more than 95% of our slot machines had beenconverted to coinless slot technology or to advanced electronic slot games. Forthe remainder of 2005 and 2006, we plan to spend an aggregate of approximately$4.2 million in capital expenditures for hotel room renovation, for aconsolidation of our laundry operation, and a new property management and backoffice computer system. Furthermore, to accommodate long-term market growth andhigh hotel occupancy rates, we plan to spend approximately $20.0 millionin capital expenditures, beginning in the fourth quarter 2005 to the firstquarter of 2006, to expand the CasaBlanca by adding a 165-room hotel tower andconvention center.

 

**Key Performance Indicators**

 

Our operating results arehighly dependent on the volume of customers at our properties, which in turnimpacts the price we can charge for our hotel rooms and other amenities. Wegenerate a significant portion of our operating income from the gaming andhotel portions of our operations. Key performance indicators in our gaming andhotel operations are as follows:

 

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

 

Hotel revenue indicators –hotel occupancy (volume indicator); average daily rate (“ADR,” priceindicator); revenue per available room (“REVPAR”), a summary measure of hotelresults, combining ADR and occupancy rate.

 

Most of our revenue isessentially cash-based, through customers wagering with cash or paying fornon-gaming services with cash or credit cards. Our industry is capitalintensive and we rely heavily on the ability of our properties to generateoperating cash flow to repay debt financing, fund maintenance capital expendituresand provide excess cash for future development.

 

Our results of operationstend to be seasonal in nature. Typically, 37% of our operating income isgenerated in the first quarter and 35% is generated in the second quarter withthe remainder being generated during the final half of the year.

 

40

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**FinancialHighlights of Virgin River Casino Corporation**

** **

**For the Three andNine months Ended September 30, 2005 and 2004 (in thousands):**

** **
| ** **                          | ** ** | **Three-months ended   September 30,** | ** ** | **%**    | ** ** | **Nine months ended   September 30,** | ** ** | **%**    | ** ** |
|-------------------------------------|------------|---------------------------------------------|------------|----------|------------|--------------------------------------------|------------|----------|------------|
| ** **                          | ** ** | **2005**                                    | ** ** | **2004** | ** ** | **Change**                                 | ** ** | **2005** | ** ** | **2004** | ** ** | **Change** | ** ** |
| Casino revenues                     |       | $                                           | 14,283     |     | $          | 13,770                                     |       | 3.7      | %          | $ | 45,861 |   | $ | 43,207 |   | 6.1 | % |
| Casino expenses                     |       | 7,712                                       |       | 7,020    |       | 9.9                                        | %          | 22,730   |       | 21,564 |   | 5.4 | % |
| Profit margin                       |       | 46.0                                        | %          | 49.0     | %          | —                                     |       | 50.4     | %          | 50.1 | % | — |   |
|                                |       |                                        |       |     |       |                                       |       |     |       |   |   |   |   |
| Food and beverage revenues          |       | $                                           | 7,149      |     | $          | 7,187                                      |       | (0.5     | )%         | $ | 22,986 |   | $ | 23,072 |   | (0.4 | )% |
| Food and beverage expenses          |       | 4,589                                       |       | 4,642    |       | (1.1                                       | )%         | 14,407   |       | 14,241 |   | 1.2 | % |
| Profit margin                       |       | 35.8                                        | %          | 35.4     | %          | —                                     |       | 37.3     | %          | 38.3 | % | — |   |
|                                |       |                                        |       |     |       |                                       |       |     |       |   |   |   |   |
| Hotel revenues                      |       | $                                           | 4,744      |     | $          | 4,138                                      |       | 14.6     | %          | $ | 15,563 |   | $ | 14,695 |   | 5.9 | % |
| Hotel expenses                      |       | 1,617                                       |       | 1,902    |       | (15.0                                      | )%         | 5,039    |       | 5,555 |   | (9.3 | )% |
| Profit margin                       |       | 65.9                                        | %          | 54.0     | %          | —                                     |       | 67.6     | %          | 62.2 | % | — |   |
|                                |       |                                        |       |     |       |                                       |       |     |       |   |   |   |   |
| Other revenues                      |       | $                                           | 5,046      |     | $          | 5,648                                      |       | (10.7    | )%         | $ | 19,028 |   | $ | 20,494 |   | (7.2 | )% |
| Other expenses                      |       | 3,448                                       |       | 3,481    |       | (0.9                                       | )%         | 10,817   |       | 10,962 |   | (1.3 | )% |
|                                |       |                                        |       |     |       |                                       |       |     |       |   |   |   |   |
| Promotional allowances              |       | $                                           | 4,315      |     | $          | 3,920                                      |       | 10.1     | %          | $ | 13,822 |   | $ | 12,921 |   | 7.0 | % |
| Percent of gross revenues           |       | 13.8                                        | %          | 12.8     | %          | —                                     |       | 13.4     | %          | 12.7 | % | — |   |
|                                |       |                                        |       |     |       |                                       |       |     |       |   |   |   |   |
| General and administrative expenses |       | $                                           | 7,937      |     | $          | 6,726                                      |       | 18.0     | %          | $ | 22,427 |   | $ | 21,214 |   | 5.7 | % |
| Percent of net revenues             |       | 29.5                                        | %          | 25.1     | %          | —                                     |       | 25.0     | %          | 24.0 | % | — |   |

** **

***ConsolidatedNet Revenues.***Consolidated net revenues increased by 0.3% to $26.9 million for thethree-months ended September 30, 2005 as compared to $26.8 millionfor the three-months ended September 30, 2004. The increase was primarilydue to a $0.5 million increase in casino revenues, a $0.6 million increasein hotel revenues offset by a $0.6 million decrease in other revenues and a$0.4 million increase in promotional allowances.  Consolidated net revenues increased by 1.2%to $89.6 million for the nine months ended September 30, 2005 ascompared to $88.5 million for the nine-months ended September 30,2004. The increase was primarily due to a $2.7 million increase in casinorevenues, a $0.9 million increase in hotel revenues offset by a $1.5 milliondecrease in other revenues and a $0.9 million increase in promotional allowances.

** **

*ConsolidatedOperating Income (Loss).* Consolidated operating income (loss) decreased by 168.9% to$(1.0) million for the three-months ended September 30, 2005 ascompared to $1.4 million for the three-months ended September 30,2004. This was mainly due to our higher depreciation and amortization expenseand a $1.2 million increase in general and administrative expenses.Consolidated operating income decreased by 35.4% to $6.2 million for the ninemonths ended September 30, 2005 as compared to $9.6 million for the ninemonths ended September 30, 2004, due mainly to the same reasons asmentioned above.

 

*Casino.* Casino revenues increased 3.7% to$14.3 million for the three-months ended September 30, 2005 ascompared to $13.8 million for the three-months ended September 30,2004. The increase in casino revenues was due to the increase in slot revenues,which increased $0.5 million between periods as coin-in increased $12.5million or 5.6%, offset by decreased overall hold. Casino profit margindecreased to 46.0% for the three-months ended September 30, 2005 ascompared to 49.0% for three-months ended September 30, 2004. The decreasein casino profit margin is primarily due to flat coin-in and increased play ongames with a lower hold. Overall casino expenses increased 9.9% for thethree-months ended September 30, 2005 compared to the same period in theprior year mainly due to the increase in promotional allowances given to gamingcustomers. Casino revenues increased 6.1% to $45.9 million for

 

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the nine months ended September 30,2005 as compared to $43.2 million for the nine months ended September 30,2004. The increase in casino revenues was due to the increase in slot revenues,which increased $3.0 million between periods as coin-in increased $25.4million or 3.6% on increased overall slot hold. The increase in slot revenuewas offset by a $0.4 million decrease in table game revenue.  Casino profit margin increased to 50.4% forthe nine months ended September 30, 2005 as compared to 50.1% for the ninemonths ended September 30, 2004. The increase in casino profit margin is primarily due to our increasedefficiency due to the purchase of the new ticket-in ticket-out slot machineswhich allowed us to reduce labor in our slot department. Overall casinoexpenses increased 5.4% for the nine months ended September 30, 2005compared to the same period in the prior year mainly due to increased taxes andlicense fees on increased gaming revenues.

 

*Foodand Beverage.*Food and beverage revenues were relatively flat decreasing by 0.5% to$7.1 million for the three-months ended September 30, 2005 ascompared to $7.2 million for the three-months ended September 30,2004 mainly due to a 7.0% decrease in restaurant covers, offset by increases inrevenues per covers. Food and beverage expenses decreased 1.1% to $4.6 millionfor the three-months ended September 30, 2005 compared to $4.6 million inthe prior year mainly due to the reduced covers.

 

Food and beveragerevenues decreased by 0.4% to $23.0 million for the nine months ended September 30,2005 as compared to $23.1 million for the nine months ended September 30,2004 mainly due to a 5.7% decrease in restaurant covers offset by increases inrevenues per cover. Food and beverage expenses increased 1.2% to $14.4 millionfor the nine months ended September 30, 2005 compared to $14.2 million forthe same period in the prior year. Increases in food and beverage expenses were due to general increases inlabor and cost of sales.

 

*Hotel.* Hotel revenues increased by 14.6% to$4.7 million for the three-months ended September 30, 2005 ascompared to $4.1 million for the three-months ended September 30,2004. The hotel revenue increase was entirely due to an increase in ADR, asoverall occupied rooms decreased approximately 6,700 rooms for the three-monthsended September 30, 2005 compared to the three-months ended September 30,2004, of which 6,200 of the room decrease was at the Casablanca as a result ofthe room remodel.  Hotel expensesdecreased 15.0% for the same time period to $1.6 million for the three-monthsended September 30, 2005 compared to $1.9 million for the three-monthsended September 30, 2004 mainly due to the decreased occupied rooms.  As a result, hotel profit margin increased to65.9% for the three-months ended September 30, 2005 from 54.0% in theprior year. Hotel revenues increased by 5.9% to $15.6 million for the ninemonths ended September 30, 2005 as compared to $14.7 million for the ninemonths ended September 30, 2004. The hotel revenue increase was entirelydue to an increase in ADR as overall occupied rooms decreased approximately5,100 rooms for the nine months ended September 30, 2005 compared to the ninemonths ended September 30, 2004, with the number of occupied rooms at theCasablanca declining approximately 12,000 rooms due to the room remodel offsetby an increase in occupied rooms at the Oasis. Hotel expenses decreased 9.3% for the same time period to $5.0 millionfrom $5.6 million mainly due to the decline in occupied rooms.  As a result, hotel profit margin increased to67.6% for the nine months ended September 30, 2005 from 62.2% in the prioryear.

 

*OtherRevenues.* Otherrevenues decreased by 10.7% to $5.0 million for the three-months ended September 30,2005 compared to $5.6 million for the same period in 2004. Other revenuedecreased due to a $0.2 million decrease in time share revenue, $0.1 milliondecrease in golf revenue and $0.1 million in spa revenue during thethree-months ended September 30, 2005 compared to the three-months ended September 30,2004. Other revenues decreased by 7.2% to $19.0 million for the ninemonths ended September 30, 2005 compared to $20.5 million for thesame period in 2004. Other revenue decreased due mainly to a $0.9 milliondecrease in time share revenue, a $0.4 million decrease in golf revenue and$0.3 million decrease in spa revenue offset by increases in other revenuecenters during the nine months ended September 30, 2005 compared to the ninemonths ended September 30, 2004.

 

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*PromotionalAllowances.*Promotional allowances increased by 10.1% to $4.3 million for thethree-months ended September 30, 2005 as compared to $3.9 million forthe three-months ended September 30, 2004. As a percent of gross revenues, promotional allowances increased to13.8% for the three-months ended September 30, 2005 compared to 12.8% inthe prior year as we focused our marketing attention on our better gamingcustomers.  Promotional allowancesincreased by 7.0% to $13.8 million for the nine months ended September 30,2005 as compared to $12.9 million for the nine months ended September 30,2004.  As a percent of gross revenues,promotional allowances increased to 13.4% for the nine months ended September 30,2005 compared to 12.7% in the prior year as we focused our marketing attentionon our better gaming customers.

 

*Generaland Administrative (“G&A”).* G&A expenses increased by 18.0% to$7.9 million for the three-months ended September 30, 2005 ascompared to $6.7 million for the three-months ended September 30,2004.  As a percent of net revenues,G&A expenses increased to 29.5% for the three-months ended September 30,2005 as compared to 25.1% for the three-months ended September 30, 2004.  The main reason for the increase was due to a$0.6 million increase in medical, a $0.3 million increase in administrativesalaries, a $0.2 million increase in management fees, and a $0.2 million inaccrued bonuses.  G&A expensesincreased by 5.7% to $22.4 million for the nine months ended September 30,2005 as compared to $21.2 million for the nine months ended September 30,2004.  As a percent of net revenues,G&A expenses increased to 25.0% for the nine months ended September 30,2005 as compared to 24.0% in the prior year due to the increase in net revenuesand G&A expenses.  The main reasonfor the increase was due to a $0.6 million increase in management fees, a $0.6million increase in administrative salaries, a $0.6 million in accrued bonusesoffset by a $0.3 million decrease in medical.

 

*Depreciationand Amortization.*Depreciation and amortization increased to $2.5 million for thethree-months ended September 30, 2005 compared to $1.7 million forthe three-months ended September 30, 2004. Depreciation and amortization increased to $7.3 million for the ninemonths ended September 30, 2005 compared to $5.4 million for the ninemonths ended September 30, 2004. The increase was due to an increase in the depreciable asset base due tothe Buyout on December 20, 2004 and slot machine purchases during theyear.

 

*Loss onsale and disposal of assets.* Loss on disposal of assets increased to$0.1 million for the three-months ended September 30, 2005 comparedto $0.0 million for the three-months ended September 30, 2004. Losson disposal of assets increased to $0.7 million for the nine months ended September 30,2005 compared to $0.0 million for the nine months ended September 30,2004.The increase was due to the disposal of slot machines with the purchase ofticket-in ticket-out slot machines during the year.

 

*Changein Fair Value of Swaps.* Change in fair value of swaps increased to $0.4 million during thethree-months ended September 30, 2005 compared to $(0.3) million in thesame period in the prior year.  Theincrease is due to an increase in the rates during the three-months ended September 30,2005 compared to the same period in the prior year.  Change in fair value of swaps decreased to$1.1 million during the nine months ended September 30, 2005 compared to$2.7 million in the same period in the prior year.  The decrease is due to a smaller increase ininterest rates in the nine months ended September 30, 2005 compared to thesame periods in the prior year.

 

*InterestExpense.* Interestexpense was $4.6 million for the three-months ended September 30,2005 compared to $1.8 million for the three-months ended September 30,2004. Interest expense was $13.3 million for the nine months ended September 30,2005 compared to $5.4 million for the nine months ended September 30,2004.  The increase in interest expensewas due to an increase in our average outstanding borrowings during the threeand nine months ended September 30, 2005 compared to the same periods inthe prior year.

 

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**Liquidity and CapitalResources for Virgin River Casino Corporation**

** **

The following liquidityand capital resources discussion contains certain forward-looking statementswith respect to our business, financial condition, results of operations,expansion projects and our subsidiaries, which involve risks and uncertaintiesthat cannot be predicted or quantified, and consequently, actual results maydiffer materially from those expressed or implied herein. Such risks anduncertainties include, but are not limited to, financial market risks, theability to maintain existing management, competition within the gamingindustry, the cyclical nature of the hotel business and gaming business,economic conditions, regulatory matters and litigation and other risksdescribed in our filings with the Securities and Exchange Commission. Inaddition, construction projects such as our tower and convention centerprojects entail significant risks, including shortages of materials or skilledlabor, unforeseen regulatory problems, work stoppages, weather interference,and unanticipated cost increases. The anticipated costs and constructionperiods are based on budgets, conceptual design documents and construction schedule estimates.There can be no assurance that the budgeted costs or construction period willbe met. All forward-looking statements are based on our current expectationsand projections about future events.

 

*Cash Flows*

* *

Our primary sources ofliquidity and capital resources have been cash flow from operations and ourcredit facility. As of September 30, 2005 and December 31, 2004, cashand cash equivalents were $6.9 million and $11.1 million,respectively.

 

Cash provided byoperating activities for the nine months ended September 30, 2005 was$9.5 million compared to $12.0 million for the nine months ended September 30,2004. The $2.5 million decrease was mainly attributable to a$0.8 million decrease in operating income (excluding depreciation andamortization expense and other noncash charges), $0.3 million related to thelease termination agreement with MDW, LLC and we paid $1.6 million more in cashfor interest in the nine months ended September 30, 2005 compared to the ninemonths ended September 30, 2004.

 

Cash used in investingactivities for the nine months ended September 30, 2005 was$10.0 million compared to $1.7 million for the nine months ended September 30,2004. For the nine months ended September 30, 2005, the majority of cashused in investing activities consisted of $2.1 million related to gamingequipment purchases at the properties, $2.9 million related to the room remodelat the Casablanca, $0.2 million for the Casablanca spa expansion, $0.3 millionfor the fine dining expansion at the Casablanca, $0.4 million for theCasablanca tower and convention center, $0.3 million for the Starbucks at theOasis, $0.4 million related to the Oasis hotel room remodel, $0.2 million forthe casino 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. In addition, $1.2 million of tax payments wasmade related to the prior owners that adjusted the purchase price of theBuyout.  The majority of cash used ininvesting activities for the nine months ended September 30, 2004 relatedto capital expenditures for slot machines and various maintenance capitalexpenditures.

 

Cash used in financingactivities for the nine months ended September 30, 2005 was$3.8 million compared to $11.7 million for the nine months ended September 30,2004. For the nine months ended September 30, 2005, $1.5 millionrepresented a decrease in the bank overdraft balance, $1.3 million relatedto payments on long-term debt associated with equipment and time share financing,$1.8 million related to tax distributions, $0.6 million related to payments ongaming equipment financing, and $0.3 million related to payment of debtissuance costs associated with the Senior Notes, Senior Sub Notes, and FoothillFacility. These financing outflows were offset by $1.7 million ofborrowings associated with our time share financing and credit line. For the ninemonths ended September 30, 2004, $11.3 million

 

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represented payments onlong-term debt (of which $10.0 million was related to our old creditfacility and the remainder related to equipment and time share financing), $1.3million represented a decrease in our bank overdraft balance, $0.9 million intax distributions and $0.6 million related to payments on our gamingequipment financing.  These financingoutflows were offset by $2.3 million of borrowings associated with our timeshare financing.

 

**FinancialHighlights of RBG, LLC For the Three and Nine months Ended September 30,2005 and 2004 (in thousands):**

** **
| ** **                           | ** ** | **Three-months ended  September 30,** | ** ** | **%**    | ** ** | **Nine months ended  September 30,** | ** ** | **%**    | ** ** |
|--------------------------------------|------------|--------------------------------------------|------------|----------|------------|-------------------------------------------|------------|----------|------------|
| ** **                           | ** ** | **2005**                                   | ** ** | **2004** | ** ** | **Change**                                | ** ** | **2005** | ** ** | **2004** | ** ** | **Change** | ** ** |
| Casino revenues                      |       | $                                          | 14,283     |     | $          | 13,770                                    |       | 3.7      | %          | $ | 45,861 |   | $ | 43,207 |   | 6.1 | % |
| Casino expenses                      |       | 7,712                                      |       | 7,020    |       | 9.9                                       | %          | 22,730   |       | 21,564 |   | 5.4 | % |
| Profit  margin                       |       | 46.0                                       | %          | 49.0     | %          | —                                    |       | 50.4     | %          | 50.1 | % | — |   |
|                                 |       |                                       |       |     |       |                                      |       |     |       |   |   |   |   |
| Food and beverage revenues           |       | $                                          | 7,149      |     | $          | 7,187                                     |       | (0.5     | )%         | $ | 22,986 |   | $ | 23,072 |   | (0.4 | )% |
| Food and beverage expenses           |       | 4,589                                      |       | 4,642    |       | (1.1                                      | )%         | 14,407   |       | 14,241 |   | 1.2 | % |
| Profit  margin                       |       | 35.8                                       | %          | 35.4     | %          | —                                    |       | 37.3     | %          | 38.3 | % | — |   |
|                                 |       |                                       |       |     |       |                                      |       |     |       |   |   |   |   |
| Hotel revenues                       |       | $                                          | 4,725      |     | $          | 4,070                                     |       | 16.1     | %          | $ | 15,125 |   | $ | 14,237 |   | 6.2 | % |
| Hotel expenses                       |       | 1,546                                      |       | 1,620    |       | (4.6                                      | )%         | 4,682    |       | 5,020 |   | (6.7 | )% |
| Profit  margin                       |       | 67.3                                       | %          | 60.2     | %          | —                                    |       | 69.0     | %          | 64.7 | % | — |   |
|                                 |       |                                       |       |     |       |                                      |       |     |       |   |   |   |   |
| Other revenues                       |       | $                                          | 3,378      |     | $          | 3,913                                     |       | (13.7    | )%         | $ | 14,054 |   | $ | 15,319 |   | (8.3 | )% |
| Other expenses                       |       | 3,448                                      |       | 3,481    |       | (0.9                                      | )%         | 10,817   |       | 10,962 |   | (1.3 | )% |
|                                 |       |                                       |       |     |       |                                      |       |     |       |   |   |   |   |
| Promotional allowances               |       | $                                          | 4,295      |     | $          | 3,912                                     |       | 9.8      | %          | $ | 13,802 |   | $ | 12,913 |   | 6.9 | % |
| Percent  of gross revenues           |       | 14.5                                       | %          | 13.5     | %          | —                                    |       | 14.1     | %          | 13.5 | % | — |   |
|                                 |       |                                       |       |     |       |                                      |       |     |       |   |   |   |   |
| General and administrative  expenses |       | $                                          | 7,870      |     | $          | 6,751                                     |       | 16.6     | %          | $ | 22,182 |   | $ | 21,052 |   | 5.4 | % |
| Percent  of net revenues             |       | 31.2                                       | %          | 27.0     | %          | —                                    |       | 26.3     | %          | 25.4 | % | — |   |

** **

***ConsolidatedNet Revenues.***Consolidated net revenues increased by 0.8% to $25.2 million for thethree-months ended September 30, 2005 as compared to $25.0 millionfor the three-months ended September 30, 2004. The increase was primarilydue to a $0.5 million increase in casino revenues, a $0.6 million increasein hotel revenues offset by a $0.5 million decrease in other revenues and a$0.4 million increase in promotional allowances.  Consolidated net revenues increased by 1.6%to $84.2 million for the nine months ended September 30, 2005 ascompared to $82.9 million for the nine months ended September 30,2004. The increase was primarily due to a $2.7 million increase in casinorevenues, a $0.9 million increase in hotel revenues offset by a $1.3 milliondecrease in other revenues and a $0.9 million increase in promotionalallowances.

** **

*ConsolidatedOperating Income (Loss).* Consolidated operating income (loss) decreased by 1,852.6% to anoperating loss of $(2.0) million for the three-months ended September 30,2005 as compared to operating income of $0.1 million for the three-monthsended September 30, 2004. Consolidated operating income decreased by 48.9%to $2.8 million for the nine months ended September 30, 2005 ascompared to $5.5 million for the nine months ended September 30,2004. For both periods, the decrease was mainly due to our higher depreciationand amortization expense and the increase in general and administrativeexpenses.

 

*Casino.* Casino revenues increased 3.7% to$14.3 million for the three-months ended September 30, 2005 ascompared to $13.8 million for the three-months ended September 30,2004. The increase in casino revenues was due to the increase in slot revenues,which increased $0.5 million between periods as coin-in increased $12.5million or 5.6% offset by decreased overall hold. Casino profit margindecreased

 

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to 46.0% for thethree-months ended September 30, 2005 as compared to 49.0% forthree-months ended September 30, 2004. The decrease in casino profitmargin is primarily due to flat coin-in and increased play on games with alower hold. Overall casino expenses increased 9.9% for the three-months ended September 30,2005 compared to the same period in the prior year mainly due to the increasein promotional allowances given to gaming customers. Casino revenues increased6.1% to $45.9 million for the nine months ended September 30, 2005 ascompared to $43.2 million for the nine months ended September 30,2004. The increase in casino revenues was due to the increase in slot revenues,which increased $3.0 million between periods as coin-in increased $25.4million or 3.6% on increased overall slot hold. The increase in slot revenuewas offset by a $0.4 million decrease in table game revenue.  Casino profit margin increased to 50.4% forthe nine months ended September 30, 2005 as compared to 50.1% for ninemonths ended September 30, 2004. The increase in casino profit margin is primarily due to our increasedefficiency due to the purchase of the new ticket-in ticket-out slot machineswhich allowed us to reduce labor in our slot department. Overall casinoexpenses increased 5.4% for the nine months ended September 30, 2005compared to the same period in the prior year mainly due to increased taxes andlicense fees on increased gaming revenues.

 

*Foodand Beverage.*Food and beverage revenues were relatively flat decreasing by 0.5% to$7.1 million for the three-months ended September 30, 2005 ascompared to $7.2 million for the three-months ended September 30, 2004mainly due to a 7.0% decrease in restaurant covers offset by increases inrevenues per covers. Food and beverage expenses decreased 1.1% to $4.6 millionfor the three-months ended September 30, 2005 compared to $4.6 million inthe prior year mainly due to the reduced covers.

 

Food and beveragerevenues decreased by 0.4% to $23.0 million for the nine months ended September 30,2005 as compared to $23.1 million for the nine months ended September 30,2004 mainly due to a 5.7% decrease in restaurant covers offset by increases inrevenues per cover. Food and beverage expenses increased 1.2% to $14.4 millionfor the nine months ended September 30, 2005 compared to $14.2 million forthe same period in the prior year. Increases in food and beverage expenses were due to general increases inlabor and cost of sales.

 

*Hotel.* Hotel revenues increased by 16.1% to$4.7 million for the three-months ended September 30, 2005 ascompared to $4.1 million for the three-months ended September 30,2004. The hotel revenue increase was entirely due to an increase in ADR, asoverall occupied rooms decreased approximately 5,700 rooms for the three-monthsended September 30, 2005 compared to the three-months ended September 30,2004, of which 6,200 of the room decrease was at the Casablanca as a result ofthe room remodel.  Hotel expensesdecreased 4.6% for the same time period to $1.5 million for the three-monthsended September 30, 2005 compared to $1.6 million for the three-monthsended September 30, 2004 mainly due to the decreased occupied rooms.  As a result, hotel profit margin increased to67.3% for the three-months ended September 30, 2005 from 60.2% in theprior year. Hotel revenues increased by 6.2% to $15.1 million for the ninemonths ended September 30, 2005 as compared to $14.2 million for the ninemonths ended September 30, 2004. The hotel revenue increase was entirelydue to an increase in ADR as overall occupied rooms decreased approximately4,100 rooms for the nine months ended September 30, 2005 compared to the ninemonths ended September 30, 2004, with the number of occupied rooms at theCasablanca declining approximately 12,000 rooms due to the room remodel offsetby an increase in occupied rooms at the Oasis. Hotel expenses decreased 6.7% for the same time period to $4.7 millionfrom $5.0 million mainly due to the decline in occupied rooms.  As a result hotel profit margin increased to69.0% for the nine months ended September 30, 2005 from 64.7% in the prioryear.

 

*OtherRevenues.* Otherrevenues decreased by 13.7% to $3.4 million for the three-months ended September 30,2005 compared to $3.9 million for the same period in 2004. Other revenuedecreased due to a $0.2 million decrease in time share revenue, $0.1 milliondecrease in golf revenue and $0.1 million in spa revenue during thethree-months ended September 30, 2005 compared to the three-months ended

 

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September 30, 2004.Other revenues decreased by 8.3% to $14.1 million for the nine monthsended September 30, 2005, compared to $15.3 million for the sameperiod in 2004. Other revenue decreased due mainly to a $0.9 million decreasein time share revenue, a $0.4 million decrease in golf revenue and $0.3 milliondecrease in spa revenue offset by increases in other revenue centers during thenine months ended September 30, 2005, compared to the nine months ended September 30,2004.

 

*PromotionalAllowances.*Promotional allowances increased by 9.8% to $4.3 million for thethree-months ended September 30, 2005 as compared to $3.9 million forthe three-months ended September 30, 2004. As a percent of gross revenues, promotional allowances increased to14.5% for the three-months ended September 30, 2005 compared to 13.5% inthe prior year as we focused our marketing attention on our better gamingcustomers.  Promotional allowancesincreased by 6.9% to $13.8 million for the nine months ended September 30,2005 as compared to $12.9 million for the nine months ended September 30,2004.  As a percent of gross revenues,promotional allowances increased to 14.1% for the nine months ended September 30,2005 compared to 13.5% in the prior year as we focused our marketing attentionon our better gaming customers.

 

*Generaland Administrative.*G&A expenses increased by 16.6% to $7.9 million for the three-monthsended September 30, 2005 as compared to $6.8 million for thethree-months ended September 30, 2004. As a percent of net revenues, G&A expenses increased to 31.2% forthe three-months ended September 30, 2005 as compared to 27.0% for thethree-months ended September 30, 2004. The main reason for the increase was due to a $0.6 million increase inmedical, a $0.3 million increase in administrative salaries, a $0.2 millionincrease in management fees, and a $0.2 million in accrued bonuses. G&Aexpenses increased by 5.4% to $22.2 million for the nine months ended September 30,2005 as compared to $21.1 million for the nine months ended September 30,2004..  As a percent of net revenues,G&A expenses increased to 26.3% for the nine months ended September 30,2005 as compared to 25.4% in the prior year due to the increases in netrevenues. The main reason for the increase was due to a $0.6 million increasein management fees, a $0.6 million increase in administrative salaries, a $0.6million in accrued bonuses offset by a $0.3 million decrease in medical.

 

*Depreciationand Amortization.*Depreciation and amortization increased to $2.0 million for thethree-months ended September 30, 2005 compared to $1.4 million forthe three-months ended September 30, 2004. Depreciation and amortization increased to $5.9 million for the ninemonths ended September 30, 2005 compared to $4.5 million for the ninemonths ended September 30, 2004. The increase was due to an increase in the depreciable asset base due toBuyout on December 20, 2004 and slot machine purchases during the year.

 

*Loss onsale and disposal of assets.* Loss on disposal of assets increased to$0.1 million for the three-months ended September 30, 2005 comparedto $0.0 million for the three-months ended September 30, 2004. Losson disposal of assets increased to $0.7 million for the nine months ended September 30,2005 compared to $0.0 million for the nine months ended September 30,2004. The increase was due to the disposal of slot machines with the purchaseof ticket-in ticket-out slot machines during the year.

 

*Changein Fair Value of Swaps.* Change in fair value of swaps increased to $0.3 million during thethree-months ended September 30, 2005 compared to $(0.2) million in thesame period in the prior year.  Theincrease was due to a change in interest rates for the three-months ended September 30,2005 compared to the same period in the prior year.  Change in fair value of swaps decreased to$0.8 million during the nine months ended September 30, 2005 compared to$1.9 million in the same period in the prior year.  The decrease is due to a smaller increase ininterest rates in the nine months ended September 30, 2005 compared to thesame period in the prior year.

 

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*InterestExpense.* Interestexpense was $0.4 million for the three-months ended September 30,2005 compared to $1.5 million for the three-months ended September 30,2004. Interest expense was $1.0 million for the nine months ended September 30,2005 compared to $4.5 million for the nine months ended September 30,2004.  The decrease in interest expensewas due to a decrease in our average outstanding borrowings during the threeand nine months ended September 30, 2005 compared to the same period inthe prior year.

 

**Liquidity and CapitalResources of RGB, LLC**

** **

The following liquidityand capital resources discussion contains certain forward-looking statementswith respect to our business, financial condition, results of operations,expansion projects and our subsidiaries, which involve risks and uncertaintiesthat cannot be predicted or quantified, and consequently, actual results maydiffer materially from those expressed or implied herein. Such risks anduncertainties include, but are not limited to, financial market risks, theability to maintain existing management, competition within the gamingindustry, the cyclical nature of the hotel business and gaming business,economic conditions, regulatory matters and litigation and other risksdescribed in our filings with the Securities and Exchange Commission. Inaddition, construction projects such as our tower and convention centerprojects entail significant risks, including shortages of materials or skilledlabor, unforeseen regulatory problems, work stoppages, weather interference,and unanticipated cost increases. The anticipated costs and constructionperiods are based on budgets, conceptual design documents and construction schedule estimates.There can be no assurance that the budgeted costs or construction period willbe met. All forward-looking statements are based on our current expectationsand projections about future events.

 

*Cash Flows*

* *

Our primary sources ofliquidity and capital resources have been cash flow from operations and ourcredit facility. As of September 30, 2005 and December 31, 2004, cashand cash equivalents were $5.5 million and $7.5 million,respectively.

 

Cash provided byoperating activities for the nine months ended September 30, 2005 was$9.5 million compared to $6.3 million for the nine months ended September 30,2004. The $3.2 million increase was mainly attributable to a$0.7 million decrease in operating income (excluding depreciation andamortization expense and other noncash charges), $0.3 million associated withthe MDW, LLC lease termination, a $0.6 million decrease in collections onreceivables offset by a $3.3 million decrease in cash paid for interest and a$1.6 million increase in accounts payable and accrued liabilities associatedwith the increase in accrued management fees and bonuses during the nine monthsended September 30, 2005 compared to the nine months ended September 30,2005.

 

Cash used in investingactivities for the nine months ended September 30, 2005 was$8.5 million compared to $1.6 million for the nine months ended September 30,2004. For the nine months ended September 30, 2005, the majority of cashused in investing activities consisted of $2.1 million related to gamingequipment purchases at the properties, $2.9 million related to the room remodelat the Casablanca, $0.2 million for the Casablanca spa expansion, $0.3 millionfor the fine dining expansion at the Casablanca, $0.4 million for theCasablanca tower and convention center, $0.3 million for the Starbucks at the Oasis,$0.4 million related to the Oasis hotel room remodel, $0.2 million for thecasino remodel at the Oasis, $0.4 for laundry equipment and $1.8 millionrelated to various maintenance capital expenditures. The majority of cash usedin investing activities for the nine months ended September 30, 2004related to capital expenditures for slot machines and various maintenancecapital expenditures.

 

Cash used in financingactivities for the nine months ended September 30, 2005 was$3.0 million compared to $4.6 million for the nine months ended September 30,2004. For the nine months ended

 

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September 30, 2005,$1.5 million represented a decrease in the bank overdraft balance,$1.1 million related to payments on long-term debt associated withequipment and time share financing and $0.6 million related to payments ongaming equipment financing.  Thesefinancing outflows were offset by $0.2 million of borrowings associated withour time share financing. For the nine months ended September 30, 2004,$3.0 million represented payments on long-term debt (of which$1.8 million was related to our old credit facility and the remainderrelated to equipment and time share financing), $1.3 million represented adecrease in our bank overdraft balance and $0.6 million related topayments on our gaming equipment financing. These financing outflows were offset by $0.3 million of borrowingsassociated with our time share financing.

 

**FinancialHighlights of B&BB, Inc.**

** **

**For the Three andNine months Ended September 30, 2005 and 2004 (in thousands):**

** **
| ** **                           | ** ** | **Three-months ended  September 30,** | ** ** | **%**    | ** ** | **Nine months ended  September 30,** | ** ** | **%**    | ** ** |
|--------------------------------------|------------|--------------------------------------------|------------|----------|------------|-------------------------------------------|------------|----------|------------|
| ** **                           | ** ** | **2005**                                   | ** ** | **2004** | ** ** | **Change**                                | ** ** | **2005** | ** ** | **2004** | ** ** | **Change** | ** ** |
| Casino revenues                      |       | $                                          | 8,390      |     | $          | 7,958                                     |       | 5.4      | %          | $ | 25,935 |   | $ | 23,839 |   | 8.8 | % |
| Casino expenses                      |       | 3,450                                      |       | 3,605    |       | (4.3                                      | )%         | 10,884   |       | 10,826 |   | .5 | % |
| Profit  margin                       |       | 58.9                                       | %          | 54.7     | %          | —                                    |       | 58.0     | %          | 54.6 | % | — |   |
|                                 |       |                                       |       |     |       |                                      |       |     |       |   |   |   |   |
| Food and beverage revenues           |       | $                                          | 2,757      |     | $          | 2,769                                     |       | (0.4     | )%         | $ | 8,752 |   | $ | 8,517 |   | 2.8 | % |
| Food and beverage expenses           |       | 1,852                                      |       | 1,694    |       | 9.3                                       | %          | 5,509    |       | 5,239 |   | 5.2 | % |
| Profit  margin                       |       | 32.8                                       | %          | 38.8     | %          | —                                    |       | 37.1     | %          | 38.5 | % | — |   |
|                                 |       |                                       |       |     |       |                                      |       |     |       |   |   |   |   |
| Hotel revenues                       |       | $                                          | 1,789      |     | $          | 1,612                                     |       | 11.0     | %          | $ | 6,444 |   | $ | 5,669 |   | 13.7 | % |
| Hotel expenses                       |       | 590                                        |       | 720      |       | (18.1                                     | )%         | 1,969    |       | 2,213 |   | (11.0 | )% |
| Profit  margin                       |       | 67.0                                       | %          | 55.3     | %          | —                                    |       | 69.4     | %          | 61.0 | % | — |   |
|                                 |       |                                       |       |     |       |                                      |       |     |       |   |   |   |   |
| Other revenues                       |       | $                                          | 709        |     | $          | 699                                       |       | 1.4      | %          | $ | 2,107 |   | $ | 2,105 |   | 0.1 | % |
| Other expenses                       |       | 350                                        |       | 365      |       | (4.1                                      | )%         | 1,100    |       | 1,087 |   | 1.2 | % |
|                                 |       |                                       |       |     |       |                                      |       |     |       |   |   |   |   |
| Promotional allowances               |       | $                                          | 1,646      |     | $          | 1,745                                     |       | (5.7     | )%         | $ | 5,547 |   | $ | 5,315 |   | 4.4 | % |
| Percent  of gross revenues           |       | 12.1                                       | %          | 13.4     | %          | —                                    |       | 12.8     | %          | 13.2 | % | — |   |
|                                 |       |                                       |       |     |       |                                      |       |     |       |   |   |   |   |
| General and administrative  expenses |       | $                                          | 5,081      |     | $          | 4,572                                     |       | 11.1     | %          | $ | 14,231 |   | $ | 13,031 |   | 9.2 | % |
| Percent  of net revenues             |       | 42.3                                       | %          | 40.5     | %          | —                                    |       | 37.8     | %          | 37.4 | % | — |   |

 

***NetRevenues.*** Netrevenues increased by 6.3% to $12.0 million for the three-months ended September 30,2005 as compared to $11.3 million for the three-months ended September 30,2004. The increase was primarily due to a $0.4 million increase in casinorevenues, a $0.2 million increase in hotel revenues and flat food and beveragerevenues.  Net revenues increased by 8.3%to $37.7 million for the nine months ended September 30, 2005 ascompared to $34.8 million for the nine months ended September 30,2004. The increase was primarily due to a $2.1 million increase in casinorevenues, a $0.8 million increase in hotel revenues and a $0.2 million increasein food and beverage revenues offset by a $0.2 million increase in promotionalallowances.

** **

*OperatingIncome.* Operatingincome decreased by 36.5% to $0.0 million for the three-months ended September 30,2005 as compared to $0.1 million for the three-months ended September 30,2004. Operating income increased by 39.6% to $2.1 million for the ninemonths ended September 30, 2005 as compared to $1.5 million for the ninemonths ended September 30, 2004. This was mainly due to increases in casino revenues and flat orimproving operating margins.

 

*Casino.* Casino revenues increased 5.4% to$8.4 million for the three-months ended September 30, 2005 ascompared to $8.0 million for the three-months ended September 30,2004. The increase in casino

 

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revenues was mainly dueto the increase in slot revenues, which increased $0.3 million betweenperiods on flat coin-in on increased overall hold. Casino profit marginincreased to 58.9% for the three-months ended September 30, 2005 ascompared to 54.7% for three-months ended September 30, 2004 due to theincreased overall hold and efficiencies generated from the purchase of the newticket-in ticket-out slot machines which allowed us to reduce labor in our slotdepartment. Overall casino expenses decreased 4.3% for the three months ended September 30,2005 compared to the same period in the prior year. Casino revenues increased8.8% to $25.9 million for the nine months ended September 30, 2005 ascompared to $23.8 million for the nine months ended September 30,2004. The increase in casino revenues was due to the increase in slot revenues,which increased $1.5 million between periods as coin-in increased $1.2million on increased overall slot hold. Table games revenue also increased $0.3million between periods. Casino profit margin increased to 58.0% for the ninemonths ended September 30, 2005 as compared to 54.6% for nine months endedSeptember 30, 2004.  The increase incasino profit margin is primarily due to the increased overall hold onrelatively flat coin-in and most costs remaining relatively flat as ourefficiency increased due to the purchase of the new ticket-in ticket-out slotmachines which allowed us to reduce labor in our slot department. Overallcasino expenses increased 0.5% for the nine months-months ended September 30,2005 compared to the same period in the prior year.

 

*Food andBeverage.* Foodand beverage revenues remained relatively flat at $2.8 million for thethree-months ended September 30, 2005 as compared to prior year as coversdecreased 10.8% on increased revenue per cover. Food and beverage expensesincreased 9.3% to $1.9 million for the three-months ended September 30,2005 compared to $1.7 million in the prior year mainly due to increase in laborand cost of sales.

 

Food and beveragerevenues increased by 2.8% to $8.8 million for the nine months ended September 30,2005 as compared to $8.5 million for the nine months ended September 30,2004 due to increases in revenue per cover as covers decreased 6.1% compared toprior year. Food and beverage expenses increased 5.2% to $5.5 million for the ninemonths ended September 30, 2005 compared to $5.2 million for the sameperiod in the prior year.  Increases infood and beverage expenses were due to general increases in labor and cost ofsales.

 

*Hotel.* Hotel revenues increased by 11.0% to$1.8 million for the three-months ended September 30, 2005 ascompared to $1.6 million for the three-months ended September 30,2004. The hotel revenue increase was entirely due to an increase in ADR, asoverall occupied rooms were down 7,700 for the three-months ended September 30,2005 compared to the three-months ended September 30, 2004.  Hotel expenses decreased 18.1% for the sametime period to $0.6 million from $0.7 million due to the decrease in occupiedrooms.   As a result hotel profit marginincreased to 67.0% for the three-months ended September 30, 2005 from55.3% in the prior year. Hotel revenues increased by 13.7% to $6.4 millionfor the nine months ended September 30, 2005 as compared to$5.7 million for the nine months ended September 30, 2004. The hotelrevenue increase was entirely due to an increase in ADR as overall occupiedrooms were down 6,700 for the nine months ended September 30, 2005compared to the nine months ended September 30, 2004.  Hotel expenses decreased 11.0% for the sametime period to $2.0 million from $2.2 million due to the decrease in occupiedrooms during the nine months ended September 30, 2005 compared to theprior year.  As a result hotel profitmargin increased to 69.4% for the nine months ended September 30, 2005from 61.0% in the prior year.

 

*Other Revenues.* Other revenues were flat at$0.7 million for the three-months ended September 30, 2005 and$0.7 million for the same period in 2004. Other revenues were flat at$2.1 million for the nine months ended September 30, 2005 compared to$2.1 million for the same period in 2004.

 

*PromotionalAllowances.*Promotional allowances remained relatively flat at $1.6 million for thethree-months ended September 30, 2005 as compared to $1.7 million forthe three-months ended September 30,

 

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2004.  Promotional allowances increased by 4.4% to$5.5 million for the nine months ended September 30, 2005 as comparedto $5.3 million for the nine months ended September 30, 2004 as wefocused our marketing attention on our better gaming customers.  As a percent of gross revenues, promotionalallowances decreased to 12.8% for the nine months ended September 30, 2005compared to 13.2% in the prior year.

 

*Generaland Administrative.*G&A expenses increased by 14.6% to $5.1 million for the three-monthsended September 30, 2005 as compared to $4.6 million for thethree-months ended September 30, 2004. As a percent of net revenues, G&A expenses increased to 42.3% forthe three-months ended September 30, 2005 as compared to 40.5% for thethree-months ended September 30, 2004. The main reason for the increase was due to a $0.3 million increase inutilities, $0.3 million in marketing, $0.1 million increase in management fees,and a $0.1 million in accrued bonuses offset by a $0.3 million decrease inmedical.  G&A expenses increased 9.2%to $14.2 million for the nine months ended September 30, 2005 as comparedto $13.0 million for the nine months ended September 30, 2004.  As a percent of net revenues, G&Aexpenses remained relatively flat at 37.8% for the nine months ended September 30,2005 as compared to 37.4% in the prior year. The main reason for the increase was due to a $0.3 million increase inadministrative salaries, $0.3 million increase in management fees, $0.4 millionin accrued bonuses and a $0.3 million increase in utility expenses.

 

*Depreciationand Amortization.*Depreciation and amortization increased to $0.6 million for thethree-months ended September 30, 2005 compared to $0.3 million forthe three-months ended September 30, 2004. Depreciation and amortization increased to $2.0 million for the ninemonths ended September 30, 2005 compared to $1.0 million for the ninemonths ended September 30, 2004. The increase was due to an increase in the depreciable assets and amortizationof intangible assets, arising as a result of the Buyout.

 

*InterestExpense.* Interestexpense was $0.6 million for the three-months ended September 30,2005 compared to $0.0 million for the three-months ended September 30,2004. Interest expense was $1.8 million for the nine months ended September 30,2005 compared to $0.0 million for the nine months ended September 30,2004. The increase in interest expense was due to the Buyout on December 20,2004.

 

**Liquidity and CapitalResources for B&BB, Inc.**

** **

The following liquidityand capital resources discussion contains certain forward-looking statementswith respect to our business, financial condition, results of operations,expansion projects and our subsidiaries, which involve risks and uncertainties thatcannot be predicted or quantified, and consequently, actual results may differmaterially from those expressed or implied herein. Such risks and uncertaintiesinclude, but are not limited to, financial market risks, the ability tomaintain existing management, competition within the gaming industry, thecyclical nature of the hotel business and gaming business, economic conditions,regulatory matters and litigation and other risks described in our filings withthe Securities and Exchange Commission. In addition, construction projects suchas our tower and convention center projects entail significant risks, includingshortages of materials or skilled labor, unforeseen regulatory problems, workstoppages, weather interference, and unanticipated cost increases. Theanticipated costs and construction periods are based on budgets, conceptualdesign documents and construction schedule estimates. There can be noassurance that the budgeted costs or construction period will be met. Allforward-looking statements are based on our current expectations andprojections about future events.

 

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*Cash Flows*

* *

Our primary sources ofliquidity and capital resources have been cash flow from operations and ourcredit facility. As of September 30, 2005 and December 31, 2004, cashand cash equivalents were $5.3 million and $5.9 million,respectively.

 

Cash provided byoperating activities for the nine months ended September 30, 2005 was$2.1 million compared to $1.9 million for the nine months ended September 30,2004. The $0.2 million increase was mainly attributable to a$1.6 million increase in operating income (excluding depreciation andamortization expense and other noncash charges) offset by the $1.0 increase incash paid for interest and $0.1 million decrease in related party interestincome.

 

Cash used in investingactivities for the nine months ended September 30, 2005 was$2.1 million compared to $0.9 million for the nine months ended September 30,2004. For the nine months ended September 30, 2005, the majority of cashused in investing activities consisted of the following at the Virgin River:$0.7 million for the room remodel, $0.3 million for the Starbucks, $0.5 millionfor gaming equipment, $0.1 million for the buffet expansion and $0.6 millionfor maintenance capital expenditures. The majority of cash used in investing activities for the nine monthsended September 30, 2004 related to capital expenditures for slot machinesand various maintenance capital expenditures.

 

Cash used in financingactivities for the nine months ended September 30, 2005 was$0.6 million compared to $0.7 million for the nine months ended September 30,2004.  The cash used in financingactivities for the nine months ended September 30, 2005 consisted of $0.4million in payments on gaming equipment financing and $0.1 million in paymentson long-term debt associated with equipment. The cash used in financing activities for the nine months ended September 30,2004 was attributable to $0.6 million in payments on gaming equipment financingand $0.1 million in payment on long-term debt associated with equipment.

 

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

 

For the remainder offiscal 2005 and 2006, we plan to spend an aggregate of approximately$4.2 million in capital expenditures for hotel room renovation, for aconsolidation of our laundry operation, and for a new property management andback office computer system.  Inaddition, we plan to spend approximately $20.0 million in capital expendituresfor the development and construction of a new 165-room hotel tower andconvention center. Of the approximately $24.2 million in capitalexpenditures referred to above, we plan to spend approximately$2.7 million in fiscal year 2005 and the remainder in 2006.

 

We believe that existingcash, cash flows from operations, equipment financing and available borrowingsunder the Foothill Facility will be adequate to satisfy our anticipated uses ofcapital during the remainder of 2005 and 2006.

 

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

 

We have no off balancesheet arrangements at September 30, 2005 or December 31, 2004.

 

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

 

Inaddition to our contractual obligations and commitments presented in our registration statement on Form S-4/Afiled with the Securities and Exchange Commission on September 22, 2005,the Companies

 

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have the followingadditional contractual obligations related to our gaming equipment financing asof September 30, 2005:

 

| **Year Ending** | ** ** | **Amount**         | ** ** |
|-----------------|------------|--------------------|------------|
| ** **      | ** ** | **(in thousands)** | ** ** |
| 2005            |       | $                  | 300        |   |
| 2006            |       | 4,651              |       |
| 2007            |       | 5,115              |       |
| 2008            |       | 619                |       |
| Total           |       | $                  | 10,685     |   |

** **

In October 2005, weentered into an agreement with Wells Fargo Financial Leasing to lease golfmaintenance equipment totaling approximately $1.3 million.  The term of the lease is 36 months at a rateof $29,000.  We are accounting for thelease as an operating lease.

 

In September 2005,we entered into an agreement with Agilysys NV, LLC to purchase a new propertymanagement system for the three properties. Implementation is expected to begin in December 2005 with acompletion date expected to occur before the end of the second quarter2006.  The estimated cost of this projectis approximately $1.7 million.

 

In September 2005,we entered into an agreement with Infinium Software, Inc. to purchase anew financial management system.  Implementationis expected to begin in December 2005 with an completion date expected tooccur before the end of the second quarter in 2006. The estimated cost of thisproject is approximately $615,000.

 

In May 2005, weentered into a lease arrangement with Dell Financial Services to lease desktopcomputers and servers.  The term of thelease is 18 months at a rate of approximately $29,000 a month.  The lease also provides for a renewal periodof an additional 18 months at approximately $6,000 a month.  We are accounting for the lease as anoperating lease.

 

**CriticalAccounting Policies**for Virgin River Casino Corporation, RBG, LLC andB&BB, Inc.

** **

A description of ourcritical accounting policies can be found in Item 7 of our registrationstatement on Form S-4/A filed on September 22, 2005.

 

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## **Item3.  Quantitative and QualitativeDisclosures About Market Risk.**

## ** **

The following tableprovides information about our long-term debt at September 30, 2005:

 
| ** **                                              | ** ** | **Maturity  Date**  | ** ** | **Face  Amount** | ** ** | **Carrying  Value** | ** ** | **Estimated  Fair  Value** | ** ** |
|---------------------------------------------------------|------------|---------------------|------------|------------------|------------|---------------------|------------|----------------------------|------------|
| ** **                                              | ** ** | ** **          | ** ** | ** **       | ** ** | **(in thousands)**  | ** ** | ** **                 | ** ** |
| Revolving credit facility at an interest rate of  8.75% |       | December 2008  |       | $                | 15,000     |                | $          | 1,277                      |       | $ | 1,277 |   |
| 9% senior secured notes                                 |       | January 2012   |       | 125,000          |       | 125,000             |       | 130,000                    |       |
| 12 3⁄4% senior subordinated notes                    |       | January 2013   |       | 66,000           |       | 43,788              |       | 46,860                     |       |
| Notes payable, interest at 6.97%                        |       | September 2006 |       | 2,292            |       | 686                 |       | 686                        |       |
| Hypothecation Note, interest at 9.75%                   |       | April 2004     |       | 10,000           |       | 252                 |       | 252                        |       |
| Notes payable, interest at 7.0%                         |       | December 2008  |       | 574              |       | 47                  |       | 47                         |       |
| Notes payable, interest at 6.21%                        |       | 2004-2007           |       | 988              |       | 195                 |       | 195                        |       |
| Market value of interest rate swaps                     |       | September 2006 |       | 758              |       | 391                 |       | 391                        |       |
| Total                                                   |       |                |       | $                | 220,612    |                | $          | 171,636                    |       | $ | 179,708 |   |

 

We are also exposed tomarket risk in the form of fluctuations in interest rates and their potentialimpact upon our debt. Historically, this market risk is managed by utilizingderivative financial instruments in accordance with established policies andprocedures. We evaluate our exposure to market risk by monitoring interestrates in the marketplace, and do not utilize derivative financial instrumentsfor trading purposes. Our derivative financial instruments consist exclusivelyof interest rate swap agreements. Interest differentials resulting from theseagreements are recorded on an accrual basis as an adjustment to interestexpense. As of September 30, 2005, as a result of the Buyout, the interestrate swaps related to debt are not matched with any of our specific fixed-rateor variable**-**rate debt obligations.

 

The following tableprovides information about our financial instruments that are sensitive tochanges in interest rates:

 
| ** **                                  | ** ** | **As of September 30** | ** ** |
|---------------------------------------------|------------|-----------------------------|------------|
| ** **                                  | ** ** | **2005**                    | ** ** | **2006** | ** ** | **2007** | ** ** | **2008** | ** ** | **2009** | ** ** | **Thereafter** | ** ** | **Total** | ** ** |
| ** **                                  | ** ** | **(dollars in thousands)**  | ** ** |
| Long-term debt (including current portion): |       |                        |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Fixed-rate                                  |       | $                           | 887        |   | $ | 40 |   | $ | — |   | $ | — |   | $ | — |   | $ | 191,000 |   | $ | 191,927 |   |
| Average interest rate                       |       | 9.96                        | %          | 10.06 | % | 10.16 | % | 10.27 | % | 10.30 | % | 10.30 | % | 10.28 | % |
| Variable-rate                               |       | $                           | 252        |   | $ | — |   | $ | — |   | $ | 1,277 |   | $ | — |   | $ | — |   | $ | 1,529 |   |
| Average interest rate                       |       | 9.75                        | %          | — |   | — |   | 8.75 | % | — |   | — |   | 8.91 | % |
| Capital leases (including current portion): |       | $                           | 5          |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | 5 |   |
| Average interest rate                       |       | 4.67                        | %          | — |   | — |   | — |   | — |   | — |   | 4.67 | % |
| Interest rate swaps:                        |       |                        |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Notional amount                             |       | $                           | —     |   | $ | 36,400 |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | 36,400 |   |
| Average payable rate                        |       | —                      |       | 5.88 | % | — |   | — |   | — |   | — |   | 5.88 | % |
| Average receivable rate                     |       |                        |       | 4.06 | % |   |   |   |   |   |   |   |   | 4.06 | % |

 

The gaming equipmentfinancing are agreements that because of their long-term nature we imputeinterest expense for accounting purposes. Contractually these agreements carry no interest therefore we believethat there is no exposure to interest rate risk and therefore have excludedthose contracts from the presentation above.

 

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PART II – OTHER INFORMATION

 

## **Item 6.  Exhibits.**

## ** **

(a)                                  Exhibits:

 

31.1                           Certification pursuant to §302 of the Sarbanes-Oxley Act of 2002, CurtMayer

 

31.2                           Certification pursuant to §302 of the Sarbanes-Oxley Act of 2002, RobertR. Black, Sr.

 

32.1                           Certification pursuant to §906 of the Sarbanes-Oxley Act of 2002, CurtMayer

 

32.2                           Certification pursuant to §906 of the Sarbanes-Oxley Act of 2002, RobertR. Black, Sr.

 

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# **SIGNATURES**

# ** **

Pursuant to the requirements of the SecuritiesExchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned thereunto duly authorized.

 
| VIRGIN  RIVER CASINO CORPORATION |                      |
|----------------------------------|---------------------------|
|                             |                      |
| By:                              | /s/  Curt Mayer           |                                                 November 17,  2005 |
|                             | Curt  Mayer               |   |
|                             | *Chief Financial Officer* | * * |
|                             | * *                  | * * |
|                             | * *                  | * * |
| RBG,  LLC                        |                      |
|                             |                      |
| By:                              | /s/  Curt Mayer           |                                                 November 17,  2005 |
|                             | Curt  Mayer               |   |
|                             | *Chief Financial Officer* | * * |
|                             | * *                  | * * |
|                             | * *                  | * * |
| B &  BB, INC.           |                      |
|                             |                      |
| By:                              | /s/  Curt Mayer           |                                                 November 17,  2005 |
|                             | Curt  Mayer               |   |
|                             | *Chief Financial Officer* | * * |

 

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