**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

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**FORM 10-K**

** **
| **x**                                                                                                                                                                                                                                                                                                                                                                                                                                   | ** ** | **ANNUAL REPORT UNDER SECTION 13  OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934**     |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                    |       |                                                                                    |   |   |
| **For the fiscal year ended December 31, 2006**                                                                                                                                                                                                                                                                                                                                                                                         |
|                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| **o**                                                                                                                                                                                                                                                                                                                                                                                                                                   | ** ** | **TRANSITION REPORT UNDER SECTION  13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|                                                                                                                                                                                                                                                                                                                                                                                                                                    |       |                                                                                    |   |   |
| **For the transition period from                                   to                                ** |

 

**Commission file number 333-123179**

 

**BLACKGAMING, LLC**

(Exact name of registrant as specified in its charter)

 

| **Nevada**                                                     | ** ** | **20-8160036**                       |
|----------------------------------------------------------------|------------|--------------------------------------|
| (State or other jurisdiction of incorporation or organization) |       | (I.R.S. Employer Identification No.) |

 

**10777 W. Twain Ave., Las Vegas, Nevada  89135**

(Address and telephone number of principalexecutive offices) (Zip Code)

 

Registrant’s telephone number, including area code:**     (702)318-6860**

 

Securities registered pursuant to Section 12(b) of the Act:

 
| **Title of each class** | ** ** | **Name of each exchange on which registered** |
|----------------------------------------|------------|-----------------------------------------------------------------------------|
| None.                                  |       |                                                                        |

 

Securities registered pursuant to Section 12(g) of theAct:

 

**None.**

(Title of each class)

 

 

(Title of each class)

 
| Indicate by check mark if the registrant is a well-known seasoned  issuer, as defined in Rule 405 of the Securities Act.                                                                                                                                                                                                                                                                                                                                    | Yes o  No x     |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                        |            |
| Indicate by check mark if the registrant is not required to file  reports pursuant to Section 13 or Section 15(d) of the Act.                                                                                                                                                                                                                                                                                                                               | Yes o  No x     |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                        |            |
| Indicate by check mark whether the registrant (1) has filed all  reports required to be filed by Section 13 or 15(d) of the Securities  Exchange Act of 1934 during the preceding 12 months (or for such shorter  period that the registrant was required to file such reports),                                                                                                                                                                            |
| and (2) has been subject to such filing requirements for the past 90  days.                                                                                                                                                                                                                                                                                                                                                                                 | Yes x  No o     |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| Indicate by check mark if disclosure of delinquent filers pursuant to  Item 405 of Regulation S-K (§229.405 of this chapter) is not contained  herein, and will not be contained, to the best of registrant’s knowledge, in  definitive proxy or information statements                                                                                                                                                                           |
| incorporated by reference in Part III of this Form 10-K or any  amendment to this Form 10-K.                                                                                                                                                                                                                                                                                                                                                                | Yes o  No x     |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| Indicate by check mark whether the registrant is a large accelerated  filer, an accelerated filer, or a non-accelerated filer. See definition of  “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange  Act. (Check one):  Large accelerated filer o          Accelerated  filer o          Non-Accelerated  filer x |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| Indicate by check mark whether the registrant is a shell company (as  defined in Rule 12b-2 of the Act).                                                                                                                                                                                                                                                                                                                                                    | Yes o  No x     |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                        |            |
| State the aggregate market value of the voting and non-voting common  equity held by non-affiliates computed by reference to the price at which the  common equity was last sold, or the average bid and asked price of such  common equity, as of the last business day                                                                                                                                                                                    |
| of the registrant’s most recently completed second fiscal quarter.                                                                                                                                                                                                                                                                                                                                                                                     | Not Applicable. |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                        |            |
| **DOCUMENTS  INCORPORATED BY REFERENCE**                                                                                                                                                                                                                                                                                                                                                                                                                    |
| Not applicable.                                                                                                                                                                                                                                                                                                                                                                                                                                             |            |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                 |  |

 

 

 

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**TABLE OF CONTENTS**

 
| ** **   | ** ** | ** **                                                                                                             | ** ** | **Page**   |
|--------------|------------|------------------------------------------------------------------------------------------------------------------------|------------|------------|
| ** **   | ** ** | ** **                                                                                                             | ** ** | ** ** |
| **PART I**   | ** ** | ** **                                                                                                             | ** ** | **3**      |
| ITEM 1.      |       | BUSINESS                                                                                                               |       | 3          |
| Item 1A.     |       | RISK FACTORS                                                                                                           |       | 13         |
| Item 1B.     |       | UNRESOLVED  STAFF COMMENTS                                                                                             |       | 28         |
| ITEM 2.      |       | PROPERTIES                                                                                                             |       | 29         |
| ITEM 3.      |       | LEGAL PROCEEDINGS                                                                                                      |       | 29         |
| ITEM 4.      |       | SUBMISSION  OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                                   |       | 29         |
| **PART II**  | ** ** | ** **                                                                                                             | ** ** | **30**     |
| ITEM 5.      |       | MARKET FOR  REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER  PURCHASES OF EQUITY SECURITIES |       | 30         |
| ITEM 6.      |       | SELECTED  FINANCIAL DATA                                                                                               |       | 30         |
| ITEM 7.      |       | MANAGEMENT’S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION                             |       | 31         |
| ITEM 7A.     |       | QUANTITATIVE  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                            |       | 40         |
| ITEM 8.      |       | FINANCIAL  STATEMENTS AND SUPPLEMENTARY DATA                                                                           |       | 42         |
|         |       | INDEX TO FINANCIAL  STATEMENTS                                                                                         |       | 42         |
| ITEM 9.      |       | CHANGES IN  AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                                  |       | 73         |
| Item 9A.     |       | CONTROLS AND  PROCEDURES                                                                                               |       | 73         |
| ITEM 9B.     |       | OTHER INFORMATION                                                                                                      |       | 74         |
| **PART III** | ** ** | ** **                                                                                                             | ** ** | **75**     |
| ITEM 10.     |       | DIRECTORS  AND EXECUTIVE OFFICERS OF THE REGISTRANT                                                                    |       | 75         |
| ITEM 11.     |       | EXECUTIVE  COMPENSATION                                                                                                |       | 76         |
| ITEM 12.     |       | SECURITY  OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                                                        |       | 80         |
| ITEM 13.     |       | CERTAIN  RELATIONSHIPS AND RELATED TRANSACTIONS                                                                        |       | 80         |
| ITEM 14.     |       | PRINCIPAL  ACCOUNTING FEES AND SERVICES                                                                                |       | 82         |
| **PART IV**  | ** ** | ** **                                                                                                             | ** ** | **83**     |
| ITEM 15.     |       | EXHIBITS AND  FINANCIAL STATEMENT SCHEDULES                                                                            |       | 83         |
| SIGNATURES   |       | 85                                                                                                                     |
| SIGNATURES   |       | 86                                                                                                                     |
| SIGNATURES   |       | 87                                                                                                                     |
| SIGNATURES   |       | 88                                                                                                                     |

 

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| EXHIBIT  Index |   | 89 |
|----------------|--------|----|

 

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# ** **

# **PART I**

# ** **

## **ITEM 1.**                             BUSINESS.

## ** **

Unlessthe context indicates otherwise, all references to the “Company”, “Black Gaming”,“we”, “our” and “us” refer to Black Gaming, LLC and its direct and indirectwholly owned subsidiaries, Virgin River Casino Corporation, RBG, LLC, B & BB, Inc., Casablanca Resorts, LLC, Oasis Interval Ownership, LLC, Oasis IntervalManagement, LLC, Oasis Recreational Properties, Inc. and R. Black, Inc.

 

**Forward-looking Statements**

 

Certaininformation included herein contains statements that may be consideredforward-looking, such as statements relating to projections of future resultsof operations or financial condition, expectations for our casinos, andexpectations of the continued availability of capital resources. Anyforward-looking statement made by us necessarily is based upon a number ofestimates and assumptions that, while considered reasonable by us, isinherently subject to significant business, economic and competitiveuncertainties and contingencies, many of which are beyond our control, and aresubject to change. Actual results of our operations may vary materially fromany forward-looking statement made by us or on our behalf. Forward-lookingstatements should not be regarded as representation by us or any other personthat the forward-looking statements will be achieved. Readers are cautioned notto place undue reliance on any forward-looking statements, which speak only asof the date thereof. We undertake no obligation to publicly release anyrevisions to such forward-looking statements to reflect events or circumstancesafter the date hereof. Some of the contingencies and uncertainties to which anyforward-looking statement contained herein are subject to include, but are notlimited to, those set forth below in the heading “Item 1A. Risk Factors.”

 

**The Company**

 

BlackGaming, LLC, through direct and indirect wholly owned subsidiaries, VirginRiver Casino Corporation, RBG, LLC, B & B B, Inc., Casablanca Resorts, LLC,Oasis Interval Ownership, LLC, Oasis Interval Management, LLC, OasisRecreational Properties, Inc. and R. Black, Inc., owns and operates theCasaBlanca Hotel & Casino, or the CasaBlanca, the Oasis Hotel & Casino,or the Oasis, and the Virgin River Hotel & Casino, or the Virgin River, inMesquite, Nevada, which is located approximately 80 miles north of Las Vegas.In addition, we own the Virgin River Convention Center (formally known as theMesquite Star Hotel and Casino), also in Mesquite, Nevada, which is currentlyused as a special events facility and for overflow hotel traffic from our otherproperties. The websites for the CasaBlanca, the Oasis and the Virgin Riverproperties are www.cassablancaresort.com, www.oasisresort.com andwww.virginriver.com, respectively. We do not have a website for the VirginRiver Convention Center.

 

Weown three of the four casino hotels operating in Mesquite maintaining a gamingmarket share of 68%. Our properties are well established and serve local,regional and national audiences. As of December 31, 2006, our propertiescollectively feature approximately 2,200 slot machines, 72 table games, 2,200hotel rooms and 85 timeshare units and offer extensive amenities includingchampionship golf courses, full service spas, a bowling center, a movietheater, both gourmet and casual restaurants, and banquet and conferencefacilities.

 

**Recent Reorganization**

 

OnDecember 31, 2006, we announced the completion of a holding companyreorganization whereby each of Virgin River Casino Corporation, RBG, LLC and B& B B, Inc. became direct or indirect wholly owned subsidiaries of BlackGaming, LLC. Black Gaming, LLC has no other operations 

 

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orassets other than the ownership interests in Virgin River Casino Corporation,RBG, LLC and B & B B, Inc. The reorganization was consummated in part tostreamline our organizational structure and to allow for consolidated financialreporting. The transaction was treated as a reorganization of entities undercommon control and the purchase of minority interest treated as a purchase foraccounting purposes. Accordingly, all financial disclosures and accountingpresentations are prepared assuming the reorganization occurred on January 1,2004, with the exception of the purchase of the minority holder, which was accountedfor on the date the purchase closed which was December 31, 2006. Thereorganization had no significant effect on our management or operations.

 

Thefollowing chart illustrates our corporate structure.

 

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(1)                                  Owned as trustee of the Robert R. Black , Sr.Gaming Properties Trust u/a/d May 24, 2004.

 

(2)                                  Black Gaming, LLC, R. Black, Inc., CasablancaResorts, LLC, Oasis Interval Ownership, LLC, Oasis Interval Management, LLC andOasis Recreational Properties, Inc. are guarantors of our $125,000,000 inprincipal amount of 9.00% Senior Secured Notes due 2012, or the Senior SecuredNotes, and our $66,000,000 in principal amount at maturity of 12.75% SeniorSubordinated Notes due 2013, or the Senior Subordinated Notes, and 

 

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collectivelywith the Senior Secured Notes referred to generally as the notes, all of whichwere issued by Virgin River Casino Corporation, RBG, LLC and B & B B, Inc.

 

(3)                                 Virgin River Casino Corporation owns theVirgin River real property as well as the Virgin River Convention Center.

 

(4)                                  B & B B, Inc. owns theVirgin River personal property.

 

(5)                                  RBG,LLC owns the CasaBlanca.

 

(6)                                  Casablanca Resorts, LLC owns the Oasis.

 

**Casino Properties**

 

*CasaBlanca Hotel & Casino.*The CasaBlanca is a full serviceentertainment and resort destination located off of exit 120 on Interstate 15.The CasaBlanca targets middle market guests looking for a high-quality gamingexperience in a full service resort environment and a value alternative to LasVegas. The CasaBlanca offers approximately 480 tower rooms (includes 18 suiteswith Jacuzzi tubs) and 22 timeshare units. The approximately 27,000 square footcasino offers 730 video poker and slot machines, 28 table games, a full servicerace and sports book, lounge entertainment and dancing. The CasaBlanca offersvarious resort and entertainment amenities, including championship golf, a fullservice spa, tennis courts, a lagoon swimming pool with a waterfall and slide,a hot tub, a sand volleyball court and an arcade. In addition, the CasaBlancaoffers a 320-seat buffet restaurant, a 180-seat 24-hour café, a 136-seat finedining restaurant, an ice cream parlor, a Starbucks®, a gift shop and 10,000square foot banquet and conference facilities. The CasaBlanca is situated on anapproximately 43-acre site, containing a parking lot with a capacity forapproximately 1,940 cars as well as a 45-unit full service R.V. park.Approximately one mile from the casino hotel, situated on a 221-acre site, isthe CasaBlanca Golf Club featuring an 18-hole, 7,011 yard championship coursedesigned by Cal Olson. We lease the land on which the golf club is locatedpursuant to a 99-year lease that expires in June 2094. We also ownapproximately 34 acres of unimproved land near the golf club. For the twelvemonths ended December 31, 2006, the average daily room rate was approximately$78 and the overall occupancy rate was 89%.

 

*Oasis Hotel & Casino.*The Oasis is a full service entertainment andresort destination located off of exit 120 on Interstate 15 across MesquiteBoulevard from the CasaBlanca. The Oasis also targets middle market guestslooking for value alternatives to Las Vegas and a high quality gamingexperience in a full service resort environment. The Oasis offers approximately950 rooms (includes 49 suites) and 63 timeshare units. The approximately 34,700square foot casino offers over 725 video poker and slot machines, 33 tablegames, a full service sports book, and a live poker room. The Oasis offersvarious resort and entertainment amenities, including golf, a full service spa,swimming pools and hot tubs, tennis courts, arcade, go-kart track, miniaturegolf range, lounge entertainment and a nightclub. In addition, the Oasis offersa 260-seat buffet restaurant, a 125-seat fine dining restaurant, a Starbucks®,a gift shop and 5,000 square foot banquet and conference facilities. The Oasisis situated on an approximately 26-acre site, containing a parking lot with acapacity for approximately 1,800 cars as well as an 87 unit full-service R.V.park. Approximately four miles from the casino hotel is the Palms Golf Coursefeaturing an 18-hole, 7,008 yard championship course. The Palms Golf Coursestraddles the Nevada/Arizona border and is located on a 256-acre site, of which180 acres is leased from the State of Arizona pursuant to a 10-year lease thatexpires in May 2008. We are currently marketing our Palms Golf Course and OasisGun Club property for sale. See “Item 8 – Financial Statements andSupplementary Data – Black Gaming, LLC Consolidated Financial Statements,Footnote 3.” For the twelve months ended December 31, 2006, the averagedaily room rate was approximately $47 and the 

 

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occupancyrate was 76%. In January 2006, Oasis Interval Ownership, LLC entered into anagreement with Global Exchange Development Corp. to sell substantially all ofthe unsold time share intervals at the Oasis Hotel and Casino. The sale isexpected to close in three separate closings each involving approximatelyone-third of the unsold time share intervals at the Oasis Hotel and Casino.Each close is expected to occur within six months of the preceding close. Thefirst and second close occurred in January and June 2006, respectively. See “Item8 – Financial Statements and Supplementary Data – Black Gaming, LLCConsolidated Financial Statements, Footnote 11.”

 

*Virgin River Hotel & Casino.*The Virgin River is located off of exit 122on Interstate 15 across the highway from the Virgin River Convention Center.The Virgin River mostly attracts local customers and drive-in middle marketcustomers. The Virgin River offers approximately 710 rooms (includes twosuites) and a 36,000 square foot casino with 740 video poker and slot machines,18 table games, a full service race and sports book, a 350-seat bingo parlor,live keno and a poker room. The Virgin River offers various resort andentertainment amenities, including swimming pools and hot tubs, a 24-lanestate-of-the art bowling center, four first-run movie theaters, an arcade and alounge for entertainment and dancing. In addition, the Virgin River offers a182-seat 24-hour café, a 178-seat buffet restaurant, a Starbucks® and a giftshop. The Virgin River is situated on an approximately 32-acre site, containinga parking lot with a capacity for approximately 1,650 cars as well as a 47 unitfull-service R.V. park. We also own approximately 31 acres of unimproved landadjacent to the Virgin River. For the twelve months ended December 30, 2006,the average daily room rate was approximately $47 and the occupancy rate was81%.

 

*Virgin River Convention Center.*The Virgin River Convention Center issituated on an approximately 14-acre site located off of the Interstate 15 andEast Mesquite Boulevard interchange. We acquired the Virgin River ConventionCenter out of bankruptcy in November 2000. The Virgin River ConventionCenter has 12,000 square feet of potential gaming space and 210 hotel rooms. Wecurrently use the Virgin River Convention Center as a special event facilityand for overflow hotel traffic from our other properties. At acquisition, theVirgin River Convention Center had a gourmet restaurant, a cocktail lounge witha performance stage, one coffee shop, an arcade and a gift shop, none of whichis currently in operation. Although the Virgin River Convention Center has12,000 square feet of potential gaming space, we do not hold a gaming licenseto operate a casino at the Virgin River Convention Center. We will apply for agaming license in the future if we determine to operate a casino at the VirginRiver Convention Center.

 

**Competition**

 

*General.*We face competition in the market in which our gaming facilities arelocated as well as in or near any geographic area from which we attract orexpect to attract a significant number of our customers. As a result, ourcasino properties face direct competition from all other casinos and hotels inthe Las Vegas, Nevada region and the Wendover, Nevada region as well as theCalifornia gaming market.

 

*Mesquite, Nevada.*There are four hotel-casinos in Mesquite,Nevada, three of which are owned by us. As of December 2006 there wereapproximately 2,700 hotel rooms in Mesquite, Nevada. Approximately 2,450 of theexisting hotel rooms are associated with the four hotel-casinos. Through ourthree properties, we own approximately 2,200 of those rooms. Also, within thefour hotel-casinos there are eleven dining options, nine of those diningoptions exist at one of our three properties. We also compete with freestanding dining facilities in Mesquite, Nevada as a restaurant option. The onlyother licensed resort gaming facility in Mesquite is the Eureka Casino Hotel,or the Eureka. We believe that the hotel casinos are sufficiently distinct anddiversified such that each property caters to a different type of clientele.For instance, the CasaBlanca, which contains a spacious casino floor and atower hotel, appeals to the customer who seeks to enjoy a mega resort typeexperience that is away from the hustle and bustle of Las

 

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Vegas.On the other hand, the Virgin River caters to the local Mesquite customer whois more likely to be attracted by the intimate gaming atmosphere and amenitiessuch as a bowling alley and movie theaters. With 210 rooms and 2 diningfacilities, we believe the Eureka targets the local Mesquite customer andcompetes directly with the Virgin River and to a lesser extent the Oasis. Thereis no limit on the number of gaming licenses that may be granted in Mesquite orin some of the other gaming markets in which we compete. In particular, otherthan zoning limitations and licensing requirements of the City of Mesquite,there are no restrictions on additional casinos being constructed and opened inMesquite, including by competitors that may have greater financial and otherresources than we do.

 

*Las Vegas, Nevada.*Many of our competitors in the Las Vegasmarket have significantly greater name recognition and financial, marketing andother resources than we do. However, our focus on providing value-orientedamenities with a quality casino experience attracts many of the Las Vegaslocals who want to enjoy a weekend getaway.

 

*West Wendover, Nevada.*West Wendover, Nevada is located on theeastern border of Nevada in Elko County. The city is contiguous with Wendover,Utah and is approximately 120 miles west of Salt Lake City, Utah, less thanhalf the distance between Mesquite and Salt Lake City, Utah. According to theNevada State Gaming Control Board, the West Wendover casinos collectivelycontain approximately 3,900 slot machines and more than 190 games and tables asof December 31, 2006. We compete with these casinos for gaming customerslocated in Salt Lake City, Utah and the outlying areas. Nonetheless, we believeour more favorable climate and more attractive amenities give us a competitiveadvantage. In West Wendover, during October through January, the average numberof days with precipitation ranges from five to nine days with temperaturesranging from 27 to 51 degrees Fahrenheit. Mesquite, on the other hand, has onaverage two to three days of precipitation with temperatures ranging from 44 toapproximately 65 degrees Fahrenheit during the same months.

 

*California Gaming Market.*Voters in California approved an amendment tothe California constitution in 2000 that gave Native American tribes inCalifornia the right to offer a limited number of slots machines and a range ofhouse-banked card games. A number of Native American tribes have already signedand others have begun signing gaming compacts with the State of California. Asof December 28, 2006, California has signed 66 compacts with Indian Tribes andcasino-style gaming is legal on those tribal lands. According to the NationalIndian Gaming Commission, there currently are approximately 57 operating tribalcasinos in California. In addition, several Native American tribes inCalifornia have reached agreements with the State of California that allow foran increased number of gaming machines within the facilities operated by suchtribes in exchange for a revenue-based payment to the state. The competitiveimpact on our gaming establishments from the continued growth of gaming inCalifornia cannot be definitively determined but, depending on the nature,extent and location of the growth, the impact could be material.

 

Manyof our competitors have significantly greater name recognition and financial,marketing and other resources than we do. We also compete, to some extent, withother forms of gaming on both a local and national level, includingstate-sponsored lotteries, Internet gaming, on- and off-track wagering and cardparlors. The recent and continued expansion of legalized casino gaming to newjurisdictions throughout the United States has increased competition faced byus and will continue to do so in the future. Additionally, if gaming werelegalized or expanded in jurisdictions near our properties or any geographicarea from which we expect to attract a significant number of our customers, wecould face additional competition which could have a significant adverse impacton our business, financial condition and results of operations. There can be noassurance that we will be able to continue to compete successfully in ourexisting markets or that we will be able to compete successfully against anysuch future competition.

 

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**Employees**

 

Asof December 31, 2006, we employed approximately 2,300 employees. None of our employeesare covered by a collective bargaining agreement. We believe that ourrelationship with our employees is good.

 

**Environmental Matters**

 

Weare subject to various federal, state and local environmental laws, ordinancesand regulations, including those governing discharges to air and water, thegeneration, handling, management and disposal of petroleum products andhazardous substances, and the health and safety of our employees. Permits maybe required for our operations and these permits are subject to renewal,modification and, in some cases, revocation. In addition, as a property ownerand operator, we may be liable for the costs of investigating and remediatinghazardous substances or petroleum products on, under, or in our property,without regard to whether we knew of, or caused, the presence of thecontaminants, and regardless of whether the practices that resulted in thecontamination were legal at the time they occurred. The presence of, or failureto remediate properly, the substances may adversely affect our ability to sellor rent our property or to borrow funds using it as collateral. Additionally,we may be subject to claims by third parties based on damages and costsresulting from environmental contamination emanating from our property.

 

Wehave reviewed environmental assessments, and limited soil and groundwatertesting, relating to our properties. As a result, we have become aware thatthere is contamination present on some of our properties apparently due to pastoperations, which included a truck stop and a gas station. In particular,groundwater contamination at our Oasis property (which appears to have migratedonto our CasaBlanca property) is the subject of investigation and cleanupactivities being conducted by the prior owners of the Oasis. The water supplyfor the Oasis property and the CasaBlanca properties does not come from groundwater that has been contaminated. Although we believe that the prior owners areresponsible for such matters under an indemnity agreement we negotiated at thetime we purchased the Oasis, we cannot give assurance that we will not incurcosts related to this matter. Further, we could be held strictly liable for theenvironmental clean up of the contaminated properties.

 

Wedo not anticipate any material adverse effect on our earnings or competitiveposition relating to environmental matters, but it is possible that futuredevelopments could lead to material environmental compliance costs or otherliabilities for us and that these costs could have a material adverse effect onour business and financial condition.

 

**Regulation and Licensing**

 

Theownership and operation of casino gaming facilities in Nevada are subject tothe Nevada Gaming Control Act and the regulations promulgated thereunder, orthe Nevada Act, and various local regulations. In addition, our gamingoperations are subject to the licensing and regulatory control of the NevadaGaming Commission, the Nevada State Gaming Control Board, the Clark CountyLiquor and Gaming Licensing Board, or the City of Mesquite and other localauthorities, or collectively, the Nevada Gaming Authorities.

 

Thelaws, regulations and supervisory procedures of the Nevada Gaming Authoritiesare based upon declarations of public policy which are concerned with, amongother things:

 

•                  the prevention of unsavory or unsuitablepersons from having a direct or indirect involvement with gaming at any time orin any capacity;

 

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•                  the establishment and maintenance ofresponsible accounting practices and procedures;

 

•                  the maintenance of effective controls overthe financial practices of licensees, including the establishment of minimumprocedures for internal fiscal affairs and the safeguarding of assets andrevenues, providing reliable record keeping and requiring the filing ofperiodic reports with the Nevada Gaming Authorities;

 

•                  the prevention of cheating and fraudulentpractices; and

 

•                  providing a source of state and localrevenues through taxation and licensing fees.

 

Changesin these laws, regulations and procedures could have an adverse effect on ourbusiness, financial condition and results of operations.

 

Corporationsand other entities that operate casinos in Nevada are required to be licensedby the Nevada Gaming Authorities. A gaming license for such activities requiresthe periodic payment of fees and taxes and is not transferable. In December2004, Virgin River Casino Corporation, RBG, LLC and B & B B, Inc., and inDecember 2006, Black Gaming, LLC, became registered by the Nevada GamingCommission as a publicly traded corporation, or registered corporation. As aregistered corporation, we are required to periodically submit detailedfinancial and operating reports to the Nevada Gaming Commission and furnish anyother information that the Nevada Gaming Commission may require.

 

TheNevada Gaming Authorities may investigate any individual who has a materialrelationship to, or material involvement with us in order to determine whethersuch individual is suitable or should be licensed as a business associate of agaming licensee. Our officers, directors and certain key employees must fileapplications with the Nevada Gaming Authorities and are required to be licensedby the Nevada Gaming Authorities. The Nevada Gaming Authorities may deny anapplication for licensing for any cause that they deem reasonable. A finding ofsuitability is comparable to licensing, and both require submission of detailedpersonal and financial information followed by a thorough investigation. Changesin licensed positions must be reported to the Nevada Gaming Authorities and, inaddition to their authority to deny an application for a finding of suitabilityor licensure, the Nevada Gaming Authorities have jurisdiction to disapprove achange in a corporate position.

 

Ifthe Nevada Gaming Authorities were to find an officer, director or key employeeunsuitable for licensing or unsuitable to continue having a relationship withus, we would have to sever all relationships with that person. In addition, theNevada Gaming Commission may require us to terminate the employment of anyperson who refuses to file appropriate applications. Determinations ofsuitability or of questions pertaining to licensing are not subject to judicialreview in Nevada.

 

Weare required to submit detailed financial and operating reports to the NevadaGaming Commission. Substantially all material loans, leases, sales ofsecurities and similar financing transactions by us must be reported to theNevada Gaming Commission.

 

Ifit were determined that we violated the Nevada gaming laws, our gaming licensesand registrations with the Nevada Gaming Commission could be limited,conditioned, suspended or revoked, subject to compliance with certain statutoryand regulatory procedures. In addition, we and the persons involved could besubject to substantial fines for each separate violation of the Nevada laws atthe discretion of the Nevada Gaming Commission. Further, the Nevada GamingCommission could appoint a supervisor to operate our gaming properties and,under certain circumstances, earnings generated during the supervisor’sappointment (except for the reasonable rental value of our gaming properties)could be forfeited to the State of Nevada. Limitation, conditioning orsuspension of any gaming license or the 

 

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appointmentof a supervisor could (and revocation of any gaming license would) materiallyadversely affect our operations.

 

Asa registered corporation, any beneficial holder of our voting securities,regardless of the number of shares owned, may be required to file anapplication, be investigated, and have his suitability as a beneficial holderof our voting securities determined if the Nevada Gaming Commission has reasonto believe that such ownership would otherwise be inconsistent with thedeclared policies of the State of Nevada. No transfer or issuance of our votingsecurities can be made without the prior approval of the Nevada GamingAuthorities. The applicant must pay all costs of investigation incurred by theNevada Gaming Authorities in conducting such investigation.

 

Althoughwe do not intend to register or sell any equity securities, Nevada law requiresany person who acquires more than 5% of a registered corporation’s votingsecurities to report the acquisition to the Nevada Gaming Commission. Nevadalaw requires that beneficial owners of more than 10% of a registeredcorporation’s voting securities apply to the Nevada Gaming Commission for afinding of suitability within 30 days after the Chairman of the NevadaState Gaming Control Board mails the written notice requiring the filing for afinding of suitability. Under certain circumstances, an “institutionalinvestor,” as defined in the regulations of the Nevada Gaming Commission, whichacquires more than 10%, but not more than 15%, of our voting securities mayapply to the Nevada Gaming Commission for a waiver of such finding ofsuitability if that institutional investor holds the voting securities forinvestment purposes only. An institutional investor will not be deemed to holdvoting securities for investment purposes unless the voting securities wereacquired and are held in the ordinary course of business as an institutionalinvestor and not for the purpose of causing, directly or indirectly, theelection of a majority of the members of our board of directors, any change inour corporate charter, bylaws, management, policies or operations, or any ofour gaming affiliates, or any other action which the Nevada Gaming Commissionfinds to be inconsistent with holding our voting securities for investmentpurposes only. Activities which are not deemed to be inconsistent with holdingvoting securities for investment purposes only include:

 

•                  voting on all matters voted on by stockholders;

 

•                  making financial and other inquiries ofmanagement of the type normally made by securities analysts for informationalpurposes and not to cause a change in its management, policies or operations;and

 

•                  other activities as the Nevada Gaming Commissionmay determine to be consistent with such investment intent.

 

Ifthe beneficial holder of voting securities who must be found suitable is acorporation, partnership or trust, it must submit detailed business andfinancial information including a list of beneficial owners. The applicant isrequired to pay all costs of investigation.

 

Anyperson who fails or refuses to apply for a finding of suitability or a licensewithin 30 days after being ordered to do so by the Nevada GamingCommission or the Chairman of the Nevada State Gaming Control Board, may befound unsuitable. The same restrictions apply to a record owner if the recordowner, after request, fails to identify the beneficial owner. Any stockholderfound unsuitable and who holds, directly or indirectly, any beneficialownership of the common stock of a registered corporation beyond the period oftime as may be prescribed by the Nevada Gaming Commission may be guilty of acriminal offense. We may become subject to disciplinary action if, after receiptof notice that a person is unsuitable to be a stockholder or to have any otherrelationship with us, we:

 

•                  pay that person any dividend or interest uponvoting securities;

 

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•                  allow that person to exercise, directly orindirectly, any voting right conferred through securities held by that person;

 

•                  pay remuneration in any form to that personfor services rendered or otherwise; or

 

•                  fail to pursue all lawful efforts to requirethe unsuitable person to relinquish his voting securities for cash at fairmarket value.

 

Additionally,the Clark County Liquor and Gaming Licensing Board has taken the position thatit has the authority to approve all persons owning or controlling the stock ofany corporation controlling a gaming license.

 

Wemay be required to disclose to the Nevada State Gaming Control Board and theNevada Gaming Commission the identities of all holders of the notes. The NevadaGaming Commission may, in its discretion, require the holder of any debtsecurity of a registered corporation to file applications, be investigated andbe found suitable to own the debt security of a registered corporation. If theNevada Gaming Commission determines that a person is unsuitable to own a debtsecurity, then pursuant to Nevada law, the registered corporation can besanctioned, including the loss of its approvals, if without the prior approvalof the Nevada Gaming Commission, it:

 

•                  pays to the unsuitable person any dividend,interest, or any distribution whatsoever;

 

•                  recognizes any voting right by the unsuitableperson in connection with debt securities;

 

•                  pays the unsuitable person remuneration inany form; or

 

•                  makes any payment to the unsuitable person byway of principal, redemption, conversion, exchange, liquidation or similartransaction.

 

Weare required to maintain a current ledger in Nevada, which may be examined bythe Nevada Gaming Authorities at any time. If any securities are held in trustby an agent or by a nominee, the record holder may be required to disclose theidentity of the beneficial holder to the Nevada Gaming Authorities. A failureto make such disclosure may be grounds for finding the record holderunsuitable. We are also required to render maximum assistance in determining theidentity of the beneficial owner. The Nevada Gaming Commission has the power torequire our securities to bear a legend indicating that the securities aresubject to the Nevada Act. However, to date, the Nevada Gaming Commission hasnot imposed such a requirement on us.

 

Wemay not make a public offering of securities without the prior approval of theNevada Gaming Commission if the securities or proceeds from the securities areintended to be used to construct, acquire or finance gaming facilities in Nevada,or to retire or extend obligations incurred for the purposes of constructing,acquiring or financing gaming facilities. Furthermore, any approval, ifgranted, does not constitute a finding, recommendation or approval by theNevada Gaming Commission or the Nevada State Gaming Control Board as to theaccuracy or adequacy of the prospectus or the investment merits of thesecurities offered. Any representation to the contrary is unlawful.

 

Changesin our control through merger, consolidation, stock or asset acquisitions,management or consulting agreements, or any act or conduct by a person wherebythat person obtains control (including foreclosure on the pledged shares), maynot occur without the prior approval of the Nevada Gaming Commission. Entitiesseeking to acquire control or ownership of a registered corporation mustsatisfy the Nevada State Gaming Control Board and Nevada Gaming Commission in avariety of stringent standards prior to assuming control of such registeredcorporation. The Nevada Gaming Commission may also require the stockholders,officers, directors and other persons having a material relationship or 

 

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involvementwith the entity proposing to acquire control, to be investigated and licensedas part of the approval process relating to the transaction.

 

Licensefees and taxes, computed in various ways depending on the type of gaming oractivity involved, are payable to the State of Nevada and to the counties andcities in which the Nevada licensee’s respective operations are conducted.Depending upon the particular fee or tax involved, these fees and taxes arepayable either monthly, quarterly or annually and are based upon either:

 

•                  a percentage of the gross revenues received;

 

•                  the number of gaming devices operated; or

 

•                  the number of table games operated.

 

Anyperson who is licensed, required to be licensed, registered, required to beregistered, or is under common control with such persons, or Licensees, and whois or who proposes to become involved in a gaming venture outside of Nevada, isrequired to deposit with the Nevada State Gaming Control Board, and thereaftermaintain, a revolving fund in the amount of $10,000 to pay the expenses ofinvestigation by the Nevada State Gaming Control Board of the Licensees’participation in foreign gaming. The revolving fund is subject to increase ordecrease in the discretion of the Nevada Gaming Commission. Thereafter,Licensees are also required to comply with certain reporting requirements imposedby the Nevada gaming laws. Licensees are also subject to disciplinary action bythe Nevada Gaming Commission if they knowingly violate any laws of the foreignjurisdiction pertaining to a foreign gaming operation, fail to conduct theforeign gaming operation in accordance with the standards of honesty andintegrity required of Nevada gaming operations, engage in activities or enterinto associations that are harmful to the State of Nevada or its ability tocollect gaming taxes and fees, or employ, contract with or associate with aperson in the foreign operation who has been denied a license or a finding ofsuitability in Nevada on the ground of personal unsuitability.

 

**Treasury Department Regulations**

 

TheInternal Revenue Code and Treasury Regulations require operators of casinoslocated in the United States to file information returns for United Statescitizens, including names and addresses of winners, for keno and slot machinewinnings in excess of prescribed amounts and table game winnings in which thepayout is a certain amount greater than the wager. The Internal Revenue Codeand Treasury Regulations also require operators to withhold taxes on some keno,bingo, and slot machine winnings of nonresident aliens. We are unable topredict the extent to which these requirements, if extended, might impede orotherwise adversely affect operations of, and/or income from, the other games.

 

Regulationsadopted by the Financial Crimes Enforcement Network, or FinCEN, of the TreasuryDepartment and the gaming regulatory authorities in some of the domesticjurisdictions in which we operate casinos, require the reporting of currencytransactions in excess of $10,000 occurring within a gaming day, includingidentification of the patron by name and social security number. This reportingobligation began in May 1985 and may have resulted in the loss of gamingrevenues to jurisdictions outside the United States, which are exempt from theambit of these regulations. In 2002 FinCEN implemented the suspicious activityreporting rule. This new reporting obligation requires casinos to reportsuspicious monetary transactions when the casino knows, suspects, or has reasonto suspect that the transaction involves funds derived from illegal activity oris otherwise intended to facilitate illegal activity. The new reportingobligations were effective in March 2003.

 

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**Potential Changes in Tax and Regulatory Requirements**

 

Inthe past, federal and state legislators and officials have proposed changes intax law, or in the administration of the laws, affecting the gaming industry.Regulatory commissions and state legislatures sometimes consider limitations onthe expansion of gaming in jurisdictions where we operate and other changes in gaminglaws and regulations. Proposals at the national level have included a federalgaming tax and limitations on the federal income tax deductibility of the costof furnishing complimentary promotional items to customers, as well as variousmeasures which would require withholding on amounts won by customers or onnegotiated discounts provided to customers on amounts owed to gaming companies.It is not possible to determine with certainty the likelihood of possiblechanges in tax or other laws or in the administration of the laws. The changes,if adopted, could have a material adverse effect on our financial results.

 

**Compliance with Other Laws and Regulations**

 

Inaddition to the regulations described above, our operations are also subject toextensive state and local laws, regulations and ordinances that apply tonon-gaming businesses generally, and, on a periodic basis, we must obtainvarious other licenses and permits, including those required to sell alcoholicbeverages. We have not incurred, and do not expect to incur, materialexpenditures with respect to these laws and regulations. There can be noassurances, however, that we will not incur material liability under these lawsand regulations in the future. See also “Item 1A. Risk Factors—Risks Related toOur Business—Governmental Regulation,” “—Environmental Matters” and “—FactorsBeyond Our Control.”

 

## **ITEM 1A.               RISKFACTORS.**

## ** **

Ifany of the following risks actually occurs, our business, financial conditionand/or operating results could be materially adversely affected.

 

**RisksRelated to Our Business**

 

**Geographic Concentration of Properties—*We are subject to greater risks than a geographicallydiversified gaming company.***

 

Allof our properties are located in Mesquite, Nevada. Therefore, the impact ofmany economic and other business factors in Mesquite, and Nevada in general, onour properties are more significant to us than it would be to a geographicallydiversified gaming company, and we are subject to more significant fluctuationsin our operating results than a geographically diversified gaming company wouldbe due to factors such as:

 

•                  a downturn in local or regional economicconditions;

 

•                  an increase in competition in the surroundingarea;

 

•                  inaccessibility to our properties due to roadconstruction or closure of Interstate 15; and

 

•                  natural and other disasters in thesurrounding area, including severe weather, flooding, fire, and other casualtylosses.

 

Anyof the foregoing factors could limit or result in a decrease in the number ofcustomers at our properties or a decrease in the amount that customers arewilling to wager. Although we maintain insurance policies, which may covercertain casualties, insurance proceeds may not adequately 

 

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compensateus for all economic consequences of any such event. If our properties are notable to generate sufficient cash flow, we may not be able to meet our paymentobligations under the notes and our other indebtedness.

 

**Competition—*We facesubstantial competition in the gaming industry.***

 

Thereis substantial competition among companies in the gaming industry, whichincludes land-based casinos, dockside casinos, riverboat casinos, casinoslocated on Native American land and other forms of legalized gaming. If othercasinos operate more successfully, if existing properties are enhanced orexpanded, or if additional hotels and casinos are established in and around thelocations where we conduct business, we may lose market share. We also compete,to some extent, with other forms of gaming on both a local and national level,including state-sponsored lotteries, Internet gaming, on- and off-trackwagering and card parlors. In particular, the legalization of gaming or theexpansion of legalized gaming in or near any geographic area from which weattract or expect to attract a significant number of our customers could have asignificant adverse effect on our business, financial condition and results ofoperations. In addition, there is no limit on the number of gaming licensesthat may be granted in Mesquite or in some of the other gaming markets in whichwe compete. In particular, other than zoning limitations and licensingrequirements of the City of Mesquite, there are no restrictions on additionalcasinos being constructed and opened in Mesquite, including by competitors thatmay have greater financial and other resources than we do.

 

Ourcasino properties face direct competition from all other casinos and hotels inthe southern Nevada region, including, to some degree, from each other. Inaddition, we also face competition from all other types of entertainment,recreational activities and other attractions in and near Las Vegas. Futurevisits to our properties may be negatively affected as customers who havepreviously visited our properties may choose to experience Las Vegas casinosand hotels with greater name recognition, different attractions, amenities andentertainment options. Further, many of our competitors have greater financial,selling and marketing, technical and other resources than we do. We mustcontinually attract customers to our properties, which requires us to maintaina high level of investment in marketing and customer service. We may not beable to compete effectively with our competitors.

 

Increasedcompetition also may require us to make substantial capital expenditures tomaintain and enhance the competitive positions of our properties, includingupdating slot machines to reflect changing technology, refurbishing rooms andpublic service areas periodically, replacing obsolete equipment on an ongoingbasis and making other expenditures to increase the attractiveness and add tothe appeal of our properties. Because we are highly leveraged, after satisfyingour obligations under our outstanding indebtedness, there can be no assurancethat we will have sufficient funds to undertake these expenditures or that wewill be able to obtain sufficient financing to fund such expenditures. If weare unable to make such expenditures, our competitive position and our resultsof operations could be materially adversely affected.

 

**Dependence on Management—*Werely on our Chairman of the Board, Chief Executive Officer and President, theloss of whose services could materially and adversely affect our business.***

 

Oursuccess is substantially dependent upon the efforts and skills ofRobert R. Black, Sr., our Chairman of the Board, Chief ExecutiveOfficer and President. Mr. Black is important to our success because hehas been instrumental in setting our strategic direction, operating ourbusiness, identifying, recruiting and training personnel, identifyingopportunities and arranging financing. We have not entered into an employmentagreement with Mr. Black. If we were to lose his services, our business,financial condition and results of operations could be materially adverselyaffected.

 

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**Governmental Regulations—*Weface extensive regulation from gaming and other government authorities.***

 

Asowners and operators of gaming facilities, we are subject to extensive Nevadastate and local regulation. Nevada state and local government authoritiesrequire us and our subsidiaries to obtain gaming licenses and require ourofficers and key employees to demonstrate suitability to hold gaming licenses.The Nevada state and local government authorities may limit, condition, suspendor revoke a license for any cause deemed reasonable by the respective licensingagency. They may also levy substantial fines against us or our subsidiaries orthe individuals involved in violating any gaming laws or regulations. Theoccurrence of any of these events could have a material adverse effect on ourbusiness, financial condition and results of operations.

 

Noassurances can be given that any new licenses, registrations, findings ofsuitability, permits and approvals, including for any proposed expansion of ourproperties, will be given or that existing ones will be renewed when theyexpire. Any failure to renew or maintain our licenses or receive new licenseswhen necessary would have a material adverse effect on us.

 

Weare subject to a variety of other rules and regulations, including zoning,environmental, construction and land-use laws and regulations governing theserving of alcoholic beverages. We also pay substantial taxes and fees inconnection with our operations as a gaming company, which taxes and fees aresubject to increase or other change at any time. Any changes to these lawscould have a material adverse effect on our business, financial condition andresults of operations.

 

Thecompliance costs associated with these laws, regulations and licenses aresignificant. A change in the laws, regulations and licenses applicable to ourbusiness or a violation of any current or future laws or regulations or ourgaming licenses could require us to make material expenditures or couldotherwise materially adversely affect our business, financial condition orresults of operations. For more detailed information, see “Item 1. Business -Regulation and Licensing.”

 

**Concentration of Ownership—O*urChairman of the Board, Chief Executive Officer and President owns a substantialmajority of the Company and could have interests that conflict with thenoteholders.***

 

RobertR. Black, Sr., our Majority Member and Sole Manager, directly owns 99.03% ofthe Company. There can be no assurance that the interests of Mr. Blackwill not conflict with the interests of holders of the notes. Because of hiscontrolling interests, he has the power to elect all or a majority of ourboard, appoint new management and approve any action requiring the approval ofholders of our equity interests, including adopting amendments to ourorganizational documents, approving mergers or sales of substantially all ofour assets or changes to our capital structure, or pursuing other transactionswhich may increase the value of his equity investment even though thesetransactions may involve risks to the holders of the notes.

 

**Union Efforts to Organize Employees—*Our business, financial condition, and results ofoperation may be harmed by union efforts to organize our employees.***

 

Ouremployees are not covered by collective bargaining agreements. However, theIndustrial Technical and Professional Employees Union has twice sought toorganize the workers at our properties. If the Industrial Technical andProfessional Employees Union or any other union seeks to organize any of ouremployees, we could experience disruption in our business and incur significantcosts, both of which could have a material adverse effect on our results ofoperation and financial condition. If a union were successful in organizing anyof our employees we could experience significant increases in our labor 

 

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costswhich could also have a material adverse effect on our business, financialcondition, and results of operations.

 

**Factors Beyond Our Control—*Ourbusiness, financial condition and results of operations are dependent in parton a number of factors that are beyond our control.***

 

Theeconomic health of our business is generally affected by a number of factorsthat are beyond our control, including:

 

•                  continued increases in healthcare costs;

 

•                  general economic conditions and economicconditions specific to our primary markets;

 

•                  levels of disposable income of casinocustomers;

 

•                  increases in transportation costs;

 

•                  local conditions in key gaming markets,including seasonal and weather-related factors;

 

•                  increase in gaming taxes or fees;

 

•                  decline in tourism and travel due tooccurrences or threats of terrorism or other destabilizing events;

 

•                  substantial increases in the cost ofelectricity, natural gas and other forms of energy;

 

•                  competitive conditions in the gamingindustry, including the effect of such conditions on the pricing of our gamesand products;

 

•                  the relative popularity of entertainmentalternatives to casino gaming that compete for the leisure dollar;

 

•                  the adoption of additional anti-smokingregulations; and

 

•                  an outbreak or suspicion of an outbreak of aninfectious communicable disease.

 

Anyof these factors could negatively impact our properties or geographic locationin particular or the casino industry generally, and as a result, our business,financial condition and results of operations.

 

**Environmental Matters—*Weare subject to environmental laws and potential exposure to environmentalliabilities. This may cause us to incur costs or affect our ability to develop,sell or rent our property or to borrow money where such property is required tobe used as collateral.***

 

Weare subject to various federal, state and local environmental laws, ordinancesand regulations, including those governing discharges to air and water, thegeneration, handling, management and disposal of petroleum products and hazardoussubstances, and the health and safety of our employees. Permits may be requiredfor our operations and these permits are subject to renewal, modification and,in some cases, revocation. In addition, as a property owner and operator, wemay be liable for the costs of investigating and remediating hazardoussubstances or petroleum products on, under, or in our property, without regardto whether we knew of, or caused, the presence of the contaminants, andregardless of whether the practices that resulted in the contamination werelegal at the time they occurred. The presence of, or failure to remediateproperly, the substances may adversely affect our ability to sell or rent ourproperty or to borrow funds using it as collateral. Additionally, we may be subjectto claims by third parties based on damages and costs resulting fromenvironmental contamination emanating from our property.

 

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Wehave reviewed environmental assessments, and limited soil and groundwatertesting, relating to our properties. As a result, we have become aware thatthere is contamination present on some of our properties apparently due to pastoperations, which included a truck stop and a gas station. In particular,groundwater contamination at our Oasis property (which appears to have migratedonto our CasaBlanca property) is the subject of investigation and cleanupactivities being conducted by the prior owners of the Oasis. The water supplyfor the Oasis property and the CasaBlanca property does not come from groundwater that has been contaminated. Although we believe that the prior owners areresponsible for such matters under an indemnity agreement we negotiated at thetime we purchased the Oasis, we cannot assure note holders that we will notincur costs related to this matter. Further, we could be held strictly liablefor the environmental clean-up of the contaminated properties.

 

Wedo not anticipate any material adverse effects on our earnings or competitiveposition relating to environmental matters, but it is possible that futuredevelopments could lead to material environmental compliance costs or otherliabilities for us and that these costs could have a material adverse effect onour business and financial condition.

 

**Risks Associated with Construction Projects—*Expansion and renovation efforts are inherentlysubject to significant development and construction risks.***

 

Expansionprojects and periodic renovations will be subject to the many risks inexpanding or renovating an existing enterprise or developing new projects,including unanticipated design, construction, regulatory, environmental andoperating problems, and the significant risks commonly associated withimplementing an expansion strategy. In particular, any such projects aresubject to the risks associated with the following:

 

•                  the availability of financing and the termsand covenants in our senior credit facility and other debt;

 

•                  shortages in materials;

 

•                  insufficient public infrastructureimprovements or maintenance;

 

•                  shortages of skilled labor or work stoppages;

 

•                  unforeseen construction, scheduling,engineering, environmental or geological problems;

 

•                  weather interference, floods, fires or othercasualty losses;

 

•                  the failure to obtain required licenses, permitsor approvals;

 

•                  regulatory or private litigation arising outof projects; and

 

•                  unanticipated cost increases and budgetoverruns.

 

Inaddition, although we design our projects for existing facilities to minimizedisruption of business operations, expansion and renovation projects require,from time to time, portions of the existing operations to be closed ordisrupted. Any extended disruptions in our operations could have a materialadverse affect on our business, financial condition or results of operations.

 

**Uninsured Losses—*We mayincur losses that are not adequately covered by insurance which may harm ourfinancial condition and results of operations.***

 

Althoughwe maintain insurance which we believe is customary and appropriate for ourbusiness, we cannot give assurance that insurance will be available or adequateto cover all loss and damage to which our business and our assets might besubjected. In connection with insurance renewals subsequent 

 

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tothe events of September 11, 2001, the insurance coverage for certain typesof damages or occurrences has been diminished substantially and is unavailableat commercial rates. The lack of adequate insurance for certain types or levelsof risk could expose us to significant losses in the event that a catastropheoccurred for which we are underinsured. Any losses we incur that are notadequately covered by insurance may decrease our future operating income,require us to find replacements or repairs for destroyed property and reducethe funds available for payment of our obligations on the notes.

 

**RisksRelated to the Notes**

 

**Substantial Debt—*Oursubstantial level of debt could adversely affect our financial condition andprevent us from fulfilling our obligations under the notes and our other debt.***

 

Wehave substantial debt. As of December 31, 2006 we have total debt of $182.0million. In addition, we and our subsidiaries are permitted under theindentures governing the notes to incur additional debt including up to$15.0 million principal amount of debt under our senior secured creditfacility and certain debt to purchase furniture, fixtures and equipment.Additionally, if we satisfy debt coverage tests in our debt agreements, wecould issue additional notes and incur further debt. If new debt were to beincurred in the future, the related risks could intensify.

 

Oursubstantial debt could have significant effects on our business. For example,it could:

 

•                  make it more difficult for us to satisfy ourobligations under the notes and our other debt;

 

•                  result in an event of default if we fail tosatisfy our obligations under the notes or our other debt or fail to complywith the financial and other restrictive covenants contained in the indenturesor our senior secured credit facility, which event of default could result inall of our debt becoming immediately due and payable and could permit ourlenders to foreclose on our assets securing such debt;

 

•                  require us to dedicate a substantial portionof our cash flow from our business operations to pay our debt, thereby reducingthe availability of cash flow to fund working capital, capital expenditures,development projects, general operational requirements and other purposes;

 

•                  limit our ability to obtain additionalfinancing for working capital, capital expenditures and other activities;

 

•                  limit our flexibility in planning for, orreacting to, changes in our business and the industry in which we operate;

 

•                  increase our vulnerability to general adverseeconomic and industry conditions or a downturn in our business; and

 

•                  place us at a competitive disadvantagecompared to competitors that are not as highly leveraged.

 

Anyof the above-listed factors could have a material adverse effect on ourbusiness, financial condition and results of operations and our ability to meetour payment obligations under the notes and our other debt.

 

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**Ability to Service Debt—*Toservice our debt, we will require a significant amount of cash. If we fail togenerate sufficient cash flow from future operations, we may have to refinanceall or a portion of our debt or seek to obtain additional financing.***

 

Weexpect to obtain the funds to pay our expenses and to pay the amounts due underthe notes, our senior secured credit facility and our other debt primarily fromour operations. Our ability to meet our expenses and make these payments thusdepends on our future performance, which will be affected by financial,business, economic and other factors, many of which we cannot control. Ourbusiness may not generate sufficient cash flow from operations in the futureand our currently anticipated growth in revenue and cash flow may not berealized, either or both of which could result in our being unable to payamounts due under our debt, including the notes, or to fund other liquidityneeds, including our plans to continue to renovate our facilities and addamenities. In particular, during 2007, we plan to (i) add a permanentconvention and concert space and redesign the center and pool bar at the CasaBlanca;(ii) add an additional restaurant and finish refurbishing and remodeling thecasino interior, coffee shop and lounge at the Virgin River; and(iii) remodel hotel rooms at the Oasis and Virgin River.****If we do not have sufficient cash flowfrom operations, we may be required to refinance all or part of our thenexisting debt (including the notes), sell assets, reduce or delay capitalexpenditures or borrow more money. We cannot assure note holders that we willbe able to accomplish any of these alternatives on terms acceptable to us, orat all. In addition, the terms of existing or future debt agreements, includingour senior secured credit facility and the indentures governing the notes, mayrestrict us from adopting any of these alternatives. The failure to generatesufficient cash flow or to achieve any of these alternatives could materiallyadversely affect the value of the notes and our ability to pay the amounts dueunder the notes. The cash available to us as of December 31, 2006 was$11.1 million, not including $15 million available under our seniorsecured credit facility. There are no restrictions on our ability to use thesenior secured credit facility to make payments to holders of the notes.

 

**Value of Collateral Securing the Senior Secured Notes—*The fair market value of the collateral securing theSenior Secured Notes may not be sufficient to pay the amounts owed under theSenior Secured Notes. As a result, holders of the Senior Secured Notes may notreceive full payment following an event of default.***

 

TheSenior Secured Notes and the guarantees thereof are secured by a securityinterest in substantially all of our and the guarantors’ existing and futureassets (other than certain excluded assets) and a pledge of the equityinterests owned by Robert R. Black, Sr. in the issuers of the notes, VirginRiver Casino Corporation, RBG, LLC and B & B B, Inc., or the issuers, or inBlack Gaming, LLC, subject to certain limitations.

 

Theproceeds of any sale of collateral following an event of default with respectto the Senior Secured Notes may not be sufficient to satisfy, and may besubstantially less than, amounts due on the Senior Secured Notes. The totalvalue of the collateral may be less than the amount due on the Senior SecuredNotes.

 

Thevalue of the collateral in the event of liquidation will depend upon market andeconomic conditions, the availability of buyers and similar factors. Thecollateral does not include contracts, agreements, licenses (including gaming,and liquor licenses) and other rights that by their express terms prohibit theassignment thereof or the grant of a security interest therein. Some of thesemay be material to us and such exclusion could have a material adverse effecton the value of the collateral. By its nature, some or all of the collateralmay not have a readily ascertainable market value or may not be saleable or, ifsaleable, there may be substantial delays in its liquidation. To the extentthat liens, security interests and other rights granted to other parties(including the lenders under our senior secured credit facility) encumberassets owned by us, those parties have or may exercise rights and remedies withrespect to the 

 

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propertysubject to their liens that could adversely affect the value of that collateraland the ability of the trustee under the indenture governing the Senior SecuredNotes or the holders of the Senior Secured Notes to realize or foreclose onthat collateral. Consequently, we cannot assure note holders that liquidatingthe collateral securing the Senior Secured Notes would produce proceeds in anamount sufficient to pay any amounts due under the Senior Secured Notes afteralso satisfying the obligations to pay any creditors with prior claims on thecollateral.

 

Inaddition, under the intercreditor agreement between the trustee under theSenior Secured Note indenture and the lenders under our senior secured creditfacility, described below, the right of the lenders to exercise remedies withrespect to the collateral could delay liquidation of the collateral. The gaminglicensing process, along with bankruptcy laws and other laws relating toforeclosure and sale, as discussed below, also could substantially delay orprevent the ability of the trustee or any holder of the Senior Secured Notes toobtain the benefit of any collateral securing the Senior Secured Notes. Suchdelays could have a material adverse effect on the value of the collateral.

 

Theindenture governing the Senior Secured Notes and the agreements governing ourother secured debt also permit us to designate one or more of our restrictedsubsidiaries as an unrestricted subsidiary. If we designate a restrictedsubsidiary as an unrestricted subsidiary, all of the liens on any collateralowned by the unrestricted subsidiary or any of its subsidiaries and anyguarantees of the Senior Secured Notes by the unrestricted subsidiary or any ofits subsidiaries will be released under the Senior Secured Note indenture butnot necessarily under our senior secured credit facility. Designation of anunrestricted subsidiary will reduce the aggregate value of the collateralsecuring the Senior Secured Notes to the extent that liens on the assets of theunrestricted subsidiary and its subsidiaries are released. In addition, thecreditors of the unrestricted subsidiary and its subsidiaries will have a priorclaim (ahead of the Senior Secured Notes) on the assets of such unrestrictedsubsidiary and its subsidiaries.

 

Ifthe proceeds of any sale of collateral are not sufficient to repay all amountsdue on the Senior Secured Notes, the holders of the Senior Secured Notes (tothe extent not repaid from the proceeds of the sale of the collateral), wouldhave only an unsecured claim against our remaining assets.

 

**Lien Subordination of Senior Secured Notes—*The lien on the collateral securing the SeniorSecured Notes is contractually subordinated pursuant to the intercreditoragreement to the liens securing our senior secured credit facility and also issubject to the prior claim of purchase money lenders and holders of mechanics’liens.***

 

Thesecurity interests securing the Senior Secured Notes and the guarantees of theSenior Secured Notes are contractually subordinated to up to $15.0 millionprincipal amount of debt (plus related interest, fees, indemnities, costs andexpenses) that may be incurred under our senior secured credit facility,pursuant to an intercreditor agreement between the trustee under the SeniorSecured Note indenture and the lenders under our senior secured creditfacility. In addition, lenders of furniture, fixtures and equipment financingand other purchase money debt have a security interest in the assets securingthat debt, although those assets, so long as they secure only such debt, do notsecure the Senior Secured Notes. As a result, upon any distribution to ourcreditors, whether or not in bankruptcy, liquidation, reorganization or similarproceedings, or following acceleration of our debt or an event of default undersuch debt, the lenders under our senior secured credit facility and the lendersof furniture, fixtures and equipment financing and other purchase money debtwill be entitled to be repaid in full from the proceeds of the assets securingsuch debt before any payment is made to holders of Senior Secured Notes fromsuch proceeds.

 

Consequently,it is unlikely that the liquidation of the collateral securing the SeniorSecured Notes would produce proceeds in an amount sufficient to pay the amountsdue on the Senior Secured 

 

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Notesafter also satisfying the obligations to pay our senior secured credit facilitylenders and purchase money lenders, even if the fair market value of thecollateral securing the Senior Secured Notes would be sufficient, absent oursenior secured credit facility and purchase money debt, to pay all amounts dueon the Senior Secured Notes. If the proceeds of any sale of collateral are notsufficient to repay all amounts due on the Senior Secured Notes, the holders ofthe Senior Secured Notes (to the extent not repaid from the proceeds of thesale of the collateral), would have only an unsecured claim against ourremaining assets.

 

**Limited Ability of Holders of Senior Secured Notes toExercise Remedies—*The rights of the trusteeand holders of Senior Secured Notes to exercise remedies under the indentureare limited by an intercreditor agreement between the trustee and the lendersunder our senior secured credit facility.***

 

Anumber of the rights and remedies of the trustee and the holders of the SeniorSecured Notes are significantly limited under the intercreditor agreement. Forinstance, if the Senior Secured Notes become due and payable prior to the statedmaturity or are not paid in full at the stated maturity at a time during whichwe have debt outstanding under our senior secured credit facility, the SeniorSecured Note trustee will not have the right to foreclose upon the collateralunless and until the lenders under our senior secured credit facility fail totake steps to exercise remedies with respect to or in connection with thecollateral within 120 days following notice to such lenders of the occurrenceof an event of default under the indenture. In addition, the intercreditoragreement prevents the trustee and the holders of the Senior Secured Notes frompursuing remedies with respect to the collateral in an insolvency proceeding.

 

Therights and remedies of the Senior Secured Note trustee also are subject toadditional practical limitations with respect to certain collateral so long assuch collateral also secures our senior secured credit facility. The SeniorSecured Note trustee will not have possession of the equity interests of theguarantors or the equity interests owned by Robert R. Black, Sr. in theissuers and in Black Gaming, LLC (even though such equity interests constituteSenior Secured Note collateral), so long as such equity interests also secureour senior secured credit facility. As a result, so long as such equityinterests also secure our senior secured credit facility, the trustee (althoughit does have a perfected security interest in such equity interests) will notbe able to take possession of such equity interests upon the occurrence of anevent of default under the indenture governing the Senior Secured Notes. Inaddition, the Senior Secured Note trustee does not have a perfected securityinterest in certain other portions of the Senior Secured Notecollateral—including deposit accounts—that consist of assets that are notperfected by filing a Uniform Commercial Code financing statement, or thatrequire that the issuers or any guarantor, as applicable, cause the trustee toobtain “control” (as defined in the Uniform Commercial Code) or possession ofsuch assets (and, after commercially reasonable efforts, the issuers or suchguarantor, as applicable, are unable to cause the trustee to obtain suchcontrol or possession).

 

**Limited Ability of Holders of Senior Secured Notes to Realizeon Collateral—*Gaming laws, bankruptcy lawsand other factors may delay or otherwise impede the trustee’s ability toforeclose on the collateral securing the Senior Secured Notes.***

 

Inaddition to our intercreditor arrangements with lenders under our creditfacility, described above, the gaming laws of the State of Nevada and thelicensing processes, along with other laws relating to foreclosure and sale,could substantially delay or prevent the ability of the trustee or any holderof the Senior Secured Notes to obtain the benefit of any collateral securingthe Senior Secured Notes. For example, if the trustee sought to operate, orretain an operator for, any of our gaming properties, the trustee would berequired to obtain Nevada gaming licenses. Potential purchasers of our gamingproperties or the gaming equipment would also be required to obtain a Nevadagaming license. This could limit the number of potential purchasers in a saleof our gaming properties or gaming equipment, which may delay the sale of andreduce the price paid for the collateral.

 

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Inaddition, the trustee’s ability to repossess and dispose of collateral issubject to the procedural and other restrictions of state real estate, commercialand gaming law, as well as the prior approval of the lenders under our seniorsecured credit facility. Among other things, if the trustee did conduct aforeclosure sale, and if the proceeds of the sale were insufficient, afterexpenses, to pay all amounts due on the Senior Secured Notes, the trusteemight, under certain circumstances, be permitted to assert a deficiency claimagainst us. There can be no assurance that the trustee would be able to obtaina judgment for the deficiency or that we would have sufficient other assets topay a deficiency judgment.

 

Federalbankruptcy law also could impair the trustee’s ability to foreclose upon thecollateral. If we or a guarantor become a debtor in a case under the UnitedStates Bankruptcy Code, as amended, or the Bankruptcy Code, the automatic stay,imposed by the Bankruptcy Code upon the commencement of a case, would preventthe trustee from foreclosing upon the collateral or (if the trustee has alreadytaken control of the collateral) from disposing of it, without prior bankruptcycourt approval.

 

Thebankruptcy court might permit us to continue to use the collateral while thebankruptcy case was pending, even if the Senior Secured Notes were then indefault. Under the Bankruptcy Code, holders of Senior Secured Notes and thetrustee would be entitled to “adequate protection” of the interest of holdersof Senior Secured Notes in the collateral, if necessary to protect against anydiminution in value during the case. Because the Bankruptcy Code does notdefine “adequate protection,” and because the bankruptcy court has broaddiscretion, however, there can be no assurance that the court would require usto provide holders of Senior Secured Notes with any form of “adequateprotection,” or that any protection so ordered would, in fact, be adequate.

 

Ina bankruptcy case, the court would allow a claim for all amounts due under theSenior Secured Notes, including all accrued and unpaid interest through thedate of bankruptcy. Under the Bankruptcy Code, interest stops accruing on thedate of bankruptcy except under certain specified circumstances, and there canbe no assurance that the court would allow a claim for post-bankruptcyinterest. If the court held that the value of the collateral securing theSenior Secured Notes was less than the amount due, the trustee would bepermitted to assert a secured claim in an amount equal to the collateral’svalue and an unsecured claim for the deficiency.

 

Forthese and other reasons, if we or our subsidiaries become debtors in casesunder the Bankruptcy Code, there can be no assurance:

 

•                  whether any payments under the notes would bemade;

 

•                  whether or when the trustee could forecloseupon or sell the collateral;

 

•                  whether the term or other conditions of thenotes or any rights of the holders could be altered in a bankruptcy casewithout the trustee’s or the noteholders’ consent;

 

•                  whether the trustee or note holders would beable to enforce the noteholders’ rights against the guarantors under theirguarantees; or

 

•                  whether or to what extent holders of theSenior Secured Notes would be compensated for any delay in payment or declinein the collateral’s value.

 

Finally,the trustee’s ability to foreclose on the collateral on behalf of the holdersof Senior Secured Notes may be subject to the consent of third parties, priorliens (as discussed above) and practical problems associated with therealization of the trustee’s security interest in the collateral.

 

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**Senior Subordinated Notes Are Unsecured—*If we fail to meet our payment or other obligationsunder our secured debt, including the Senior Secured Notes and our seniorsecured credit facility, the holders of our secured debt could foreclose on,and acquire control of, substantially all of our assets.***

 

TheSenior Subordinated Notes and the guarantees thereof are unsecured. The SeniorSecured Notes and our senior secured credit facility are secured by a securityinterest in substantially all of our and the guarantors’ existing and futureassets (other than certain excluded assets) and a pledge of the equityinterests owned by Robert R. Black, Sr. in the issuers and in Black Gaming,LLC, subject to certain limitations. As a result of these security interests,if we fail to meet our payment or other obligations under such secured debt,the trustee of the Senior Secured Notes and the lenders under our seniorsecured credit facility would be entitled to foreclose on all of our assets andliquidate those assets in accordance with the intercreditor agreement.Similarly, in a bankruptcy or liquidation note holders may not receive anypayment on the Senior Subordinated Notes, except to the extent that the valueof our assets exceeds our secured debt. Accordingly, we may not have sufficientfunds to pay amounts due on the Senior Subordinated Notes. As a result noteholders may lose a portion of or the entire value of an investment in theSenior Subordinated Notes.

 

**Subordination of Senior Subordinated Notes—*The right to receive payments on the SeniorSubordinated Notes or under the guarantees thereof is subordinated to oursenior debt, including the Senior Secured Notes and our senior secured creditfacility.***

 

TheSenior Subordinated Notes and the guarantees thereof are subordinated in rightof payment to all of our and the guarantors’ existing and future senior debt,including the Senior Secured Notes and our senior secured credit facility. As aresult, upon any distribution to our creditors or the creditors of any of the guarantorsin a bankruptcy, liquidation or reorganization or similar proceeding relatingto us or any of the guarantors or our or their property, the holders of our orthe guarantor’s senior debt, including the Senior Secured Notes and our seniorsecured credit facility, will be entitled to be paid in full before any paymentmay be made with respect to the Senior Subordinated Notes or the guaranteesthereof. In such case, holders of the Senior Subordinated Notes willparticipate with trade creditors, other holders of unsecured debt, and anysecured creditor not already paid in full in the assets remaining after we andthe guarantors have paid all of the senior debt. In these cases, we and theguarantors may not have sufficient funds to pay all of our creditors, andholders of the Senior Subordinated Notes may receive less, ratably, than theholders of our senior debt.

 

Inaddition, all payments on the Senior Subordinated Notes and the guaranteesthereof, including the principal of and premium, if any, and interest (andLiquidated Damages, if any) on the Senior Subordinated Notes, or on account ofthe redemption provisions of the Senior Subordinated Notes or any repurchasesof Senior Subordinated Notes, will be blocked in the event of a payment defaulton our designated senior debt and may be blocked for up to 179 of 360consecutive days in the event of certain non-payment defaults on our designatedsenior debt.

 

Asof December 31, 2006, the Senior Subordinated Notes and the guarantees thereofwere subordinated to approximately $130.7 million of senior debt, consisting of$125 million aggregate principal amount of the Senior Secured Notes and $5.7million of gaming equipment financing, Additionally, as of December 31, 2006, approximately $15 million wasavailable for borrowing as additional senior debt under our senior securedcredit facility. We are permitted to borrow substantial additional debt,including senior debt, in the future under the terms of the indenture governingthe Senior Subordinated Notes.

 

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**Restrictive Covenants—*Theindentures governing the notes and our senior secured credit facility containcovenants that significantly restrict our operations.***

 

Theindentures governing the notes and the agreement governing our senior securedcredit facility contain, and any other future debt agreements may contain,numerous covenants imposing financial and operating restrictions on ourbusiness. These restrictions may affect our ability to operate our business,may limit our ability to take advantage of potential business opportunities asthey arise and may adversely affect the conduct of our current business. Thesecovenants restrict on our ability and the ability of our restrictedsubsidiaries to, among other things:

 

•      pay dividends, redeem stock or make other distributions or restrictedpayments;

 

•      incur debt or issue preferred equity interests;

 

•      make certain investments;

 

•      create liens;

 

•      agree to payment restrictions affecting the subsidiary guarantors;

 

•      consolidate or merge;

 

•      sell or otherwise transfer or dispose of assets, including equityinterests of our restricted subsidiaries;

 

•      enter into transactions with our affiliates;

 

•      designate our subsidiaries as unrestricted subsidiaries; and

 

•      use the proceeds of permitted sales of our assets.

 

Theindentures governing the notes do not allow us to incur additional debt unlessthe debt is classified as permitted indebtedness or we meet certain financialratios. Permitted indebtedness includes, among other things:

 

•      indebtedness evidenced by the notes or refinancing of the notes;

 

•      indebtedness to finance purchases of furniture, fixture and equipment,or FF&E, so long as the financing does not exceed $2.5 million fornon-gaming FF&E;

 

•      indebtedness to finance our general liability insurance premium so longas the amount does not exceed $1.0 million;

 

•      indebtedness secured by our contracts between us and owners oftimeshare interests in our timeshare units so long as the amount does notexceed $1.0 million; and

 

•      other indebtedness in an amount not to exceed $1.0 million.

 

Wemay also incur additional indebtedness that does not qualify as permittedindebtedness if we are not in default under our existing indebtedness and wemeet certain financial ratios after incurring such additional indebtedness. Inaddition, we may incur a maximum of $15.0 million in indebtedness under oursenior secured credit facility. Our organizational documents do not contain anylimitations on the amount or percentage of indebtedness we may incur. As ofDecember 31, 2006, we have incurred $0.5 million in additional indebtedness incompliance with these restrictions in order to finance our general liabilityinsurance premium, to finance our purchases of FF&E and to obtain advancesagainst our timeshare contracts.

 

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Oursenior secured credit facility also requires us to meet certain financialratios and tests. Compliance with these financial ratios and tests mayadversely affect our ability to adequately finance our operations or capitalneeds in the future or to pursue attractive business opportunities that mayarise in the future. Our ability to meet these ratios and tests and to complywith other provisions governing our debt may be adversely affected by ouroperations and by changes in economic or business conditions or other eventsbeyond our control. Our failure to comply with our debt-related obligationscould result in an event of default under the notes and our other debt.

 

**Ability to Repurchase Notes—*Ourability to repurchase the notes upon a change of control or an asset sale maybe limited.***

 

Uponthe occurrence of specific “change of control” events and “asset sale” events,in each case as defined in the indentures, we will be required to offer torepurchase all outstanding notes at 101% of the principal amount (in the caseof a change of control) and 100% of the principal amount (in the case of anasset sale), in each case, plus accrued and unpaid interest to the date ofrepurchase. The lenders under our senior secured credit facility have a similarright to be repaid upon a change of control. Any of our future debt agreementsmay contain similar provisions with respect to a change of control or assetsale. However, we may not have sufficient funds at the time of the change ofcontrol or asset sale to make the required repurchase of notes or repayment ofour other debt. The terms of our senior secured credit facility also limit ourability to purchase the notes until all debt under our senior secured creditfacility is paid in full. Any of our future debt agreements may contain similarrestrictions. If we fail to repurchase any notes submitted in a change ofcontrol or asset sale offer, it would constitute an event of default under theindentures which would, in turn, constitute an event of default under oursenior secured credit facility and could constitute an event of default underour other debt, even if the change of control itself would not cause a default.

 

Inaddition, all payments on the Senior Subordinated Notes and the guaranteesthereof, including on account of any repurchases of Senior Subordinated Notes,are blocked in the event of a payment default on our designated senior debt.See “Item 1A. Risk Factors—Subordination of Senior Subordinated Notes.”  Under the Senior Subordinated Note indenture,prior to complying with any of the provisions of the change of control or assetsale covenants, but in any event within 90 days following a change incontrol or an asset sale, respectively, we are required either to repay alloutstanding senior debt or obtain the requisite consents, if any, under allagreements governing outstanding senior debt to permit the repurchase of SeniorSubordinated Notes required by the change of control or asset sale covenants,respectively.

 

Importantcorporate events, such as takeovers, recapitalizations or similar transactions,may not constitute a change of control under the indentures governing the notesand thus not permit the holders of the notes to require us to repurchase orredeem the notes.

 

**Required Regulatory Redemption—*Noteholders may be required to be licensed by a gaming authority and,if not so licensed, their notes will be subject to redemption.***

 

Weare required to notify the Nevada State Gaming Control Board as to the identityof, and may be required to submit background information regarding, each recordor beneficial owner of the notes. For purposes of these rules, “beneficialinterest” includes all direct and indirect forms of ownership or control,voting power or investment power held through any contract, lien, lease,partnership, stockholding, syndication, joint venture, understanding,relationship, present or reversionary right, title or interest, or otherwise.The Nevada State Gaming Control Board may determine that holders of the noteshave a “beneficial interest” in the issuers.

 

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Ifthe Nevada Gaming Authorities require any person, including a record orbeneficial owner of the notes, to be licensed, qualified or found suitable,that person must apply for a license, qualification or finding of suitabilitywithin the time period specified by the Nevada Gaming Authorities. The personwould be required to pay all costs of obtaining a license, qualification orfinding of suitability. If such person is unable or unwilling to obtain suchlicense, qualification or finding of suitability, such agencies and authoritiesmay not grant us or, if already granted, may suspend or revoke our licensesunless we terminate our relationship with such person. Under thesecircumstances, we would be required to repurchase the relevant notes. There canbe no assurance that we will have sufficient funds or otherwise will be able torepurchase any or all of the notes. See “Item 1. Business–Regulation andLicensing.”

 

**Fraudulent Transfer—*Undercertain circumstances, a court could cancel the guarantees of our subsidiariesor limit the obligations of an individual issuer under the notes.***

 

Unlessdesignated as an unrestricted subsidiary, each domestic subsidiary we form oracquire will be required to guarantee the notes and grant a security interestin certain of its assets (junior to the security interest granted to thelenders under our senior secured credit facility) to secure its guarantee.Under federal bankruptcy law and comparable provisions of state and federalnonbankruptcy fraudulent transfer laws, under certain circumstances a courtcould avoid (*i.e.*, cancel) aguarantee and the security interest in the guarantor’s assets, and order thereturn of any payments made thereunder to the guarantor or to a fund for thebenefit of its other creditors.

 

Acourt might take these actions if it found that when the guarantor entered intoits guarantee (or, in some jurisdictions, when payments became due on itsguarantee), (i) it received less than reasonably equivalent value or fairconsideration for its guarantee, and (ii) any of the following conditionswas then satisfied:

 

•      the guarantor was insolvent or rendered insolvent by reason ofincurring its obligations under its guarantee or granting a security interestin its assets;

 

•      the guarantor was engaged in a business or transaction for which itsremaining assets constituted unreasonably small capital; or

 

•      the guarantor intended to incur, or believed (or reasonably should havebelieved) that it would incur, debts beyond its ability to pay as those debtsmatured.

 

Inapplying these factors, a court would likely find that a subsidiary guarantordid not receive fair consideration or reasonably equivalent value for itsguarantee, except to the extent that it benefited directly or indirectly fromthe notes’ issuance. The determination of whether a subsidiary was or wasrendered “insolvent” would vary depending on the law of the jurisdiction beingapplied. Generally, an entity would be considered insolvent if the sum of itsdebts (including contingent or unliquidated debts) is greater than all of itsproperty at a fair valuation or if the present fair salable value of its assetsis less than the amount that will be required to pay its probable liability onits existing debts (including contingent or unliquidated debts) as they becomeabsolute and matured.

 

Acourt might also avoid a guarantor’s guarantee and the security interest in itsassets, if the court concluded that the guarantor entered into the guaranteewith actual intent to hinder, delay, or defraud creditors. If a court avoided aguarantor’s guarantee, note holders would no longer have a claim against thatsubsidiary, and the claims of creditors of the subsidiary generally would beentitled to payment in full before the subsidiary paid any dividends or madeany distributions to us for the purpose of our satisfying any claims under thenotes.

 

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Similarly,under federal bankruptcy law and comparable provisions of state and federalnon-bankruptcy fraudulent transfer laws, under certain circumstances a courtcould limit or avoid the issuers’ obligations under the notes and the securityinterest in the issuers’ assets, and order the return of any payments madethereunder to the issuers or to a fund for the benefit of their othercreditors.

 

Thenotes are joint and several obligations of each of the three issuers. However,none of the issuers, individually, has sufficient cash flow to service thenotes or assets that exceed the aggregate principal amount of the notes. Toprevent the obligations of an issuer under the notes being subject to avoidanceas a fraudulent obligation, each of the indentures provides that theobligations under such indenture and the notes are allocated among each of theissuers, pro rata, based on their respective asset book values as of the issuedate of the notes. Each issuer has agreed in the indentures to be responsiblefor its pro rata share of such obligations and to reimburse the other issuersto the extent that any issuer pays more than its pro rata share of suchobligations. However, there can be no assurances that each of the issuers willbe able to pay its pro rata share of such obligations or that any issuer willbe able to reimburse any other issuer that pays more than its pro rata share.In that case, under federal bankruptcy laws, a court could order the avoidanceof all or a portion of an individual issuer’s obligations under the notes andorder the return of any payments made by an issuer in excess of its pro ratashare either to such issuer or to a fund for the benefit of such issuer’s othercreditors.

 

Inaddition, a substantial portion of the net proceeds from the offering of theold notes was used to redeem and purchase equity interests in us not owned byRobert R. Black, Sr. or his affiliates and a minority owner. Although we cannotpredict how a court would rule in this case, courts have found that an issuerdid not receive reasonably equivalent value or fair consideration if theproceeds of the issuance were paid to such issuer’s equity holders.

 

Regardlessof the factors identified above, a court might also avoid the obligations ofthe issuers under the notes and the security interest in their assets and orderthe return of any payments made under the notes either to the issuers or to afund for the benefit of the issuers’ other creditors if the court found thatthe issuers incurred the obligations under the notes with actual intent tohinder, delay, or defraud creditors of the issuers.

 

**No Existing Trading Market for the Notes—*There is currently no trading market for the notes,and an active trading market may not develop for the notes. The failure of amarket to develop for the notes could affect the liquidity and value of thenotes.***

 

Thereis no existing trading market for the notes. An active market may not developfor the notes, and there can be no assurance as to the liquidity of any marketthat may develop for the notes. If an active market does not develop, themarket price and liquidity of the notes may be adversely affected. The notesmay trade at a discount from their purchase price.

 

Theliquidity of the trading market, if any, and future trading prices of the noteswill depend on many factors, including, among other things, prevailing interestrates, our operating results, financial performance and prospects, the marketfor similar securities and the overall securities market, and may be adverselyaffected by unfavorable changes in these factors. Historically, the market forhigh-yield debt has been subject to disruptions that have caused substantialfluctuations in the prices of these securities. In addition, securities ofgaming companies historically have been more volatile than securities of othercompanies. The notes and any markets for the notes may be subject to suchdisruptions and volatility, either of which could have an adverse effect on theprice and liquidity of the notes.

 

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**Original Issue Discount on Senior Subordinated Notes—*The Senior Subordinated Notes have significantoriginal issue discount, or OID, for United State federal income tax purposes,and accordingly, United States holders of the Senior Subordinated Notes will berequired to include OID in income in advance of the receipt of cashattributable to such income.***

 

Becausethe Senior Subordinated Notes do not provide for cash payment of statedinterest prior to January 15, 2009, the Senior Subordinated Notes havesignificant OID for United States federal income tax purposes. United Statesholders generally must include OID income for United States federal income taxpurposes under a constant yield accrual method regardless of their regularmethod of tax accounting. As a result, United States holders of the SeniorSubordinated Notes will include OID in income in advance of the receipt of cashattributable to such income.

 

**Past Breach of Credit Facility Covenants**—***We have breached certain covenants of our previous creditfacility.***

 

OnJune 28, 2001 we entered into a credit agreement with Bank of America, N.A.,Wells Fargo Bank, N.A. and U.S. Bank, N.A. We refer to the credit agreement asthe Original Credit Agreement. The terms of the Original Credit Agreementcontained certain financial and other covenants. These included a leverageratio which was calculated quarterly based on the ratio of funded debt to ourtrailing twelve-month EBITDA (as that term is defined in the Indenturesgoverning the notes and the agreement governing our senior secured creditfacility). In addition to the leverage ratio, we were to maintain throughoutthe term of the Original Credit Agreement, a certain adjusted fixed chargeratio and, commencing June 30, 2002, a minimum trailing twelve-month adjustedEBITDA of no less than $23.0 million.

 

Asof March 31, 2004, December 31, 2003 and September 30, 2003, we were not incompliance with the adjusted fixed charge coverage ratio and the minimumtrailing twelve-month EBITDA. Further, at December 31, 2003 and March 31, 2004we were not in compliance with the leverage ratio. On July 6, 2004, we enteredinto a forbearance agreement with the lenders whereby the lenders agreed to forbearexercising their legal remedies under the Original Credit Agreement by reasonof technical default while we renegotiated the terms of the Original CreditAgreement with the lenders. On November 4, 2004, we obtained an amended creditagreement which cured all past covenant violations and extended the due date ofthe loans. We used the proceeds of the old notes to pay this credit facility infull. At the closing of the transactions on December 20, 2004, we obtained oursenior secured credit facility to replace the Original Credit Agreement. We arenot in breach of any of the covenants of our senior secured credit facility.

 

**Redemption**—***We may chooseto redeem the notes at anytime on or after January 15, 2009.***

 

Thenotes are redeemable at our option on or after January 15, 2009. Thismeans that we have the right, without our noteholder’s consent, to redeem or “call”all or a portion of the notes at any time on or after January 15, 2009. Thisdoes not mean that note holders have a similar right to require us to repaytheir notes. We may choose to redeem the notes, for example, when prevailinginterest rates are lower than the rate then borne by the notes. In that case aninvestor would not be able to reinvest the redemption proceeds in a comparablesecurity at an effective interest rate as high as the interest rate on thenotes being redeemed. Any such redemption right also may adversely impact aninvestor’s ability to sell its notes, and/or the price at which it could sellits notes, as the redemption date approaches.

 

## **ITEM 1B.****    ****UNRESOLVED STAFF COMMENTS.**

##  

Notapplicable.

 

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## **ITEM 2.****    ****PROPERTIES.**

##  

Ourcorporate office is located at 10777 W. Twain Avenue, Las Vegas, Nevada inapproximately 5,100 square feet of space leased from an affiliate. Thefollowing table provides an overview of our other owned and leased realproperties: 

** **
| **Location and Function(s)**                | ** ** | **Ownership Structure**               |
|-------------------------------------------------------|------------|--------------------------------------------|
| **CasaBlanca Hotel & Casino**                     |       |                                       |
| Main Site and Improvements                            |       | Owned                                      |
| Timeshare Units                                       |       | Owned by us and unrelated third parties    |
| Timeshare Unit Land                                   |       | Owned(1)                                   |
| CasaBlanca Golf Club                                  |       | Leased(2)                                  |
| Unimproved Land                                       |       | Owned                                      |
| **Oasis Hotel & Casino**                          |       |                                       |
| Main Site and Improvements                            |       | Owned                                      |
| Palms Golf Course                                     |       | Nevada Land Owned / Arizona Land Leased(3) |
| Oasis Recreational Facility(4)                        |       | Owned                                      |
| Timeshare Units                                       |       | Owned by us and unrelated third parties(5) |
| Timeshare Units Land                                  |       | Owned by us and unrelated third parties    |
| **Virgin River Hotel, Casino & Bingo**            |       |                                       |
| Main Site and Improvements                            |       | Owned                                      |
| Unimproved Land                                       |       | Owned                                      |
| **Virgin River Convention Center Hotel & Casino** |       |                                       |
| Main Site and Improvements                            |       | Owned                                      |
| Unimproved Land                                       |       | Owned                                      |

 

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(1)    We leased the land on which some of our former timeshare units aresituated pursuant to a 50-year lease with our affiliate, MDW Mesquite, LLC.Pursuant to an agreement which became effective December 15, 2004, RBG, LLC andMDW Mesquite, LLC terminated the lease. See “Item 13. Certain Relationships andRelated Transactions.”

(2)    We lease the land on which the golf club islocated pursuant to a 99-year lease with River View, LLC that expires inJune 2094.

(3)    The Palms Golf Course is located on a256-acre site in Arizona, of which 180 acres are leased from the State ofArizona pursuant to a 10-year lease that expires in May 2008.

(4)    The Oasis Recreational Facility consists of agun club as well as motocross and equestrian facilities in Arizona.

(5)    In January 2006, Oasis Interval Ownership,LLC entered into an agreement with Global Exchange Development Corp. to sellsubstantially all of the unsold time share intervals at the Oasis Hotel andCasino. The sale is expected to close in three separate closings each involvingapproximately one-third of the unsold time share intervals at the Oasis Hoteland Casino. Each close is expected to occur within six months of the precedingclose. The first and second closings occurred in January and June 2006, respectively.See “Item 8 – Financial Statements and Supplementary Data – Black Gaming, LLCConsolidated Financial Statements, Footnote 11.”

 

## **ITEM 3.****    ****LEGAL PROCEEDINGS.**

##  

Fromtime to time, we are a party to various claims arising in the normal course ofbusiness. However, management believes that there are no proceedings pending orthreatened against us which, if determined adversely, would have a materialadverse effect on our financial condition, results of operations or liquidity.

 

## **ITEM 4.****    ****SUBMISSION OF MATTERS TO AVOTE OF SECURITY HOLDERS.**

##  

Notapplicable.

 

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# **PART II**

#  

| **ITEM 5.** | **MARKET  FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER  PURCHASES OF EQUITY SECURITIES.** |
|-------------|-----------------------------------------------------------------------------------------------------------------------------|

##  

Notapplicable.

 

## **ITEM 6.****    ****SELECTED FINANCIAL DATA.**

##  

Theselected financial data of Black Gaming, LLC set forth below as of and for eachof the years ended December 31, 2002, 2003, 2004, 2005 and 2006. OnDecember 31, 2006, we completed a holding company reorganization of entitiesunder common control whereby each of Virgin River Casino Corporation, RBG, LLCand B&BB, Inc. became a directly or indirectly wholly owned subsidiary ofBlack Gaming, LLC. In addition Black Gaming, LLC purchased the minorityinterest of Glenn Teixeira by exchanging his interest of Virgin River CasinoCorporation for an interest in Black Gaming, LLC. Prior to the transactionVirgin River Casino Corporation, RBG, LLC and B&BB, Inc. each filed as aRegistrant. As a result of the reorganization Black Gaming, LLC, became aregistrant. The selected financial data reflects the operations and financialcondition of Black Gaming, LLC as though the reorganization took place onJanuary 1, 2002 similar to a pooling of interest. The acquisition of theminority interest was accounted for as a purchase on the date the transactionclosed on December 31, 2006. Prior to the closing date the minority interestwas accounted for as minority interest in the selected financial data. Theinformation presented below summarizes certain selected financial data, whichshould be read in conjunction with “Item 8. Financial Statements andSupplementary Data” and with “Item 7. Management’s Discussion and Analysis ofFinancial Condition and Results of Operations.”

 

BlackGaming, LLC has elected to be taxed under the provisions of Subchapter S of theInternal Revenue Code of 1986, as amended, which permits the owners of ourcompanies to pay income taxes on our taxable income. Accordingly, a provisionfor income taxes is not included in our financial data. 

 
| ** **                                                     | ** ** | **Year ended December 31,** | ** ** |
|----------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                     | ** ** | **2002**                         | ** ** | **2003** | ** ** | **2004** | ** ** | **2005** | ** ** | **2006** | ** ** |
| ** **                                                     | ** ** | **(dollars in thousands)**       | ** ** |
| **Statement  of Operations Data:**                             |       |                             |       |   |   |   |   |   |   |   |   |
| Net revenues                                                   |       | 139,826                          |       | 142,648 |   | 154,010 |   | 158,904 |   | 165,045 |   |
|                                                           |       |                             |       |   |   |   |   |   |   |   |   |
| Operating  expenses                                            |       | 130,356                          |       | 132,971 |   | 140,898 |   | 148,463 |   | 157,966 |   |
|                                                           |       |                             |       |   |   |   |   |   |   |   |   |
| Operating  income                                              |       | 9,470                            |       | 9,677 |   | 13,112 |   | 10,441 |   | 7,079 |   |
|                                                           |       |                             |       |   |   |   |   |   |   |   |   |
| Net income  (loss)                                             |       | 216                              |       | 2,801 |   | 2,859 |   | (8,414 | ) | (12,097 | ) |
| ** **                                                     | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Other  Financial Data:**                                     |       |                             |       |   |   |   |   |   |   |   |   |
| Depreciation  and amortization, net of discontinued operations |       | 8,411                            |       | 8,485 |   | 8,180 |   | 12,171 |   | 16,939 |   |

 

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| ** **                     | ** ** | **As of December 31,** | ** ** |
|--------------------------------|------------|-----------------------------|------------|
| ** **                     | ** ** | **2002**                    | ** ** | **2003** | ** ** | **2004** | ** ** | **2005** | ** ** | **2006** | ** ** |
| ** **                     | ** ** | **(dollars in thousands)**  | ** ** |
| **Balance  Sheet Data:**       |       |                        |       |   |   |   |   |   |   |   |   |
| Cash and  cash equivalents     |       | 11,308                      |       | 12,942 |   | 17,033 |   | 15,632 |   | 11,118 |   |
|                           |       |                        |       |   |   |   |   |   |   |   |   |
| Total assets                   |       | 123,382                     |       | 121,604 |   | 205,630 |   | 212,944 |   | 201,694 |   |
|                           |       |                        |       |   |   |   |   |   |   |   |   |
| Total debt  and capital leases |       | 89,374                      |       | 85,122 |   | 168,564 |   | 182,665 |   | 181,954 |   |
|                           |       |                        |       |   |   |   |   |   |   |   |   |
| Total  Members’ deficit   |       | 16,566                      |       | 16,814 |   | 16,465 |   | 6,268 |   | (3,382 | ) |

##  

| **ITEM 7.** | **MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION AND RESULTS OF OPERATION.** |
|-------------|-------------------------------------------------------------------------------------------------|

##  

Thefollowing discussion and analysis should be read in conjunction with “Item 6.Selected Financial Data” of Black Gaming, LLC, and the consolidated financialstatements and related notes of Black Gaming, LLC included elsewhere in thisForm 10-K.

 

**Overview**

 

Weown and operate the CasaBlanca, the Oasis and the Virgin River in Mesquite,Nevada, which is located approximately 80 miles north of Las Vegas. We ownthree of the four casinos operating in Mesquite and our properties have adominant market share in Mesquite. Our properties are well established, eachhaving been in operation for at least ten years, and serve as significantdrive-in gaming and resort destinations. Our properties collectively featureapproximately 2,200 slot machines, 72 table games, and 2,200 deluxe hotelrooms, and offer extensive amenities, including championship golf courses, fullservice spas, a bowling center, movie theaters, restaurants, and banquet andconference facilities. With each of our properties, we leverage our extensivevalue-oriented amenities and emphasis on slot play to target middle marketgaming customers.

 

Ourrevenues are primarily derived from gaming revenues, which include revenuesfrom slot machines, table games, live keno, race and sports book wagering andbingo. Gaming revenues are generally defined as gaming wins less gaming losses.In addition, 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 hotel and food and beveragesfurnished gratuitously to customers. The retail value of such services isincluded in the respective revenue classifications and is then deducted aspromotional allowances. We calculate operating income as net revenues lesstotal operating costs and expenses. Operating income represents only thoseamounts that relate to our operations and excludes interest income, interestexpense, and other non-operating income and expenses.

 

Weare classified as “flow-through” entity 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.

 

Wewere organized in Nevada on August 4, 2006 in anticipation of modifyingB&BB’s and VRCC’s organizational structure through a holding companyreorganization (“Reorganization”) for 

 

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VRCCand B&BB. The Reorganization, which included a transfer of B&BB andVRCC shares for membership interests in us, was completed on December 31, 2006.As a result of the reorganization, the Robert R. Black, Sr. Gaming PropertiesTrust (the “Black Trust”) owns 99.03% of our membership interests and Glenn Teixeiraowns .97% of our membership interests. The transfer of shares of B&BB andVRCC for our membership interests has been accounted for as a reorganization ofentities under common control in a manner similar to a pooling-of-interests.Accordingly, the contributed assets and assumed liabilities were recorded atVRCC’s and B&BB’s historical cost basis.

 

Immediatelyprior to the Reorganization, VRCC acquired, directly and indirectly, anadditional aggregate 11.2% ownership in RBG, LLC (“RBG”) as a result of thefollowing transaction:

 

•      VRCC received 100 shares of R. Black, Inc. (“RBI”) from the Robert R.Black, Sr. Gaming Properties Trust (the “Black Trust”). The Black Trust owns100% of the outstanding shares of VRCC. The 100 shares of RBI representing 100%of the outstanding capital stock of RBI, was exchanged for 3.68 shares of VRCCheld by the Black Trust, representing 3.68% of the outstanding capital stock ofVRCC. RBI does not have any material operations, liabilities or assets otherthan a 5.47% ownership in RBG. The transfer of shares of RBI to VRCC wasaccounted for at the historical cost of RBG as RBI and VRCC were under commoncontrol.

 

•      VRCC received a 3.8% membership interest in RBG from the Black Trust inexchange for 2.57 shares of VRCC held by the Black Trust, representing 2.57% ofthe outstanding capital stock of VRCC. The transfer of membership interests ofRBG to VRCC was accounted for at historical cost as the Black Trust and VRCCwere under common control.

 

VRCCreceived a 1.92% membership interest in RBG from Glenn Teixeira in exchange for1.29 shares of VRCC held by the Black Trust, representing 1.29% of theoutstanding capital stock of VRCC. The acquisition of the membership interestsfrom RBG from Glenn Teixeira was accounted for at fair value as it wasconsidered an acquisition of a minority interest of a subsidiary. Based upon aninternal analysis the fair value of Glenn Teixeira’s interest approximated bookvalue.

 

OnDecember 20, 2004, VRCC, RBG and B&BB entered into a series oftransactions whereby they issued $125.0 million aggregate principal amountof Senior Secured Notes due 2012 and $66.0 million aggregate principalamount at maturity ($39.9 million in gross proceeds) of SeniorSubordinated Notes due 2013, and received a $16.0 million equity contributionfrom the Black Trust and RBI. The proceeds from the above offering were used 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, James Ritchieand Barry Moore as Sellers and Robert R. Black, VRCC, and B&BB asPurchasers. As a result of the Buyout, the Black Trust obtained the remaining80.97% interest in B&BB and 75.0% interest in VRCC. VRCC along with RBIobtained 32.69% of the membership interest in RBG that was being purchased. Theremaining proceeds were utilized to repay $64.0 million owed under thethen existing credit facility and the $2.0 million promissory note payableto a selling shareholder. Five days prior to the Buyout, RBG terminated thelease with MDW and certain assets were disposed of. As a result of thesetransactions, the Black Trust and RBI control VRCC, RBG and B&BB. Inaddition, VRCC, RBG and B&BB are co-issuers on the Senior Secured andSenior Subordinated Notes and all three entities are jointly managed and shareresources.

 

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RBG,LLC, a Nevada limited-liability company, was formed in February 1997 forthe purpose of acquiring the assets of Player’s Island Resort in Mesquite,Nevada, currently operating as the CasaBlanca. RBG, LLC acquired the CasaBlancafor $30.5 million. In February 2001, RBG, LLC formed a subsidiary,Casablanca Resorts, LLC, a Nevada limited-liability company, in order to purchasethe 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 withthe construction and development of the Virgin River Hotel & Casino.B & B B, Inc. operates the hotel casino and owns certainpersonal property including furniture and fixtures, leasehold improvements andgaming equipment within the casino. Virgin River Casino Corporation, a Nevadacorporation, was formed in July 1988 in connection with the constructionof the Virgin River. Virgin River Casino Corporation currently owns the landand buildings associated with the Virgin River as well as the Virgin RiverConvention Center. Virgin River Casino Corporation generates income from rentsreceived from B & B B, Inc., which operates the VirginRiver.

 

TheVirgin River Convention Center is currently a nonoperating casino, which weacquired out of bankruptcy for $6.3 million in November 2000. TheVirgin River Convention Center has 12,000 square feet of gaming space and 210hotel rooms. We are presently using the property as a special events facilityand for overflow hotel traffic from our other properties. We believe that theVirgin River Convention Center gives us a competitive advantage in the Mesquitemarket because it allows us the flexibility of opening the casino to meetmarket demand and to maintain our market share in the future on acost-effective basis.

 

Inorder to offer our customers attractive and modern facilities, we plan tocontinue to renovate our facilities and add amenities. In particular,throughout 2007, we plan to (i) begin construction on a permanentconvention and concert space and redesign the center and pool bar at the CasaBlanca;(ii) add an additional restaurant and finish refurbishing and remodeling thecasino interior, coffee shop and lounge at the Virgin River; and(iii) remodel the hotel rooms at the Oasis and Virgin River.

 

**Key Performance Indicators**

 

Ouroperating results are highly dependent on the volume of customers at ourproperties, which in turn impacts the price we can charge for our hotel roomsand other amenities. We generate a significant portion of our operating incomefrom the gaming and hotel portions of our operations. Key performance in ourgaming and hotel operations are as follows:

 

Gamingrevenue indicators – table games drop and slot handle (volume indicators); “win”or “hold” percentage, which is not fully controllable by us. Our normal tablegames win percentage is in the range of 15% to 18% of table games drop and ournormal slot win percentage is in the range of 5% to 7% of slot handle.

 

Hotelrevenue indicators – hotel occupancy (volume indicator); average daily rate, orADR, price indicator; revenue per available room, or REVPAR, a summary measureof hotel results, combining ADR and occupancy rate.

 

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Mostof our revenue is essentially cash-based, through customers wagering with cashor paying for non-gaming services with cash or credit cards. Our industry iscapital intensive and we rely heavily on the ability of our properties togenerate operating cash flow to repay debt financing, fund maintenance capitalexpenditures and provide excess cash for future development.

 

Ourresults of operations tend to be seasonal in nature. During the year endedDecember 31, 2006, approximately 38% of our operating income (less depreciationand amortization and other non-cash items) was generated in the first quarterand approximately 32% was generated in the second quarter with the remainderbeing generated during the final half of the year.

 

**Financial Highlights of Black Gaming, LLC**

** **
| ** **                          | ** ** | **Year ended   December 31,** | ** ** | **%**    | ** ** | **Year ended  December 31,** | ** ** | **%**    | ** ** |
|-------------------------------------|------------|-------------------------------|------------|----------|------------|------------------------------|------------|----------|------------|
| ** **                          | ** ** | **2004**                      | ** ** | **2005** | ** ** | **Change**                   | ** ** | **2006** | ** ** | **Change** | ** ** |
| ** **                          | ** ** | **(in thousands)**            | ** ** |
| Casino  revenues                    |       | 89,865                        |       | 97,195   |       | 8.2                          | %          | 105,762  |       | 8.8 | % |
| Casino  expenses                    |       | 42,999                        |       | 45,306   |       | 5.4                          | %          | 47,444   |       | 4.7 | % |
| Profit  margin                      |       | 52.2                          | %          | 53.4     | %          |                         |       | 55.1     | %          |   |   |
|                                |       |                          |       |     |       |                         |       |     |       |   |   |
| Food and  beverage revenues         |       | 42,011                        |       | 42,086   |       | 0.2                          | %          | 43,172   |       | 2.6 | % |
| Food and  beverage expenses         |       | 26,064                        |       | 26,404   |       | 1.3                          | %          | 25,711   |       | (2.6 | )% |
| Profit  margin                      |       | 38.0                          | %          | 37.3     | %          |                         |       | 40.4     | %          |   |   |
|                                |       |                          |       |     |       |                         |       |     |       |   |   |
| Hotel  revenues                     |       | 27,104                        |       | 29,481   |       | 8.8                          | %          | 35,062   |       | 18.9 | % |
| Hotel  expenses                     |       | 10,920                        |       | 9,610    |       | (12.0                        | )%         | 7,090    |       | (26.2 | )% |
| Profit  margin                      |       | 59.7                          | %          | 67.4     | %          |                         |       | 79.8     | %          |   |   |
|                                |       |                          |       |     |       |                         |       |     |       |   |   |
| Other  revenues                     |       | 18,953                        |       | 16,932   |       | (10.7                        | )%         | 17,062   |       | 0.8 | % |
| Other  expenses                     |       | 11,833                        |       | 9,859    |       | (16.7                        | )%         | 9,320    |       | (5.5 | )% |
|                                |       |                          |       |     |       |                         |       |     |       |   |   |
| Promotional  allowances             |       | 23,923                        |       | 26,790   |       | 12.0                         | %          | 36,013   |       | 34.4 | % |
| Percent of  gross revenues          |       | 13.4                          | %          | 14.4     | %          |                         |       | 17.9     | %          |   |   |
|                                |       |                          |       |     |       |                         |       |     |       |   |   |
| General and administrative expenses |       | 40,961                        |       | 44,384   |       | 8.4                          | %          | 49,914   |       | 12.5 | % |
|                                |       |                          |       |     |       |                         |       |     |       |   |   |
| Percent of  net revenues            |       | 26.6                          | %          | 27.9     | %          |                         |       | 30.2     | %          |   |   |

 

**Year 2006 Compared to Year 2005**

 

*Consolidated Net Revenues.*Consolidated net revenues increased by 3.9%to $165.0 million for the year ended December 31, 2006 as compared to$158.9 million for the year ended December 31, 2005. The increase wasprimarily due to a $8.6 million increase in casino revenues, a $1.1 millionincrease in food and beverage revenues, a $5.6 million increase in hotelrevenues offset by a $9.2 million increase in promotional allowances.

 

*Consolidated Operating Income.*Consolidated operating income decreased by32.2% to $7.1 million for the year ended December 31, 2006 as compared to $10.4million from the prior year. This was mainly due to a $5.5 million increase ingeneral and administrative expenses, a $4.8 million increase in depreciationand amortization expense, and a $1.4 million impairment loss recorded to adjustthe carrying value of land due to contested ownership rights offset by a $6.1million increase in net revenues and $2.5 million decrease in hotel expenses.Operating income margin decreased to 4.3% of net revenues for the year endedDecember 31, 2006 as compared to 6.6% in the prior year.

 

*Casino.*Casino revenues increased 8.8% to $105.8 million for the yearended December 31, 2006 as compared to $97.2 million for the year endedDecember 31, 2005. The increase in casino revenues was due to the increase inslot revenues, which increased $8.1 million between periods on an increasedoverall hold for the year ended December 31, 2006 compared to the prior year.Table games revenues increased $0.3 million for the year ended December 31,2006 as compared to the year ended December 31, 2005. This increase resultedfrom an overall increase in hold on a consistent drop year 

 

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overyear. These increases were offset by decreases in keno revenue which decreasedduring the year ended December 31, 2006 due to the closure of two of our kenooperations in December 2005. Casino profit margin increased to 55.1% for the yearended December 31, 2006 as compared to 53.4% for year ended December 31, 2005.Overall casino expenses increased 4.7% to $47.4 million for the year endedDecember 31, 2006 compared to $45.3 million for the year ended December 31,2005. The increase was due to an increase in revenues as well as an increase incasino marketing as we continue to focus on targeting our casino customers.

 

*Food and Beverage.*Food and beverage revenues increased by 2.6%to $43.2 million for the year ended December 31, 2006 as compared to$42.1 million for the year ended December 31, 2005. Revenues increased dueto an increase in pricing offset by fewer covers. Food and beverage expensesdecreased 2.6% to $25.7 million for the year ended December 31, 2006 ascompared to $26.4 million for the year ended December 31, 2005. Thedecrease in expenses was primarily due to a reduction in covers. Food andbeverage profit margin increased to 40.4% for the year ended December 31, 2006as compared to 37.3% for the year ended December 31, 2005. This increasein food and beverage profit margin is primarily due to an increase in revenuedue to pricing.

 

*Hotel.*Hotel revenues increased by 18.9% to $35.1 million for the yearended December 31, 2006 as compared to $29.5 million for the year ended December31, 2005. Hotel revenues increased due to increased ADR on decreased number ofoccupied rooms. Hotel expenses decreased 26.2% for the same time period to $7.1million from $9.6 million mainly due to an overall decline in occupied roomsand efficiency gains in payroll management. As a result of increased pricing ondeclining occupied rooms, hotel profit margin increased to 79.8% for the yearended December 31, 2006 as compared to 67.4% for the prior year.

 

*Other Revenues.*Other revenues increased slightly by 0.8% to$17.1 million for the year ended December 31, 2006 as compared to$16.9 million for the year ended December 31, 2005. Other revenueincreases were primarily due to a $0.5 million increase in spa revenues offsetby a $0.4 million decrease in time share revenues. Other expenses decreased5.5% to $9.3 million for the year ended December 31, 2006 as compared to $9.9million for the year ended December 31, 2005.  The main reason for thedecrease is a reduction in the cost associated with the time share operationoffset by increases in costs associated with the concert and showroom revenue.

 

*Promotional Allowances.*We provide promotional allowances at ourproperties including complimentary hotel rooms, food and beverage, golf rounds,spa treatments and gift shop purchases. Promotional allowances increased by34.4% to $36.0 million for the year ended December 31, 2006 as compared to$26.8 million for the year ended December 31, 2005. As a percent of grossrevenues, promotional allowances increased to 17.9% for the year ended December31, 2006 from 14.4% for the year ended December 31, 2005 as we focused ourmarketing attention on targeting our casino customers and due to the increasein the retail pricing associated with our complimentary hotel rooms and foodand beverage.

 

*General and Administrative (“G&A”).*G&A expenses increased by 12.5% to$49.9 million for the year ended December 31, 2006 as compared to$44.4 million for the year ended December 31, 2005. As a percent of netrevenues, G&A expenses increased to 30.2% for the year ended December 31,2006 as compared to 27.9% for the year ended December 31, 2005. The increase inG&A expense was primarily due to an increase in repairs and maintenance of$1.1 million, an increase in utilities of $1.1 million, an increase inadvertising of $0.5 million, an increase in professional fees of $1.0 millionand an increase in salaries and wages of $1.0 million.

 

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*Depreciation and Amortization.*Depreciation and amortization increased to$16.9 million for the year ended December 31, 2006 compared to $12.2 millionfor the year ended December 31, 2005. The increase in depreciation andamortization was due to large capital projects that began depreciating during theyear ended December 31, 2006 such as the consolidated laundry operation, thenew property management and back office system, and renovation of theTailgaterz lounge and CasaBlanca sports book along with the purchase ofadditional gaming equipment and other capital expenditures in addition to achange in the estimated life of our gaming equipment which was made effectiveJanuary 1, 2006 and our purchase accounting adjustment, related to the December20, 2004 buyout, completed in the fourth quarter of 2005.

 

*Loss on Disposal of Assets.* Loss on disposal of assets decreased to$0.2 million for the year ended December 31, 2006 compared to a $0.7million loss at December 31, 2005. The decrease in the loss was due to thedisposal of less equipment during the year.

 

*Change in Fair Value of Swaps.* Change in fair value of swaps decreased toincome of $0.2 million during the year ended December 31, 2006 compared to $1.3million during the year ended December 31, 2005. The decrease in income is dueto the expiration of the swap agreements.

 

*Interest Expense.*Interest expense decreased to $19.8 millionfor the year ended December 31, 2006 as compared to $20.4 million for the yearended December 31, 2005. The decrease in interest expense was due to lessoutstanding debt during the year ended December 31, 2006 compared to the yearended December 31, 2005.

 

*Loss from Operations of Discontinued OasisRecreational Properties.*Loss from operations of discontinued Oasis recreational properties were$0.2 million for the year ended December 31, 2006 compared to a $0.6million loss at December 31, 2005. The decrease in the loss was due to theelimination during the year ended December 31, 2006 of a separate sales groupdedicated to golf sales.

 

**Year 2005 Compared to Year 2004**

 

*Consolidated Net Revenues.*Consolidated net revenues increased by 3.2%to $158.9 million for the year ended December 31, 2005 as compared to$154.0 million for the year ended December 31, 2004. The increase wasprimarily due to a $7.3 million increase in casino revenues, a $2.4 millionincrease hotel revenues offset by a $2.0 million decrease in other revenues anda $2.9 million increase in promotional allowances.

 

*Consolidated Operating Income.*Consolidated operating income decreased by20.4% to $10.4 million for the year ended December 31, 2005 as compared to$13.1 million for the year ended December 31, 2004. This was mainly due to a$3.4 million increase in general and administrative expenses, a $4.0 millionincrease in depreciation and amortization expense and a $0.7 million increasein loss on disposal of assets offset by a $4.9 million increase in netrevenues. Operating income margin decreased to 6.6% of net revenues for theyear ended December 31, 2005 as compared to 8.5% during the year endedDecember 31, 2004.

 

*Casino.*Casino revenues increased 8.2% to $97.2 million for the year endedDecember 31, 2005 as compared to $89.9 million for the year ended December31, 2004. The increase in casino revenues was due to the increase in slotrevenues, which increased $6.9 million between periods as coin-in increased1.1% or $16.4 million on increased overall hold for the year ended December 31,2005 compared to the prior year. Casino profit margin increased to 53.4% forthe year ended December 31, 2005 as compared to 52.2% for year ended December31, 2004. The increase in casino profit margin is primarily due to an increasein casino revenue. Overall casino expenses increased 5.4% for the year 

 

36

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endedDecember 31, 2005 compared to the prior year which was mainly due to anincrease in casino marketing as we continue to focus on targeting our bettercasino customers.

 

*Food and Beverage.*Food and beverage revenues increased by 0.2%to $42.1 million for the year ended December 31, 2005 as compared to$42.0 million for the year ended December 31, 2004. The increase in foodand beverage revenues was due to an increase in pricing offset by fewer covers.Food and beverage expenses increased 1.3% to $26.4 million for the year endedDecember 31, 2005 as compared to $26.1 million for the year ended December31, 2004. Food and beverage profit margin decreased slightly to 37.3% for theyear ended December 31, 2005 as compared to 38.0% million for the yearended December 31, 2004.

 

*Hotel.*Hotel revenues increased by 8.8% to $29.5 million for the yearended December 31, 2005 as compared to $27.1 million for the year endedDecember 31, 2004. Hotel revenues increased due to increased ADR on decreasednumber of occupied rooms. Hotel expenses decreased 12.0% for the same timeperiod to $9.6 million from $10.9 million mainly due to the decrease inoccupied rooms. Hotel profit margin increased to 67.4% for the year endedDecember 31, 2005 as compared to 59.7% for the prior year due mainly to theincrease in ADR.

 

*Other Revenues.*Other revenues decreased by 10.7% to$16.9 million for the year ended December 31, 2005 as compared to$19.0 million for the year ended December 31, 2004. Other revenuedecreases were primarily due to a decrease in time share revenues and adecrease in spa revenues offset by increases in gift shop revenue. Otherexpenses decreased 16.7% to $9.9 million for the year ended December 31, 2005as compared to $11.8 million for the year ended December 31, 2004.  Thedecrease is due to a reduction in the cost associated with the time shareoperations.

 

*Promotional Allowances.*We provide promotional allowances at ourproperties including complimentary hotel rooms, food and beverage, golf rounds,spa treatments and gift shop purchases. Promotional allowances increased by12.0% to $26.8 million for the year ended December 31, 2005 as compared to$23.9 million for the year ended December 31, 2004. As a percent of grossrevenues, promotional allowances increased to 14.4% for the year ended December31, 2005 from 13.4% for the year ended December 31, 2004 as we focused ourmarketing attention on our better casino customers and due to the increase inthe retail pricing associated with our complimentary hotel rooms and food andbeverage.

 

*General and Administrative (“G&A”)*. G&A expenses increased by 8.4% to$44.4 million for the year ended December 31, 2005 as compared to$41.0 million for the year ended December 31, 2004. As a percent of netrevenues, G&A expenses increased to 27.9% for the year ended December 31,2005 as compared to 26.6% for the year ended December 31, 2004. The increase inG&A expense was primarily due to the increase in management fees of $1.2million, an increase in bonuses of $1.1 million, an increase in salaries of $1.3million offset by reduced medical and workman’s compensation claims.

 

*Depreciation and Amortization.*Depreciation and amortization increased to$12.2 million for the year ended December 31, 2005 compared to $8.2 million forthe year ended December 31, 2004. The increase was due to an increase in thedepreciable asset base due to the Buyout on December 20, 2004 and slot machinepurchases during the year.

 

*Loss on Disposal of Assets.*Loss on disposal of assets increased to $0.7million for the year ended December 31, 2005 compared to a $0.1 million gain atDecember 31, 2004. The increase in the loss was due to the disposal of slotmachines with the purchase of ticket-in ticket-out slot machines during theyear.

 

37

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*Change in Fair Value of Swaps.* Change in fair value of swaps increased toincome of $1.3 million during the year ended December 31, 2005 compared to anexpense of $1.5 million in the prior year. The increase in income is due to anincrease in interest rates in the year ended December 31, 2005 compared to theprior year along with an overall decrease in the average notional amount of theswap outstanding.

 

*Interest Expense.* Interest expense increased to $20.4 millionfor the year ended December 31, 2005 as compared to $7.6 million for the yearended December 31, 2004. The increase in interest expense was due to anincrease in our average outstanding borrowings during the year ended December31, 2005 compared to the prior year.

 

*Loss from Operations of Discontinued OasisRecreational Properties.*Loss from operations of discontinued Oasis recreational properties were$0.6 million for the year ended December 31, 2005 compared to a $0.2million loss at December 31, 2004. The increase in the loss was due to a $0.2million decrease in golf and gun club revenues along with a $0.2 millionincrease in the associated expenses.

 

**Liquidity and Capital Resources forBlack Gaming, LLC**

 

Thefollowing liquidity and capital resources discussion contains certain forward-lookingstatements with respect to our business, financial condition, results ofoperations, expansion projects and our subsidiaries, which involve risks anduncertainties that cannot be predicted or quantified, and consequently, actualresults may differ materially from those expressed or implied herein. Suchrisks and uncertainties include, but are not limited to, financial marketrisks, the ability to maintain existing management, competition within thegaming industry, the cyclical nature of the hotel business and gaming business,economic conditions, regulatory matters and litigation and other risks. Inaddition, construction projects such as the convention center project entailsignificant risks, including shortages of materials or skilled labor, unforeseenregulatory problems, work stoppages, weather interference, and unanticipatedcost increases. The anticipated costs and construction periods are based onbudgets, conceptual design documents and construction schedule estimates. Therecan be no assurance that the budgeted costs or construction period will be met.All forward-looking statements are based on our current expectations andprojections about future events. Some of the contingencies and uncertaintieswhich any forward looking statement set forth below are subject to include, butare not limited to, those set forth above in the heading “Item 1A. RiskFactors.”

 

*Cash Flows*

 

Ourprimary sources of liquidity and capital resources have been cash flow fromoperations and our credit facilities. As of December 31, 2006 and December 31,2005, cash and cash equivalents were $11.1 million and $15.6 million,respectively.

 

*Operating Activities*

 

Cashprovided by operating activities for the year ended December 31, 2006 was$13.6 million compared to $16.9 million for the year ended December 31,2005. The $3.3 million decrease was primarily due to a $3.4 milliondecrease in operating income and $0.4 million decrease in operating income fromdiscontinued operations of the Oasis Recreational Properties.

 

Cashprovided by operating activities for the year ended December 31, 2005 was$16.9 million compared to $16.9 million for the year ended December 31,2004.

 

38

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*Investing Activities*

 

Cashused in investing activities for the year ended December 31, 2006 was$12.0 million compared to $14.4 million for the year ended December31, 2005. For the year ended December 31, 2006, the majority of cash used ininvesting activities consisted of $11.0 million in capital expendituresdirected toward our centralized laundry project, new property management andback office computer system, the build-out of the Platinum check-in at theCasaBlanca and the remodeling of the Tailgatorz Tavern at the Oasis, CasaBlancasports book, Charmaines restaurant at the Oasis and the interior of the VirginRiver casino in addition to $1.1 million spent to purchase WSR, Inc.’sremaining property rights in the Oasis.

 

Cashused in investing activities for the year ended December 31, 2005 was$14.4 million compared to $3.6 million for the year ended December31, 2004. The majority of cash used in investing activities was related to $2.7million of gaming equipment purchases at the properties, $3.1 million related tothe room remodel at the CasaBlanca, $1.7 million of tax payments related to theprior owners that adjusted the purchase price of the 2005 repurchase of equityinterests, $0.4 million for the CasaBlanca fine dining expansion, $0.2 millionfor the CasaBlanca spa expansion, $0.5 million for the CasaBlanca tower andconvention center, $0.3 million for the Starbucks® at the Oasis, $0.4 millionrelated to the Oasis hotel room remodel, $0.4 million related to theconsolidated laundry project, $0.2 million related to the Oasis casino remodel,$0.7 million related to the Virgin River remodel, $0.9 million related to theproperty management and back office computer system project, $0.2 millionrelated to the buffet expansion, $0.4 million related to the Starbucks®addition and the remainder related to various maintenance capital expendituresat the property.

 

Cashused in investing activities for the year ended December 31, 2004 related tocapital expenditures for slot machines and various maintenance capitalexpenditures.

 

*Financing Activities*

 

Cashused in financing activities for the year ended December 31, 2006 was$6.1 million compared to $3.8 million for the year ended December 31,2005. For the year ended December 31, 2006, $7.8 million related topayments on long-term debt associated with equipment, time share financing andour credit facility, $4.3 million related to payments on gaming equipmentfinancing.  These financing outflows were offset by $5.0 million ofborrowings and an increase in the bank overdraft balance of $1.2 million.

 

Cashused in financing activities for the year ended December 31, 2005 was$3.8 million compared to $9.2 million for the year endedDecember 31, 2004. For the year ended December 31, 2005, $0.9 millionrepresented a decrease in the bank overdraft balance, $2.1 million related topayments on long-term debt associated with equipment, time share financing andour credit facility, $1.2 million related to payments on gaming equipmentfinancing, $0.6 million related to payment of financing fees and $1.8 millionfor tax distributions.

 

**Capital Expenditures for Black Gaming, LLC**

 

In2007, we plan to (i) begin construction on a permanent convention andconcert space and redesign the center and pool bar at the CasaBlanca; (ii) addan additional restaurant and finish refurbishing and remodeling the casinointerior, coffee shop and lounge at the Virgin River; and (iii) remodelthe hotel rooms at the Oasis and Virgin River.

 

39

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Webelieve that existing cash, cash flows from operations, equipment financing andavailable borrowings under our senior secured credit facility will be adequateto satisfy our anticipated uses of capital during 2007.

 

**Off Balance Sheet Arrangements for Black Gaming, LLC.**

 

Weare not currently subject to any off-balance sheet arrangements which webelieve will have a material adverse impact on our financial condition.

 

**Contractual Obligations and Commitments for Black Gaming,LLC.**

 

Thefollowing table summarizes our contractual obligations and commitments as of December 31,2006.

 
| ** **                     | ** ** | ** **                           | ** ** | **Payments Due by Period** | ** ** |
|--------------------------------|------------|--------------------------------------|------------|-------------------------------------------|------------|
| ** **                     | ** ** | **Total**                            | ** ** | **Less than  1 Year**           | ** ** | **1-3 Years** | ** ** | **4-5 Years** | ** ** | **After  5 Years** | ** ** |
| ** **                     | ** ** | **(dollars in thousands)** | ** ** |
| **Contractual  obligations:**  |       |                                 |       |                                      |       |   |   |   |   |   |   |
| Long-term  debt(1)             |       | $                                    | 191,000    |                                      | $          | — |   | $ | — |   | $ | — |   | $ | 191,000 |   |
| Gaming  equipment financing    |       | 5,656                                |       | 4,933                                     |       | 723 |   | — |   | — |   |
| Operating  leases              |       | 26,013                               |       | 938                                       |       | 1,509 |   | 816 |   | 22,750 |   |
| Total  contractual obligations |       | $                                    | 222,669    |                                      | $          | 5,871 |   | $ | 2,232 |   | $ | 816 |   | $ | 213,750 |   |

 

----

(1)   As of December 31, 2006, we were in compliance with the restrictivecovenants of the indentures governing our notes and our senior secured creditfacility.

 

Wehave no intention at the present time of entering into any new swaps to hedgethe new debt incurred as a result of the Transactions.

 

## **ITEM 7A.****    ****QUANTITATIVE AND QUALITATIVEDISCLOSURES ABOUT MARKET RISK.**

##  

Marketrisk is the risk of loss arising from adverse changes in market rates andprices, such as interest rates, foreign currency exchange rates and commodityprices. Our primary exposure to market risk is interest rate risk associatedwith our long-term debt. Historically, we have attempted to limit our exposureto interest rate risk by managing the mix of our long-term fixed-rateborrowings, which include the notes and short-term borrowings under our seniorsecured credit facility. Borrowings under our senior secured credit facilitybear interest at a margin above the Base Rate plus Base Rate Margin or theLIBOR rate plus LIBOR Rate Margin (each, as defined) as selected by us.However, the amount of outstanding borrowings is not expected to fluctuate andmay be reduced from time to time. Our secured senior credit facility matures inDecember 2008. Our Senior Secured Notes bear interest at 9% and mature inJanuary 2012. Our Senior Subordinated Notes bear interest at 12 3⁄4% and maturein January 2013. Our Senior Subordinated Notes accrue interest in the form ofincreased accreted value until January 2009 when the carrying value of theSenior Subordinated Notes will be $66.0 million.

 

40

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Thefollowing table provides information about our long-term debt at December 31,2006:

 
| ** **                                                  | ** ** | **Maturity  Date** | ** ** | **Face  Amount** | ** ** | **Carrying  Value**           | ** ** | **Estimated  Fair  Value** | ** ** |
|-------------------------------------------------------------|------------|--------------------|------------|------------------|------------|-------------------------------|------------|----------------------------|------------|
| ** **                                                  | ** ** | ** **         | ** ** | ** **       | ** ** | **(in thousands )** | ** ** | ** **                 | ** ** |
| Senior  secured credit facility at an interest rate of 8.8% |       | December 2008      |       | $                | 15,000     |                          | $          | —                     |       | $ | — |   |
| 9% Senior  Secured Notes                                    |       | January 2012       |       | 125,000          |       | 125,000                       |       | 129,225                    |       |
| 12 3⁄4% Senior  Subordinated Notes                       |       | January 2013       |       | 66,000           |       | 51,298                        |       | 46,530                     |       |
| Total                                                       |       |               |       | $                | 206,000    |                          | $          | 176,298                    |       | $ | 175,755 |   |

 

Weare also exposed to market risk in the form of fluctuations in interest ratesand their potential impact upon our debt. Historically, this market risk ismanaged by utilizing derivative financial instruments in accordance withestablished policies and procedures. We evaluate our exposure to market risk bymonitoring interest rates in the marketplace, and do not utilize derivativefinancial instruments for trading purposes. Our derivative financialinstruments consist exclusively of interest rate swap agreements. Interestdifferentials resulting from these agreements are recorded on an accrual basisas an adjustment to interest expense. As of December 31, 2005, as a result ofthe repurchase of equity interests, the interest rate swaps related to debt arenot matched with any of our specific fixed-rate or variable**-**rate debt obligations.

 

Thefollowing table provides information about our financial instruments that aresensitive to changes in interest rates:

 
| ** **                                   | ** ** | **As of December 31,**     | ** ** | ** ** | ** ** | ** ** | ** ** |
|----------------------------------------------|------------|----------------------------|------------|------------|------------|------------|------------|
| ** **                                   | ** ** | **2006**                   | ** ** | **2007**   | ** ** | **2008**   | ** ** | **2009** | ** ** | **2010** | ** ** | **Thereafter** | ** ** | **Total** | ** ** |
| ** **                                   | ** ** | **(dollars in thousands)** | ** ** |
| Long-term  debt (including current portion): |       |                       |       |       |       |       |       |   |   |   |   |   |   |   |   |
| Fixed-rate                                   |       | $                          | —     |       | $          | —     |       | $ | — |   | $ | — |   | $ | — |   | $ | 191,000 |   | $ | 191,000 |   |
| Average  interest rate                       |       | 10.09                      | %          | 10.19      | %          | 10.29      |       | 10.30 | % | 10.30 | % | 10.30 | % | 10.09 | % |
| Variable-rate                                |       | $                          | —     |       | $          | —     |       | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   |
| Average  interest rate                       |       | 8.8                        | %          | —     |       | —     |       | — |   | — |   | — |   | 8.8 | % |

 

The$15,000,000 Senior secured credit facility carries an interest rate of 8.8% asof December 31, 2006. No amounts were drawn on the line at that time. Thegaming equipment financing is separate to agreements that because of theirlong-term nature we impute interest expense for accounting purposes.Contractually these agreements carry no interest, therefore we believe thatthere is no exposure to interest rate risk and therefore have excluded thosecontracts from the presentation above.

 

41

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## ** **

## **ITEM8.**                             FINANCIAL STATEMENTSAND SUPPLEMENTARY DATA.

## ** **

## **INDEX TO FINANCIAL STATEMENTS**

 
| **BLACK  GAMING, LLC AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS**                               | ** ** |
|---------------------------------------------------------------------------------------------------------|------------|
| ** **                                                                                              | ** ** |
| **December  31, 2006 and 2005 and for Each of the Three Years in the Period Ended  December 31, 2006:** | ** ** |
| Report of Independent  Registered Public Accounting Firm                                                | 43         |
| Consolidated  Financial Statements:                                                                     |       |
| Consolidated  Balance Sheets at December 31, 2006 and 2005                                              | 44         |
| Consolidated  Statements of Operations                                                                  |       |
| For  the years ended December 2006, 2005 and 2004                                                       | 45         |
| Consolidated  Statements of Members' (Deficit) Equity                                                   |       |
| For  the years ended December 2006, 2005 and 2004                                                       | 48         |
| Consolidated  Statements of Cash Flows                                                                  |       |
| For  the years ended December 2006, 2005 and 2004                                                       | 46         |
| Notes to Consolidated  Financial Statements                                                             | 49         |

 

42

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REPORT OFINDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

Tothe Members of

BlackGaming LLC:

 

Wehave audited the accompanying consolidated balance sheets of Black Gaming LLC andsubsidiaries as of December 31, 2006 and 2005, and the relatedconsolidated statements of operations, members’ (deficit) equity, and cash flows for each of the three years in theperiod ended December 31, 2006. Our audit also included the financial statementschedule listed in the Index of Item 15(a). These financial statements are the responsibility ofthe Company’s management. Our responsibility is to express an opinion on thesefinancial statements based on our audits.

 

Weconducted our audits in accordance with the standards of the Public CompanyAccounting Oversight Board (United States). Those standards require that weplan and perform the audit to obtain reasonable assurance about whether the financial statements arefree of material misstatement. We were not engaged to perform an audit of theCompany’s internal control over financial reporting. Our audits includedconsideration of internal control over financial reporting as a basis fordesigning audit procedures that are appropriatein the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the Company’s internal control over financial reporting.Accordingly, we express no such opinion. An audit also includes examining, on atest basis, evidence supporting the amounts and disclosures in the financialstatements, assessing the accounting principles used and significant estimatesmade by management, andevaluating the overall financial statement presentation. We believe that our audits provide areasonable basis for our opinion.

 

As discussed in Note 2, in 2006, the Company adopted Statement ofFinancial Accounting Standard No. 152, Accounting for Real EstateTime-Share Transactions, and recorded a cumulative effect of a change inaccounting principle of $196,000 to increase the allowance for possible creditlosses.

 

Inour opinion, the financial statements referred to above present fairly, in allmaterial respects, the consolidated financial position of Black Gaming LLC andsubsidiaries at December 31, 2006 and 2005, and the consolidated resultsof their operations and their cash flows for each of the three years in theperiod ended December 31, 2006,in conformity with U.S. generally accepted accounting principles. Also,in our opinion, the related financial statement schedule, when considered inrelation to the consolidated financial statements taken as a whole, presentsfairly in all material respects the information set forth therein.

 

 
|   | /s/  Ernst & Young LLP |
|--------|----------------------------|

 

 

Las Vegas, Nevada

March 27, 2007

 

43

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**BLACKGAMING, LLC. AND SUBSIDIARIES**

**ConsolidatedBalance Sheets**

**(inthousands)**

 
| ** **                                                                              | ** ** | **December 31,** | ** ** |
|-----------------------------------------------------------------------------------------|------------|------------------|------------|
| ** **                                                                              | ** ** | **2006**         | ** ** | **2005** | ** ** |
| ** **                                                                              | ** ** | ** **       | ** ** | ** ** | ** ** |
| **Assets**                                                                              |       |             |       |   |   |
| Current assets:                                                                         |       |             |       |   |   |
| Cash and cash equivalents                                                               |       | $                | 11,118     |   | $ | 15,632 |   |
| Accounts receivable, net of allowance of $377  and $311 for 2006 and 2005, respectively |       | 2,788            |       | 1,396 |   |
| Related party receivables                                                               |       | 384              |       | 95 |   |
| Inventories                                                                             |       | 1,655            |       | 1,937 |   |
| Property held for vacation interval sales                                               |       | 420              |       | 392 |   |
| Prepaid expenses                                                                        |       | 5,060            |       | 4,500 |   |
| Current assets held for sale                                                            |       | 244              |       | 162 |   |
| Current portion of notes receivable                                                     |       | 349              |       | 303 |   |
| Total current assets                                                                    |       | 22,018           |       | 24,417 |   |
| Property and equipment, net                                                             |       | 122,163          |       | 126,224 |   |
| Assets held for sale, net                                                               |       | 9,116            |       | 8,023 |   |
| Notes receivable, less current portion                                                  |       | 880              |       | 1,821 |   |
| Goodwill and other intangible assets, net                                               |       | 39,294           |       | 42,761 |   |
| Deferred financing fees                                                                 |       | 7,860            |       | 9,466 |   |
| Other assets                                                                            |       | 363              |       | 232 |   |
| Total assets                                                                            |       | $                | 201,694    |   | $ | 212,944 |   |
| ** **                                                                              | ** ** | ** **       | ** ** | ** ** | ** ** |
| **Liabilities and Members’ (Deficit)Equity**                                       | ** ** | ** **       | ** ** | ** ** | ** ** |
| Current liabilities:                                                                    |       |             |       |   |   |
| Bank overdraft                                                                          |       | $                | 1,770      |   | $ | 548 |   |
| Current portion of gaming equipment  financing                                          |       | 4,933            |       | 4,175 |   |
| Current portion of long-term debt                                                       |       | —           |       | 788 |   |
| Accounts payable                                                                        |       | 2,105            |       | 3,627 |   |
| Current liabilities held for sale                                                       |       | 252              |       | 156 |   |
| Accrued liabilities                                                                     |       | 18,995           |       | 18,463 |   |
| Total current liabilities                                                               |       | 28,055           |       | 27,757 |   |
| Gaming equipment financing, less current  portion                                       |       | 723              |       | 5,369 |   |
| Long-term debt, less current portion                                                    |       | 176,298          |       | 172,333 |   |
| Fair value of interest rate swaps                                                       |       | —           |       | 195 |   |
| Commitments and contingencies                                                           |       | —           |       | — |   |
| Minority Interest                                                                       |       | —           |       | 1,022 |   |
|                                                                                    |       |             |       |   |   |
| Members’ (deficit) equity                                                          |       | (3,382           | )          | 6,268 |   |
| Total liabilities and members’ (deficit)  equity                                   |       | $                | 201,694    |   | $ | 212,944 |   |

 

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

 

44

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** **

**BLACKGAMING, LLC. AND SUBSIDIARIES**

**ConsolidatedStatements of Operations**

**For theYears Ended December 31,**

**(inthousands)**

** **
| ** **                                                                                       | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|--------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| **Revenues**                                                                                     |       |     |       |     |       |     |       |
| Casino                                                                                           |       | $        | 105,762    |     | $          | 97,195   |       | $ | 89,865 |   |
| Food and beverage                                                                                |       | 43,172   |       | 42,086   |       | 42,011   |       |
| Hotel                                                                                            |       | 35,062   |       | 29,481   |       | 27,104   |       |
| Other                                                                                            |       | 17,062   |       | 16,932   |       | 18,953   |       |
| Total  revenues                                                                                  |       | 201,058  |       | 185,694  |       | 177,933  |       |
| Less—promotional  allowances                                                                |       | (36,013  | )          | (26,790  | )          | (23,923  | )          |
| Net revenues                                                                                     |       | 165,045  |       | 158,904  |       | 154,010  |       |
| Operating  expenses:                                                                             |       |     |       |     |       |     |       |
| Casino                                                                                           |       | 47,444   |       | 45,306   |       | 42,999   |       |
| Food and  beverage                                                                               |       | 25,711   |       | 26,404   |       | 26,064   |       |
| Hotel                                                                                            |       | 7,090    |       | 9,610    |       | 10,920   |       |
| Other                                                                                            |       | 9,320    |       | 9,859    |       | 11,833   |       |
| General and  administrative                                                                      |       | 49,914   |       | 44,384   |       | 40,961   |       |
| Depreciation  and amortization                                                                   |       | 16,939   |       | 12,171   |       | 8,180    |       |
| Impairment  of long lived asset                                                                  |       | 1,350    |       | —   |       | —   |       |
| Loss (gain)  on sale and disposal of assets                                                      |       | 198      |       | 729      |       | (59      | )          |
| Total  operating expenses                                                                        |       | 157,966  |       | 148,463  |       | 140,898  |       |
| Operating  income                                                                                |       | 7,079    |       | 10,441   |       | 13,112   |       |
| Other  (expense) income:                                                                         |       |     |       |     |       |     |       |
| Interest  expense                                                                                |       | (19,808  | )          | (20,384  | )          | (7,577   | )          |
| Gain on  termination of capital lease                                                            |       | —   |       | —   |       | 1,279    |       |
| Loss on  early retirement of debt                                                                |       | —   |       | —   |       | (574     | )          |
| Change in  fair value of interest rate swaps                                                     |       | 195      |       | 1,298    |       | (1,493   | )          |
| Return on  investment with MDW LLC                                                               |       | 928      |       | 906      |       | —   |       |
| (Loss)  income from continuing operations                                                        |       | (11,606  | )          | (7,739   | )          | 4,747    |       |
| Loss from  operations of discontinued Oasis recreational properties                              |       | (247     | )          | (611     | )          | (233     | )          |
| (Loss)  income before cumulative effect of change in accounting principle and  minority interest |       | (11,853  | )          | (8,350   | )          | 4,514    |       |
| Cumulative  effect of change in accounting principle                                             |       | (196     | )          | —   |       | —   |       |
| (Loss)  income before minority interest                                                          |       | (12,049  | )          | (8,350   | )          | 4,514    |       |
|                                                                                             |       |     |       |     |       |     |       |
| Minority  interest                                                                               |       | (48      | )          | (64      | )          | (1,655   | )          |
| Net (loss) income                                                                                |       | $        | (12,097    | )        | $          | (8,414   | )          | $ | 2,859 |   |

 

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

 

45

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**BLACKGAMING, LLC. AND SUBSIDIARIES**

**ConsolidatedStatements of Members’ (Deficit) Equity**

**For theYears Ended December 31, 2006, 2005 and 2004(in thousands)**

 

| ** **                       | ** ** | **Total Member   (Deficit)   Equity** | ** ** |
|----------------------------------|------------|---------------------------------------|------------|
| ** **                       | ** ** | ** **                            | ** ** |
| Balance,  January 1, 2004        |       | $                                     | 16,814     |   |
| Net income                       |       | 2,859                                 |       |
| Redemption  of equity            |       | (22,569                               | )          |
| Equity costs                     |       | (274                                  | )          |
| Reclassification  adjustment     |       | 5,318                                 |       |
| Members’  contribution      |       | 16,049                                |       |
| Members’  distributions     |       | (1,732                                | )          |
|                             |       |                                  |       |
| Balance, December 31, 2004  |       | $                                     | 16,465     |   |
| Net loss                         |       | (8,414                                | )          |
| Members’  distributions     |       | (1,783                                | )          |
|                             |       |                                  |       |
| Balance,  December 31, 2005 |       | $                                     | 6,268      |   |
| Members’  contribution      |       | 2,447                                 |       |
| Net loss                         |       | (12,097                               | )          |
| Balance,  December 31, 2006 |       | $                                     | (3,382     | ) |

 

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

46

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**BLACKGAMING, LLC. AND SUBSIDIARIES**

**ConsolidatedStatements of Cash Flows**

**For theYears Ended December 31,**

**(inthousands)**

 
| ** **                                                                                | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|-------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Cash flows from operating activities:                                                     |       |     |       |     |       |     |       |
|   Net (loss) income                                                             |       | $        | (12,097    | )        | $          | (8,414   | )          | $ | 2,859 |   |
| Adjustments to reconcile net (loss) income  to net cash provided by operating activities: |       |     |       |     |       |     |       |
| Cumulative effect of change in accounting  principle                                      | ** ** | 196      |       | —   |       | —   |       |
| Depreciation and amortization                                                             |       | 17,207   |       | 12,539   |       | 8,511    |       |
| Minority interest                                                                         |       | 48       |       | 64       |       | 1,655    |       |
| Change in fair value of interest rate swaps                                               |       | (195     | )          | (1,298   | )          | 1,493    |       |
| Loss (gain) on sale and disposal of assets                                                |       | 235      |       | 729      |       | (59      | )          |
| Gain on termination of capital lease                                                      |       | —   |       | —   |       | (1,279   | )          |
| Amortization of deferred financing fees                                                   |       | 1,605    |       | 1,597    |       | 313      |       |
| Accretion of senior subordinated notes                                                    |       | 5,965    |       | 5,266    |       | 156      |       |
| Interest expense on gaming equipment  financing                                           |       | 76       |       | 565      |       | —   |       |
| Loss on early retirement of debt                                                          |       | —   |       | —   |       | 596      |       |
| Cost of vacation intervals sales                                                          |       | 40       |       | 69       |       | 397      |       |
| Impairment of long lived assets                                                           |       | 1,350    |       | —   |       | —   |       |
| Change in operating assets and liabilities:                                               |       |     |       |     |       |     |       |
| Accounts and related party and company receivables,  net                                  |       | (3,058   | )          | (214     | )          | 380      |       |
| Inventories                                                                               |       | 296      |       | 33       |       | (69      | )          |
| Prepaid expenses                                                                          |       | (656     | )          | (437     | )          | (167     | )          |
| Notes receivable                                                                          |       | 699      |       | 777      |       | 237      |       |
| Accounts payable and accrued liabilities                                                  |       | 1,841    |       | 5,576    |       | 1,872    |       |
| Net cash provided by operating activities                                                 |       | 13,552   |       | 16,852   |       | 16,895   |       |
|                                                                                      |       |     |       |     |       |     |       |
| Cash flows from investing activities:                                                     |       |     |       |     |       |     |       |
| Proceeds received from sale of assets                                                     |       | 54       |       | 258      |       | 6        |       |
| Capital expenditures                                                                      |       | (10,958  | )          | (12,940  | )          | (3,573   | )          |
| Purchase price adjustment                                                                 |       | —   |       | (1,743   | )          | —   |       |
| Purchase of WSR property rights                                                           |       | (1,100   | )          | —   |       | —   |       |
| Net cash used in investing activities                                                     |       | (12,004  | )          | (14,425  | )          | (3,567   | )          |
|                                                                                      |       |     |       |     |       |     |       |
| Cash flows from financing activities:                                                     |       |     |       |     |       |     |       |
| Proceeds from issuance of long-term debt                                                  |       | 5,000    |       | 2,673    |       | 2,405    |       |
| Proceeds from issuance of notes                                                           |       | —   |       | —   |       | 3,402    |       |
| Payment of gaming equipment financing                                                     |       | (4,308   | )          | (1,180   | )          | (1,411   | )          |
| Payment of long-term debt                                                                 |       | (7,788   | )          | (2,122   | )          | (11,863  | )          |
| Increase (decrease) in bank overdraft                                                     |       | 1,222    |       | (932     | )          | 216      |       |
| Payment of obligations under capital lease                                                |       | —   |       | (18      | )          | (30      | )          |
| Payment of financing fees                                                                 |       | —   |       | (646     | )          | (985     | )          |
| Change in other assets                                                                    |       | (188     | )          | 180      |       | (118     | )          |
| Member contributions                                                                      |       | —   |       | —   |       | 28       |       |
| Member distributions                                                                      |       | —   |       | (1,783   | )          | (881     | )          |
| Net cash used in financing activities                                                     |       | (6,062   | )          | (3,828   | )          | (9,237   | )          |
| Net (decrease) increase in cash and cash  equivalents                                     |       | (4,514   | )          | (1,401   | )          | 4,091    |       |
| Cash and cash equivalents at beginning of  year                                           |       | 15,632   |       | 17,033   |       | 12,942   |       |
| Cash and cash equivalents at end of year                                                  |       | $        | 11,118     |     | $          | 15,632   |       | $ | 17,033 |   |

 

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

 

47

----

 

**BLACK GAMING,LLC. AND SUBSIDIARIES**

**ConsolidatedStatements of Cash Flows (continued)**

**For theYears Ended December 31,**

**(inthousands)**

** **
| ** **                                             | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|--------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
|                                                   |       |     |       |     |       |     |       |
| Supplemental  cash flow disclosure:                    |       |     |       |     |       |     |       |
|                                                   |       |     |       |     |       |     |       |
| Cash paid for interest                                 |       | $        | 12,401     |     | $          | 7,641    |       | $ | 6,779 |   |
|                                                   |       |     |       |     |       |     |       |
| Noncash  operating activities:                         |       |     |       |     |       |     |       |
|                                                   |       |     |       |     |       |     |       |
| Payment of accrued interest with proceeds  from Buyout |       | $        | —     |     | $          | —   |       | $ | 226 |   |
|                                                   |       |     |       |     |       |     |       |
| Noncash  investing and financing activities:           |       |     |       |     |       |     |       |
|                                                   |       |     |       |     |       |     |       |
| Acquisition of assets with long-term debt              |       | $        | —     |     | $          | —   |       | $ | 164,912 |   |
|                                                   |       |     |       |     |       |     |       |
| Acquisition of assets with contributed  equity         |       | $        | —     |     | $          | —   |       | $ | 16,021 |   |
|                                                   |       |     |       |     |       |     |       |
| Acquisition of assets with gaming financing            |       | $        | 335        |     | $          | 8,974    |       | $ | 1,537 |   |
|                                                   |       |     |       |     |       |     |       |
| Equity contribution                                    |       | $        | 1,377      |     | $          | —   |       | $ | — |   |
|                                                   |       |     |       |     |       |     |       |
| Exchange of minority interest for equity               |       | $        | 1,070      |     | $          | —   |       | $ | — |   |
|                                                   |       |     |       |     |       |     |       |
| Distribution of property                               |       | $        | —     |     | $          | —   |       | $ | 851 |   |
|                                                   |       |     |       |     |       |     |       |
| Payment of financing fees with proceeds  from Buyout   |       | $        | —     |     | $          | —   |       | $ | 9,639 |   |
|                                                   |       |     |       |     |       |     |       |
| Payment of equity costs with proceeds from  Buyout     |       | $        | —     |     | $          | —   |       | $ | 274 |   |

 

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

 

48

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** **

**Black Gaming, LLC**

**Notes toConsolidated Financial Statements**

**1.**              Organization and Description of Businessand Basis of Presentation

** **

Black Gaming, LLC (the “BG LLC”), through its whollyowned subsidiaries, B&BB, Inc. (doing business as Virgin RiverHotel/Casino/Bingo) (“B&BB”) and Virgin River Casino Corporation (“VRCC”)and its wholly owned subsidiary RBG LLC (doing business as CasablancaResort/Casino/Golf/Spa) (“RBG”) and its wholly owned subsidiary CasablancaResorts, LLC (doing business as Oasis Resort & Casino) (“Resorts LLC”)(collectively the “Company”) is engaged in the hotel casino industry inMesquite, Nevada.

 

BG LLC was organized in Nevada on August 4, 2006 inanticipation of modifying B&BB’s and VRCC’s organizational structurethrough a holding company reorganization (“Reorganization”) for VRCC andB&BB. The Reorganization, which included a transfer of B&BB and VRCCshares for membership interests in BG LLC, was completed on December 31, 2006. Asa result of the reorganization, the Robert R. Black, Sr. Gaming PropertiesTrust (the “Black Trust”) owns 99.03% of the membership interests and GlennTeixeira owns .97% of the membership interests. The members’ liability islimited to the amount of capital contributions they are required to makepursuant to BG LLC’s operating agreement.

 

Immediately prior to the Reorganization, VRCCacquired, directly and indirectly, an additional aggregate 11.2% ownership inRBG, LLC (“RBG”) as a result of the following transaction:

 

•                  VRCC received 100 shares of R. Black, Inc. (“RBI”) from the Robert R.Black, Sr. Gaming Properties Trust (the “Black Trust”). The Black Trust owns100% of the outstanding shares of VRCC. The 100 shares of RBI representing 100%of the outstanding capital stock of RBI, was exchanged for 3.68 shares of VRCCheld by the Black Trust, representing 3.68% of the outstanding capital stock ofVRCC. RBI does not have any material operations, liabilities or assets otherthan a 5.47% ownership in RBG. The transfer of shares of RBI to VRCC wasaccounted for at the historical cost of RBG as RBI and VRCC were under commoncontrol.

 

•                  VRCC received a 3.8% membership interest in RBG from the Black Trust inexchange for 2.57 shares of VRCC held by the Black Trust, representing 2.57% ofthe outstanding capital stock of VRCC. The transfer of membership interests ofRBG to VRCC was accounted for at historical cost as the Black Trust and VRCCwere under common control.

 

•                  VRCC received a 1.92% membership interest in RBG from Glenn Teixeira inexchange for 1.29 shares of VRCC held by the Black Trust, representing 1.29% ofthe outstanding capital stock of VRCC. The acquisition of the membershipinterests from RBG from Glenn Teixeira was accounted for at fair value as itwas considered an acquisition of a minority interest of a subsidiary. Basedupon an internal analysis the fair value of Glenn Teixeira’s interestapproximated book value.

 

The accompanying consolidated financial statements asof December 31, 2006 and for the three years ending December 31, 2006 includethe accounts of the Company and all of its majority-owned subsidiaries and aremaintained in accordance with accounting principles generally accepted in theUnited States of America. The transfer of shares of B&BB and VRCC formembership interests in BG LLC and the presentation in the accompanying consolidatedfinancial statements have been accounted for as a reorganization of entitiesunder common control in a manner similar to a pooling-of-interests. Accordingly,the contributed assets and assumed liabilities were recorded at VRCC’s andB&BB’s historical cost basis. Since VRCC and B&BB were under commoncontrol, no adjustments in the accompanying consolidated financial statementswere necessary to conform to similar accounting policies. The financialstatements have been prepared as though the reorganization of entities undercommon control took place as of the beginning of the periods presented. Theacquisition of Glenn Teixeira’s interest was presented as of the date theexchange occurred on December 31, 2006. All significant intercompany balancesand transactions have been eliminated.

 

49

----

 

**Black Gaming, LLC**

**Notes toConsolidated Financial Statements**

 

**1.**              Organizationand Description of Business and Basis of Presentation (cont’d)

 

**The (loss) income before cumulative effect in achange of accounting principle and minority interest of VRCC and B&BB forthe years ended December 31, 2005 and 2004 were as follows (amounts inthousands):**

 
| ** ** | ** ** | **Year ended   December 31,   2005** | ** ** | **Year ended   December 31,   2004** | ** ** |
|------------|------------|--------------------------------------|------------|--------------------------------------|------------|
|       |       |                                 |       |                                 |       |
| VRCC       |       | $                                    | (8,633     | )                                    | $          | 2,675 |   |
| B&BB   |       | 283                                  |       | 1,840                                |       |
|       |       | $                                    | (8,350     | )                                    | $          | 4,515 |   |

 

On December 20, 2004, VRCC, RBG and B&BBentered into a series of transactions whereby they issued $125.0 millionaggregate principal amount of Senior Secured Notes due 2012 and $66.0 millionaggregate principal amount at maturity ($39.9 million in gross proceeds)of Senior Subordinated Notes due 2013, and received a $16.0 million equitycontribution from the Black Trust and RBI. The proceeds from the above offeringwere used to purchase the interests held by certain affiliated 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, VRCC,and B&BB as Purchasers (see Note 4). As a result of the Buyout, the BlackTrust obtained the remaining 80.97% interest in B&BB and 75.0% interest inVRCC. VRCC along with RBI obtained 32.69% of the membership interest in RBGthat was being purchased. The remaining proceeds were utilized to repay$64.0 million owed under the then existing credit facility and the$2.0 million promissory note payable to a selling shareholder (see Note 9).Five days prior to the Buyout, RBG terminated the lease with MDW and certainassets were disposed of (see Note 10). As a result of these transactions, theBlack Trust and RBI control VRCC, RBG and B&BB. In addition, VRCC, RBG andB&BB are co-issuers on the Senior Secured and Senior Subordinated Notes andall three entities are jointly managed and share resources.

 

**2.**              Summaryof Significant Accounting Policies

** **

***Casino Revenue and Promotional Allowances***—In accordance with industry practice, theCompany recognizes as casino revenue the net win from gaming activities, whichis the difference between gaming wins and losses. The retail value of rooms,food and beverage furnished to customers without charge is included in grossrevenues and then deducted as promotional allowances. The estimateddepartmental costs of providing such promotional allowances are included incasino costs and expenses and consist of the following (amounts in thousands):

 
| ** **         | ** ** | **Year ended   December 31,   2006** | ** ** | **Year ended   December 31,   2005** | ** ** | **Year ended   December 31,   2004** | ** ** |
|--------------------|------------|--------------------------------------|------------|--------------------------------------|------------|--------------------------------------|------------|
|               |       |                                 |       |                                 |       |                                 |       |
| Food and  beverage |       | $                                    | 9,798      |                                 | $          | 10,095                               |       | $ | 9,963 |   |
| Hotel              |       | 4,795                                |       | 3,585                                |       | 2,823                                |       |
| Other              |       | 2,681                                |       | 1,944                                |       | 1,489                                |       |
|               |       | $                                    | 17,274     |                                 | $          | 15,624                               |       | $ | 14,275 |   |

 

50

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**Black Gaming, LLC**

**Notes toConsolidated Financial Statements**

 

**2.**              Summary of Significant Accounting Policies (cont’d)

** **

The Company’s slot club program (the “Slot Program”)allows customers to redeem points earned from their gaming activity at therespective property for complimentary food, beverage, rooms, entertainment andmerchandise. At the time redeemed, the retail value of complimentaries underthe Slot Program is recorded as revenue with a corresponding offsetting amountincluded in promotional allowances. The cost associated with complimentaryfood, beverage, rooms, entertainment and merchandise redeemed under the SlotProgram is recorded in casino costs and expenses.

 

***Vacation Interval Sales***—The Company recognizes revenue on thesale of vacation intervals when a minimum of 10% of the sales price has beenreceived in cash, collectibility of the receivable representing the remainderof the sales price is reasonably assured, and the Company has completedsubstantially all of the obligations with respect to any development related tothe real estate sold.

 

***Cash and Cash Equivalents***—The Company considers all highly liquidinvestments with purchased maturities of three months or less to be cashequivalents. Bank overdraft represents a negative cash balance that has beenreclassified to current liabilities.

 

***Inventories***—Inventories are stated at the lower ofcost or market value. Cost is determined by the first-in, first-out method.

 

***Property Held for VacationInterval Sales***—Propertyheld for vacation interval sales includes the acquisition costs of the vacationintervals and renovations and the cost of land, development and construction ofthe vacation interval project. As intervals are sold, the cost of the intervaland the estimated cost of renovations or the estimated total costs atcompletion for the project are charged ratably to cost of vacation intervalsales. Interest on renovations or development and construction of vacationintervals is capitalized or charged to expense depending on the duration of therenovations.

 

***Notes and Accounts Receivable***—The Company’s notes receivablesoriginate from the Company’s time share operations and are consideredhomogenous and are evaluated for impairment collectively, except for individualreceivables placed on nonaccrual status, in which case receivables are reviewedindividually for impairment. In January of 2006, the Company adopted theprovisions of SFAS 152, “*Accounting for Real EstateTime-Sharing Transactions*.” SFAS 152 amends existing accountingguidance to reference the financial accounting and reporting guidance for realestate time-sharing transactions provided in AICPA Statement of Position 04-02,“*Accounting for Real Estate Time-SharingTransactions*.” In determining the allowance for possible creditlosses, the Company, in accordance with SFAS 152, uses a technique referred toas static pool analysis, which tracks uncollectible note receivables based oneach year’s sales over the entire life of those notes. The Company considerswhether the historical economic conditions are comparable to current economicconditions. If current economic conditions differ from the economic conditionsin effect when the historical experience was generated, the Company adjusts theallowance for possible credit losses to reflect the expected effects of currenteconomic conditions on uncollectibility. The Company groups all notes receivablesin one pool for analytical purposes based on historical collectibility andcustomer demographics. As a result of the change in accounting for theallowance for possible credit losses, the Company has recorded in theaccompanying consolidated statement of operations for the year ended December31, 2006, a cumulative effect of a change in accounting principle of $196,000to increase the allowance for possible credit losses.

 

The Company’s accounts receivable represent amountsdue from patrons for gaming activities, hotel and other.

 

Bad debt expense for notes and accounts receivable totaled $59,000, $129,000 and $301,000 for theyears ended December 31, 2006, 2005 and 2004, respectively.

 

51

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** **

**Black Gaming, LLC**

**Notes to Consolidated Financial Statements**

 

**2.**              Summary of Significant Accounting Policies (cont’d)

** **

***Fair Value of FinancialInstruments***—The carrying value of the Company’s cash and cashequivalents, receivables, accounts payable and debt, other than the Company’s Notes, approximates fair value primarilybecause of the short maturities of these instruments. The fair value on theNotes is based on quoted market prices.

 

***Property and Equipment***—Property and equipment is stated atcost, including interest capitalized on internally constructed assetscalculated at the overall weighted-average borrowing rate of interest.

 

Depreciation and amortization is provided on astraight-line basis over the assets’ estimated useful lives. The estimated usefullives are as follows: 

 

| Buildings                         |   | 31.5 to 39.5 years |
|-----------------------------------|--------|--------------------|
| Land improvements                 |   | 15 years           |
| Leasehold improvements            |   | 5 to 10 years      |
| Furniture, fixtures and equipment |   | 5 years            |

 

The Company evaluates the carrying value for realestate inventories, including property held for vacation interval sales, inaccordance with FASB Statement No. 144, *Accountingfor the Impairment or Disposal of Long-lived Assets* (“SFAS 144”).SFAS 144 requires that when events or changes in circumstances indicatethat the carrying amount of an asset may not be recoverable, companies shouldevaluate the need for an impairment write-down. Impairment write-downs arerecorded to real estate inventories when indicators of impairment are presentand the undiscounted cash flows estimated to be generated from those assets areless than the carrying amount of the assets. When an impairment write-down isrequired, the related assets are adjusted to their estimated fair value lesscosts to sell. See Note 14.

 

***Income Taxes***— The Company is a limited liabilitycompany. As such, federal income taxes are an obligation of the individualowners and no provision for income taxes is reflected in the accompanyingconsolidated financial statements.

 

***Advertising Costs***—Advertising costs, with the exception oftelevision advertising, incurred by the Company are expensed as incurred.Television advertising is expensed the first time the respective advertising isaired. Advertising costs included in general and administrative expenses were$5.4 million, $6.6 million and $4.5 million for the years endedDecember 31, 2006, 2005 and 2004, respectively.

 

***Deferred Financing Costs***—Deferred financing costs are amortizedto interest expense over the term of the related financing.

 

***Goodwill and Other IntangibleAssets***—Goodwillassociated with the Buyout totaled $12.5 million at December 31, 2006and 2005. Other intangible asset, represent acquired customer lists, which isstated at cost net of accumulated amortization, and trademarks. Trademarkstotaled $10.5 million at December 31, 2006 and 2005. Customer lists, originallyvalued at $21.3 million, totaled $16.3 million and $19.8 million as ofDecember 31, 2006 and 2005, respectively. These costs are being amortizedon a straight-line basis over the assets’ revised estimated useful life ofapproximately seven years effective January 1, 2006. Total accumulatedamortization related to customer lists was $5.0 million as of December 31, 2006.During the year ended December 31, 2005, these costs were amortized on astraight-line basis over three years. Amortization expense was $3.5 million,$1.5 million and $0.3 million for the years ended December 31, 2006, 2005and 2004, respectively. Future amortization expense of intangible assets isestimated to be approximately $3.5 million per annum.

 

The Company reviews intangible assets that are subjectto amortization for impairment in accordance with SFAS 144. In accordancewith SFAS 144, an impairment loss will be recognized if the carryingamount of an intangible asset is not recoverable and its carrying amountexceeds its fair value. The Company did not record any impairment lossesrelated to its intangible assets during the years ended December 31, 2006, 2005and 2004.

 

52

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**Black Gaming, LLC**

**Notes toConsolidated Financial Statements**

 

**2.**              Summary of Significant Accounting Policies (cont’d)

** **

After an impairment loss is recognized, the adjustedcarrying amount of the intangible asset becomes the new accounting basis.

 

***Interest Rate Swaps***—The Company, from time to time, has usedinterest rate swaps and similar financial instruments to assist in managinginterest incurred on its long-term debt. The difference between amountsreceived and amounts paid under such agreements, as well as any costs or fees,is recorded as a reduction of, or addition to, interest expense as incurredover the life of the swap or similar financial instrument. The Company accountsfor interest rate swap agreements in accordance with SFAS No. 133, “*Accounting for Derivative Instruments and HedgingActivities*,” and its corresponding amendments under SFAS 138and SFAS 149. SFAS 133 requires the Company to measure every derivativeinstrument (including certain derivative instruments embedded in othercontracts) at fair value and record them in the balance sheet as either anasset or liability. Changes in fair value of derivatives are recorded currentlyin earnings as a change in fair value of the swap unless special hedgeaccounting criteria are met whereby the change is recorded as a component ofother comprehensive income. During the year ended December 31, 2004, theCompany’s cash flow hedge became ineffective and, accordingly, the change infair value is being accounted for in earnings on the consolidated statements ofoperations for the years ending December 31, 2006, 2005 and 2004. As ofDecember 31, 2006 the hedging agreements have expired.

 

***Use of Estimates***—The preparation of financial statementsin conformity with U.S. generally accepted accounting principles requires managementto make estimates and assumptions that affect the reported amounts of assetsand liabilities and disclosure of contingent assets and liabilities at the dateof the financial statements, and the reported amounts of revenues and expensesduring the reporting period. Actual results could differ from those estimates.

 

***Players Club Liability***—The Company adopted the consensusprovisions of EITF 00-22—“*Accounting for Points andCertain Other Time-Based or Volume-Based Sales Incentive Offers, and Offers forFree Products or Services to Be Delivered in the Future*.”EITF 00-22 requires that the redemption of points, such as points earnedin slot players clubs, be recorded as a reduction of revenue.

 

Althoughthe consensus reached in EITF 00-22 applies to a redemption of points forcash as opposed to a redemption of points for free products and services,management believes the premise of EITF 00-22 applies to the Company’sslot club program, which provides for the redemption of points for only freeproducts and services (and not for cash). The Company’s One Card Slot Programallows customers to redeem points earned from their gaming activity at all theCompany’s properties for complimentary food, beverage, rooms, entertainment andmerchandise. At the time redeemed, the retail value of complimentaries isrecorded as revenue with a corresponding offsetting amount included inpromotional allowances. The cost associated with complimentary food, beverage,rooms, entertainment and merchandise redeemed is recorded in casino costs andexpenses. The Company also records a liability for the estimated cost of theoutstanding points related to the Slot Program.

 

***Self-Insurance Reserves*****–**The Company reviews self-insurancereserves at least quarterly. The amount of reserve is determined by reviewingactual expenditures for the previous twelve-month period and reviewing reportsprepared by the third party plan administrator for any significant unpaidclaims. The reserve is accrued at an amount that approximates the amount neededto pay both reported and unreported claims as of the balance sheet date, whichmanagement believes are adequate.

 

***Segment Information***—It is management’s belief that the Company’soperations are part of a single segment which is the casino and hotel businessand related amenities. The Company believes that it meets the “economicsimilarity” criteria established by SFAS No. 131, and as a result, theCompany aggregates all of its properties into one operating segment. All of ourproperties offer similar products, cater to the same customer base, are alllocated in the Mesquite, Nevada, area, have the same regulatory and taxstructure, share the same marketing techniques and are all directed by acentralized management structure.

 

53

----

 

**Black Gaming, LLC**

**Notes to Consolidated FinancialStatements**

 

**2.**              Summary of Significant Accounting Policies (cont’d)

** **

Inaddition, management believes that all of the Company’s ancillary operationssuch as golf course operations, spa, timeshare and other amenities are in placeto increase and enhance the casino and hotel business.

 

***Reclassifications***—Certain balance sheet and income statementamounts reported in the prior years have been reclassified to follow theCompany’s current year’s reporting practice.

 

***Recently Issued Accounting Standards***— In February 2007, the FASB issued SFAS No.159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“FAS159”). SFAS No. 159 permits entities to choose to measure at fair value manyfinancial instruments and certain other items that are not currently requiredto be measured at fair value. Subsequent changes in fair value for designateditems will be required to be reported in earnings in the current period. SFASNo. 159 also establishes presentation and disclosure requirements for similartypes of assets and liabilities measured at fair value. SFAS No. 159 iseffective for financial statements issued for fiscal years beginning afterNovember 15, 2007. The Company is currently assessing the effect ofimplementing this guidance, which depends on the nature and extent of itemselected to be measured at fair value, upon initial application of the standardon January 1, 2008.

 

InSeptember 2006, the Financial Accounting Standards Board (“FASB”) issuedSFAS 158, “Employers’ Accounting for Defined Benefit Pension and OtherPostretirement Plans”. SFAS 158 applies to all plan sponsors who offer definedpostretirement benefit plans and requires an entity to:

 

•                  Recognize in its balance sheet an asset for adefined benefit postretirement plan’s overfunded status or a liability for aplan’s underfunded status.

 

•                  Measure a defined benefit postretirement plan’sassets and obligations that determine its funded status as of the end of theemployer’s fiscal year.

 

•                  Recognize changes in the funded status of adefined benefit postretirement plan in comprehensive earnings in the year inwhich the changes occur.

 

The Company does not have any defined benefit plans,therefore, the adoption did not have an impact on our results of operations orfinancial position.

 

InSeptember 2006, the FASB issued SFAS 157, “Fair Value Measurements”. Thisstatement defines fair value, establishes a framework for measuring fair valuefor both assets and liabilities through a fair value hierarchy and expandsdisclosure requirements. SFAS 157 is effective for financial statements issuedfor fiscals years beginning after November 15, 2007 and interim periodswithin those fiscal years. The Company is currently evaluating SFAS 157 and hasnot yet determined the impact the adoption will have on the consolidatedfinancial statements.

 

54

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**Black Gaming, LLC**

**Notes to Consolidated FinancialStatements**

 

**2.**              Summary of Significant Accounting Policies (cont’d)

** **

In September 2006, the Securities and ExchangeCommission (“SEC”) released Staff Accounting Bulletin (“SAB”) No. 108, “Consideringthe Effects of Prior Year Misstatements when Quantifying Misstatements inCurrent Year Financial Statements” (“SAB No. 108”). SAB No. 108provides interpretive guidance on the SEC’s views on how the effects of thecarryover or reversal of prior year misstatements should be considered inquantifying a current year misstatement. The provisions of SAB No. 108were effective for the Company for the fiscal year ended December 31,2006. The adoption of SAB No. 108 had no effect on the Company’s financialstatements for the year ended December 31, 2006.

 

**3.****             ****Discontinued Operations**

 

As part of a strategic plan to dispose of non-core hotelassets, during the fourth quarter of 2006, the Company began marketing for sale approximately 350 acres ofland owned by Resorts LLC’s subsidiary, Oasis Recreational Properties, Inc., inthe state of Arizona located immediately adjacent to the city of Mesquite,Nevada, including the land underlying the Company’s Palms Golf Course and OasisGun Club. The Company anticipates operating and generating operating cashflow from the golf course and gun club until its disposition. In anticipationof the marketing of the golf course property, on August 17, 2006, Resorts, LLC,entered into several agreements with WSR, Inc, the former owners of the OasisHotel & Casino, to terminate WSR’s remaining rights in the golf courseproperty, among other matters, for approximately $1.1 million.  Pursuantto the agreements, the funds paid to WSR will be used by WSR to remediate theexisting environmental liability (see Note 12) at the Oasis Hotel & Casinowhich continues to be an obligation of WSR.  The 350 acres of land andcertain other assets of Oasis Recreational Properties, Inc. met the “held forsale” and “discontinued operations” criteria in accordance with SFAS 144.

 

The following sets forth the discontinued operations forthe years ended December 31, 2006, 2005 and 2004 related to Oasis RecreationalProperties, Inc’s assets held for sale (in thousands):

 
| ** **                         | ** ** | **Year Ended   December 31,   2006** | ** ** | **Year Ended   December 31,   2005** | ** ** | **Year Ended   December 31,  2004** | ** ** |
|------------------------------------|------------|--------------------------------------|------------|--------------------------------------|------------|------------------------------------------|------------|
|                               |       |                                 |       |                                 |       |                                     |       |
| Operating  revenues                |       | $                                    | 3,185      |                                 | $          | 3,358                                    |       | $ | 3,506 |   |
| Operating  expenses                |       | 3,164                                |       | 3,597                                |       | 3,376                                    |       |
| Depreciation  and amortization     |       | 268                                  |       | 368                                  |       | 331                                      |       |
| Loss on  retirement of debt        |       | —                               |       | —                               |       | 22                                       |       |
| Interest  expense                  |       | —                               |       | 4                                    |       | 10                                       |       |
|                               |       |                                 |       |                                 |       |                                     |       |
| Loss from  discontinued operations |       | $                                    | (247       | )                                    | $          | (611                                     | )          | $ | (233 | ) |

 

The following sets forth the assets that areheld for sale that are related to the discontinued operations (in thousands):

 
| ** **                                    | ** ** | **December 31,** | ** ** |
|-----------------------------------------------|------------|------------------|------------|
| ** **                                    | ** ** | **2006**         | ** ** | **2005** | ** ** |
| ASSETS                                        |       |             |       |   |   |
| Inventory                                     |       | $                | 93         |   | $ | 107 |   |
| Prepaid  expenses                             |       | 151              |       | 55 |   |
| Property and  equipment, net                  |       | 8,016            |       | 8,023 |   |
| Other assets                                  |       | 1,100            |       | — |   |
|                                          |       |             |       |   |   |
| Total assets  of discontinued operations      |       | $                | 9,360      |   | $ | 8,185 |   |
|                                          |       |             |       |   |   |   |   |
| LIABILITIES                                   |       |             |       |   |   |   |   |
|                                          |       |             |       |   |   |   |   |
| Accounts  payable                             |       | $                | 31         |   | $ | — |   |
|                                          |       |             |       |   |   |   |   |
| Accrued  liabilities                          |       | 221              |       | 156 |   |
|                                          |       |             |       |   |   |   |   |
| Total  liabilities of discontinued operations |       |             | $          | 252 |   |   | $ | 156 |   |
|                                               |            |                  |            |  |  |  |  |  |  |

** **

**55**

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**Black Gaming, LLC**

**Notes to Consolidated FinancialStatements**

 

**4.**              Purchaseof Equity Interests

** **

On December 20, 2004, pursuant to the Agreementfor Purchase of Equity Interests described in Note 1, the Black Trust andRBI acquired certain interests in B&BB, VRCC and RBG for$101.4 million. During the year ended December 31, 2005, the Company paidan additional $1.8 million to the previous owners pursuant to the Agreement forPurchase of Equity Interests. The Company incurred approximately$10.6 million in capitalized deferred financing fees related to theissuance of the Notes, of which $9.0 million, net of accumulated amortization,is recorded in the accompanying consolidated balance sheet at December 31, 2006.The Company also incurred $274,000 in costs during 2004 associated with theAgreement for Purchase of Equity Interests which were charged to equity in theaccompanying consolidated financial statements. Management originally valuedthe 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 building improvements were valued based uponcomparable values of recent sales in the Mesquite, Nevada market and 3rdparty market valuations of comparable assets in Mesquite, Nevada. Forequipment, management recorded these assets at book value, which was deemed tobe fair value, considering the relative age and working condition of theequipment. Intangible assets, representing the Company’s customer list and slotclub program, were recorded at fair value, which was calculated based uponcomparable customer lists and slot programs with other casinos operating in theLas Vegas and surrounding market. In accordance with the provisions of SFAS No.141, the remainder of the purchase price was allocated to goodwill. Managementbelieves that the goodwill arose from the Company’s dominance in the growingMesquite, Nevada market, the value of the existing workforce and existingaccounting and operating infrastructure.

 

Subsequentto management’s initial valuation, a third-party business valuation wasobtained in the fourth quarter of 2005. Based upon the independent valuation, afinal allocation of the purchase price was prepared.

 

Thefollowing table summarizes the estimated fair values of the assets acquired andliabilities assumed by the Company at the date of acquisition based upon thefinal valuation (in thousands):

 
| ** **                | ** ** | **At   December 20, 2004** | ** ** |
|---------------------------|------------|----------------------------|------------|
|                      |       |                       |       |
| Current  assets           |       | $                          | 15,600     |   |
| Property and  equipment   |       | 105,200                    |       |
| Other  non-current assets |       | 3,300                      |       |
| Intangibles               |       | 31,900                     |       |
| Goodwill                  |       | 12,500                     |       |
| Total assets acquired     |       | 168,500                    |       |
| Current liabilities       |       | 12,800                     |       |
| Long-term  liabilities    |       | 1,200                      |       |
| Long-term  debt assumed   |       | 53,300                     |       |
| Total liabilities assumed |       | 67,300                     |       |
|                      |       |                       |       |
| Net assets acquired       |       | $                          | 101,200    |   |

** **

**56**

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**Black Gaming, LLC**

**Notes to Consolidated FinancialStatements**

 

**4.**              Purchaseof Equity Interests (con’t)

** **

The following unaudited pro forma consolidatedfinancial information for the Company has been prepared assuming the Buyoutoccurred on January 1, 2004 (in thousands):

 
| ** **              | ** ** | **Year Ended  December 31, 2004** | ** ** |
|-------------------------|------------|-----------------------------------|------------|
|                    |       |                              |       |
| Net revenues            |       | $                                 | 163,561    |   |
| Income from  operations |       | $                                 | 9,154      |   |
| Net loss                |       | $                                 | (12,333    | ) |

 

 

**5.****             ****Property and Equipment**

 

Property and equipment consists of the following (inthousands):

 

| ** **                                           | ** ** | **December 31,** | ** ** |
|------------------------------------------------------|------------|------------------|------------|
| ** **                                           | ** ** | **2006**         | ** ** | **2005** | ** ** |
|                                                 |       |             |       |   |   |
| Land                                                 |       | $                | 21,421     |   | $ | 25,764 |   |
| Buildings                                            |       | 73,232           |       | 71,523 |   |
| Land and  leasehold improvements                     |       | 28,125           |       | 25,071 |   |
| Furniture,  fixtures and equipment                   |       | 70,159           |       | 62,850 |   |
| Construction  in progress                            |       | 3,049            |       | 1,936 |   |
|                                                 |       | 195,986          |       | 187,144 |   |
| Less—accumulated  depreciation and amortization |       | (73,823          | )          | (60,920 | ) |
| Property and  equipment, net                         |       | $                | 122,163    |   | $ | 126,224 |   |

 

The Company owns the Virgin River Convention Center which is opened asneeded during the year to provide additional rooms for the Company’soperations. As of December 31, 2006 and 2005, these assets are reported inthe accompanying consolidated balance sheets at $5.3 million, net ofaccumulated depreciation.

 

As a result of the third party business valuation thatwas conducted in the fourth quarter of 2005, the Company has re-evaluated theuseful lives of its slot machines (included in furniture, fixture and equipmentabove) and effective January 1, 2006, changed that estimate from seven years tofive years.  For the years ended December 31, 2006, 2005 and 2004,operating income of the Company decreased approximately $1.1 million, $0 and$0, respectively, as a result of the change in the estimated lives.

 

As part of the on-going construction activities relatedto certain projects of the Company, the Company capitalized approximately $94,000and $0 in interest for the years ended December 31, 2006 and 2005, respectively.

 

**6.****              Notes Receivable**

 

Notes receivable consist of the following (inthousands):

 

| ** **                            | ** ** | **December 31,** | ** ** |
|---------------------------------------|------------|-----------------------|------------|
| ** **                            | ** ** | **2006**              | ** ** | **2005** | ** ** |
|                                  |       |                  |       |   |   |
| Vacation  interval notes receivable   |       | $                     | 1,571      |   | $ | 2,519 |   |
| Allowance  for possible credit losses |       | (342                  | )          | (395 | ) |
| Total notes  receivable               |       | 1,229                 |       | 2,124 |   |
| Less:  current portion                |       | (349                  | )          | (303 | ) |
| Non-current  notes receivable         |       | $                     | 880        |   | $ | 1,821 |   |

 

57

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**Black Gaming, LLC**

**Notes to Consolidated FinancialStatements**

 

**6.****              Notes Receivable (con’t.)**

 

Notes generated from the sale of vacation intervalsgenerally bear interest at annual rates ranging from 12.75% to 14.75% and haveterms of 5 to 7 years. The vacation interval notes receivable arecollateralized by the right to use and deeds of trust on the vacation intervalsold and serve as collateral to the Hypothecation Note (see Note 9).

 

Maturities of notes receivable are as follows (inthousands):

 
| Years ending December 31: |   |   |   |
|---------------------------|--------|--------|--------|
| 2007                      |   | $      | 402    |   |
| 2008                      |   | 353    |   |
| 2009                      |   | 329    |   |
| 2010                      |   | 280    |   |
| Thereafter                |   | 207    |   |
|                      |   | 1,571  |   |
| Less allowance            |   | (342   | )      |
|                      |   | $      | 1,229  |   |

** **

**7.****              Accrued Liabilities**

 

Accrued liabilities consist of the following(in thousands):

 

| ** **                                         | ** ** | **December 31,** | ** ** |
|----------------------------------------------------|------------|-----------------------|------------|
| ** **                                         | ** ** | **2006**              | ** ** | **2005** | ** ** |
|                                               |       |                  |       |   |   |
| Accrued  management fees                           |       | $                     | 1,231      |   | $ | 1,239 |   |
| Accrued  taxes                                     |       | 1,358                 |       | 938 |   |
| Accrued  insurance                                 |       | 1,524                 |       | 1,669 |   |
| Accrued  Player's Club                             |       | 2,462                 |       | 2,278 |   |
| Accrued  wages, benefits and other personnel costs |       | 3,331                 |       | 1,851 |   |
| Accrued  interest on Senior Notes                  |       | 5,191                 |       | 4,335 |   |
| Accrued  other                                     |       | 3,898                 |       | 6,153 |   |
| Total  accrued liabilities                         |       | $                     | 18,995     |   | $ | 18,463 |   |

 

 

**8.****             ****GamingEquipment Financing**

 

The Company from time to time enters into agreementswith gaming manufacturers to finance the purchase of gaming equipment. Contractualterms of the agreements with the gaming manufactures consist of payment termsof less than one year to up to three years without interest. In the event thatan agreement with a gaming manufacturer extends past a year, the Company willimpute interest at a rate of 8%.

 

58

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**Black Gaming, LLC**

**Notes to Consolidated FinancialStatements**

 

**8.****             ****GamingEquipment Financing (con’t.)**

 

Gaming equipment financing consists of the following(in thousands): 

 
| ** **                                                                                                                                      | ** ** | **December 31,** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------|------------|
| ** **                                                                                                                                      | ** ** | **2006**         | ** ** | **2005** | ** ** |
| Gaming equipment financing to purchase 478  games, no payments for one year and monthly payments of $251 for 24 months  beginning February 2006 |       | $                | 3,139      |   | $ | 5,503 |   |
| Gaming equipment financing to purchase 68  games, no payments for one year and monthly payments of $43 for 24 months  beginning January 2006    |       | 534              |       | 945 |   |
| Gaming equipment financing to purchase 70  games, no payments for one year and monthly payments of $39 for 24 months  beginning March 2006      |       | 550              |       | 838 |   |
| Gaming equipment financing to purchase 80  games, monthly payments of $18 for 36 months beginning April 2005                                    |       | 393              |       | 665 |   |
| Gaming equipment financing to purchase 64  games, no payments for one year and monthly payments of $26 for 24 months  beginning February 2006   |       | 326              |       | 577 |   |
| Gaming equipment financing to purchase 38  games, monthly payments of $13 for 36 months beginning April 2005                                    |       | 200              |       | 312 |   |
| Gaming equipment financing to purchase 55  games, no payments for one year and monthly payments of $16 for 24 months  beginning January 2006    |       | 171              |       | 350 |   |
| Gaming equipment financing to purchase 20  games, no payments for one year and monthly payments of $7 for 36 months  beginning April 2005       |       | 87               |       | 167 |   |
| Gaming equipment financing. monthly  payments of $3 for 36 months beginning January 2005                                                        |       | 25               |       | 59 |   |
| Gaming equipment financing to purchase 4  games, monthly payments of $1 for 36 months beginning April 2005                                      |       | 18               |       | 32 |   |
| Gaming equipment financing to purchase 6  games, no payments for one year and monthly payments of $6 for 24 months  beginning February 2007     |       | 66               |       | — |   |
| Gaming equipment financing, monthly  payments of $1 for 36 months beginning July 2006                                                           |       | 29               |       | — |   |
| Gaming equipment financing, no payments for  18 months and monthly payments of $1 for 36 months beginning July 2006                             |       | 90               |       | — |   |
| Gaming equipment financing, no payments for  36 months and a lump sum payment of $95 due January 2008                                           |       | 28               |       | — |   |
| Gaming equipment financing with terms of  less than 12 months                                                                                   |       | —           |       | 96 |   |
|                                                                                                                                            |       | 5,656            |       | 9,544 |   |
|  Less:  current portion                                                                                                                    |       | (4,933           | )          | (4,175 | ) |
| Gaming equipment financing, long-term  portion                                                                                                  |       | $                | 723        |   | $ | 5,369 |   |

 

Maturities of gaming equipment financing are asfollows (in thousands):

 
| Years ending December 31: |   |   |   |
|---------------------------|--------|--------|--------|
| 2007                      |   | $      | 4,933  |   |
| 2008                      |   | 716    |   |
| 2009                      |   | 12     |   |
| 2010                      |   | — |   |
| Thereafter                |   | — |   |
|                      |   | 5,661  |   |
| Less debt  discount       |   | (5     | )      |
|                      |   | $      | 5,656  |   |

** **

**59**

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**Black Gaming, LLC**

**Notes to Consolidated FinancialStatements**

 

**9.**              Long-termDebt

** **

Long-term debt consists of the following (inthousands): 

 
| ** **                                                                                                                                                                                                                                                                                  | ** ** | **December 31,** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------|------------|
| ** **                                                                                                                                                                                                                                                                                  | ** ** | **2006**         | ** ** | **2005** | ** ** |
| Revolving credit facility totaling $15  million with Wells Fargo Foothill at a margin above prime or LIBOR, as  defined; collateralized by substantially all assets of the Company as defined                                                                                               |       | $                | —     |   | $ | 2,000 |   |
| 9% senior secured notes, interest payable  semiannually, principal due January 15, 2012, callable January 15, 2009                                                                                                                                                                          |       | 125,000          |       | 125,000 |   |
| 12 3⁄4% senior subordinated notes, non-cash  interest will accrue at an annual rate of 12 3⁄4% in the form of increase  accreted value until January 15, 2009. Beginning January 15, 2009, interest  payable semiannually, principal due January 15, 2013, callable January 15,  2009 |       | 51,298           |       | 45,333 |   |
| Promissory note payable to Wells Fargo  Equipment Finance, Inc. payable in monthly installments of $54 at an interest  rate of 6.97%, due June 2006                                                                                                                                         |       | —           |       | 537 |   |
| Hypothecation note at prime plus 3.0%  (10.25 at December 31, 2005), collateralized by certain notes receivable as  defined; guaranteed by one of the Members, due April 2004                                                                                                               |       | —           |       | 94 |   |
| Promissory note payable to Wells Fargo  Equipment Finance, Inc. payable in monthly installments of $14 at an interest  rate of 6.21%, due December 2006                                                                                                                                     |       | —           |       | 157 |   |
|                                                                                                                                                                                                                                                                                        |       | 176,298          |       | 173,121 |   |
| Less—current portion                                                                                                                                                                                                                                                                   |       | —           |       | (788 | ) |
| Total long-term debt                                                                                                                                                                                                                                                                        |       | $                | 176,298    |   | $ | 172,333 |   |

 

Maturities of long-term debt are as follows (inthousands):

 
| Years ending December 31: |   |    |    |
|---------------------------|--------|---------|---------|
| 2007                      |   | —  |    |
| 2008                      |   | —  |    |
| 2009                      |   | —  |    |
| 2010                      |   | —  |    |
| 2011                      |   | —  |    |
| Thereafter                |   | 191,000 |    |
|                      |   | 191,000 |    |
| Less debt  discount       |   | (14,702 | )       |
|                      |   | $       | 176,298 |   |
|                           |        |         |         |  |

** **

***Revolving Facility***

** **

Concurrent with the Buyout, the Company entered into afour-year $15.0 million senior secured credit facility (“Foothill Facility”)on December 20, 2004 with Wells Fargo Foothill, Inc. that matures inDecember 2008. The Foothill Facility is secured by substantially all the assetsof the Company. During the life of the Foothill Facility, the Company mayborrow up to the lesser of (1) $15.0 million less the Letter ofCredit Usage, as defined, less the Bank Product Reserve, as defined, or(2) the Borrowing Base, as defined, less the Letter of Credit Usage. AtDecember 31, 2006, no amounts were drawn under the Foothill Facility. Accordingly, the availability under the Foothill Facility at December 31, 2006was $15.0 million.

 

60

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**Black Gaming, LLC**

**Notes to Consolidated FinancialStatements**

 

**9.**              Long-termDebt (con’t.)

** **

Under the terms of the Foothill Facility, interestaccrues on the outstanding principal balance at LIBOR plus the LIBOR RateMargin, which is 3.5%, or the Base Rate, as defined, plus the Base Rate Margin,which is 2%. LIBOR was approximately 5.3% and prime was 8.25% atDecember 31, 2006. The Foothill Facility also contains certain financialand other covenants. These include a minimum trailing twelve-month Earningsbefore Interest, Taxes, Depreciation and Amortization (“EBITDA”) of $15,000,000for the Company and limitations on other indebtedness and capital expenditures,as defined. The Company was in compliance with these covenants at December 31,2006 and December 31, 2005, respectively.  The outstanding balance on theFoothill Facility is a joint and several obligation of the Company.

 

As part of the costs of entering into the FoothillFacility, the Company incurred approximately $0.5 million of deferredfinancing fees that will be amortized over the life of the facility.

 

***Senior Secured and SeniorSubordinated Notes***

 

In December 2004, as part of the Buyout, VRCC, RBG andB&BB (the “Issuers”) issued $125.0 million of 9% senior secured notes(“Senior Notes”) due on January 15, 2012 and $39.9 million in grossproceeds of 123⁄4% senior subordinated notes (“Senior Sub Notes”) dueJanuary 15, 2013 (collectively the “Notes”). The Notes are joint andseveral obligations of the Issuers and all current and future subsidiaries ofthe Issuers.

 

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

 

The indentures governing the Notes contain certaincustomary financial and other covenants, which limit the Company’s ability toincur additional debt. The indentures provide that the Company may not incuradditional indebtedness, other than specified types of indebtedness, unless theConsolidated Coverage Ratio, on a pro-forma basis after the incurrence of theadditional indebtedness is at least 2.00 to 1.00. As of December 31, 2006, theCompany has a Consolidated Coverage Ratio that is less than 2.00 to 1.00 andaccordingly has incurred $0 of additional indebtedness as defined.

 

The Indentures also containother covenants which limit the ability of the Issuers and Guarantors, asdefined, to pay dividends, redeem stock, or make other distributions, makeinvestments, create certain liens, enter into certain transactions withaffiliates, utilize proceeds from asset sales, transfer or sell assets, issueor sell equity interests of subsidiaries and enter into certain mergers andconsolidations, as defined in the Indentures. There are no restrictions relatedto the transfer of funds between the Issuers, Guarantors and their respectivesubsidiaries. The Issuers were in compliance with these covenants atDecember 31, 2006 and December 31, 2005.

 

The Senior Notes are securedby 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 Black Trust in the Issuers. The Guarantors are all thewholly owned subsidiaries of the Issuers. The Senior Notes are subordinated tothe security interests of the Foothill Facility. The Senior Sub Notes aresubordinate to the Senior Notes and all other indebtedness of the Company.

 

As part of the costs ofissuing the Notes, the Company incurred approximately $10.6 million in deferredfinancing fees. Within the $10.6 million in deferred financing fees is $7.7million in underwriter fees associated with the Notes. These costs are beingamortized over the life of the Notes.

 

61

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**Black Gaming, LLC**

**Notes to Consolidated FinancialStatements**

 

**9.****             ****Long-term Debt (con’t.)**

 

***Interest Rate Swaps***

 

During 2001, as part of entering into the OriginalCredit Agreement, the Company entered into two interest-rate swaps, each withnotional amounts equal to $28.0 million (the “Swaps”), to be utilized ascash-flow hedges to reduce the Company’s exposure to changes in interest rates.The Swaps effectively converted $56.0 million of the Company’s floatingrate debt to a fixed rate. The Swaps became effective on June 29, 2001 andterminated on June 30, 2006. The Company paid a fixed rate of 5.88% on theSwaps, which was priced to assume no value at inception.

 

The Swaps became completely ineffective during theyear ended December 31, 2004. Accordingly, for the years ended December 31,2006, 2005 and 2004, the change in fair value of the Swaps was accounted for asincome to current earnings. Specifically for the year ended December 31,2004, the Company recorded a loss relating to the change in the fair value ofthe Swaps totaling $1.5 million, which was equal to the write-off of thecumulative comprehensive loss of $5.3 million, net of the current year increasein fair value of the Swaps of $3.8 million. The total amount of the loss wasrecorded in the accompanying consolidated statement of operations of theCompany. As of December 31, 2006, the Company had no swap arrangements.The fair value of the Swaps at December 31, 2006 and 2005 was $0 and $0.2million respectively, and is included in the accompanying consolidated balancesheet. The notional amount of the Swaps at December 31, 2005 was $33.6 million.

 

The estimated fair value of the Company’s Senior Notesand Senior Sub Notes at December 31, 2006 and 2005 was $129.2 million, $46.5million, $127.5 million and $45.4 million, respectively. The estimated fairvalue amounts were based on quoted market prices. For all other indebtedness,the fair value approximates the carrying amount of the debt due to theshort-term maturities of the individual components of the debt.

 

**10.**       RelatedParty Transactions

** **

Wingnuts, Inc. is a company that owns an airplaneused by the Company. Wingnuts, Inc. is owned by the sole shareholder ofthe Black Trust along with various former shareholders of the Company.Wingnuts, Inc. charged the Company for business usage of the airplaneusing hourly rates for actual air time. Total charges for the years endedDecember 31, 2006, 2005 and 2004 were $0, $0 and $70,000, respectively.

 

MJB Development is a real estate construction companyowned by a former shareholder of the Company which provided constructionservices associated with hotel facilities of the Company. When performingconstruction services, the actual costs of construction, overhead charges, anda profit are charged to the Company. In addition to construction services, MJBDevelopment has also leased containers for storage to the Company. Totalcharges for construction and leasing of storage containers totaled $0, $2,000and $23,000 during the years ended December 31, 2006, 2005 and 2004, andare included in the accompanying consolidated statements of operations. Inaddition, during the year ended December 31, 2005, the Company paid MJBDevelopment $68,000 to purchase previously leased storage containers.

 

MDW is a Nevada limited-liability company in which thesole shareholder of the Black Trust has an interest. MDW owns a condominiumcomplex located in Mesquite, Nevada. The Company had entered into a leaseagreement with MDW whereby MDW gave the members of the CasaBlanca Vacation Club(the timeshare club associated with the CasaBlanca) the right to use and occupythe timeshare units located on the leasehold property. The remaining units atthe condominium complex were utilized by the CasaBlanca for hotel and apartmentpurposes. On December 15, 2004, pursuant to a termination agreement, theCompany terminated its lease with MDW. The rent payments paid by the Company toMDW during the years ended December 31, 2006, 2005, and 2004 were $0, $0 and$739,000, respectively, and are included in the consolidated statements ofoperations. The Company  recordedapproximately $0.9 million, $0.9 million, and $0 in other income related to thecondominium sales during the years ended December 31, 2006, 2005 and 2004,respectively. In addition, pursuant to the lease termination agreement, theCompany owed MDW $0 and $16,000 at December 31, 2006 and 2005, respectively.

 

62

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**Black Gaming, LLC**

**Notes to Consolidated FinancialStatements**

 

**10.**       RelatedParty Transactions (con’t)

** **

Virgin River Foodmart, Inc., a Nevadacorporation, (“Foodmart”) is owned by the sole shareholder of the Black Trustand former shareholders of VRCC. Pursuant to a lease agreement dated November1996, VRCC leased to Foodmart certain real property and the structures andimprovements contained thereon for the purposes of operating the Virgin RiverFood Mart. The term of the lease was for 30 years at approximately $18,500 amonth with Foodmart having the option to extend the lease for two additionalten year periods. Pursuant to the Buyout, the real property, structures andimprovements previously leased to Foodmart were not acquired by the BlackTrust, but were distributed to the shareholders of VRCC; therefore the leasebetween VRCC and Foodmart was terminated. Lease payments made to VRCC were $0,$0 and $222,000 for years ended December 31, 2006, 2005 and 2004,respectively, and are included in the accompanying consolidated statements ofoperations.

 

In addition, participants in the Company’s SlotProgram are able to redeem their points for gasoline at the Foodmart. Foodmartcharges the Company the retail amount of gas purchased with player points. Forthe years ended December 31, 2006, 2005 and 2004, Foodmart has charged theCompany $45,000, $351,000 and $456,000 respectively, for gasoline purchasedwith points from the Company’s Slot Program.

 

Black, LoBello &Sparks is a law firm managed by the daughter of the sole shareholder of theBlack Trust. TheCompany retains Black, LoBello & Sparks as outside legal counsel, andBlack, LoBello & Sparks has received legal fees for legal services inthe amount of $303,000, $131,000 and $196,000 for the years ended December 31,2006, 2005 and 2004, respectively.

 

Pursuant to the Indenture, Mr. Black is entitled to amanagement fee for his management of the Companies of up to 5% of EBITDA, asdefined. The Company has expensed $1.3 million and $1.2 million as of December31, 2006 and 2005, respectively. In addition, Mr. Black received managementfees totaling $2,000 for the year ended December 31, 2004.

 

During the year ended December 31, 2006, it wasdetermined upon completion of the Company’s income tax returns that $1.4 millionwas overpaid by the Company to Mr. Black for tax distributions during the yearended December 31, 2005. As a result, the Company offset that overpaymentagainst earned and unpaid management fees during the year ended December 31,2006 which resulted in an equity contribution of $1.4 million to the Company.

 

Gaming Research is a consulting firm retained toperform marketing research for the Company. The principal of Gaming Research isthe father of the Company’s chief operating officer. Gaming research receivedconsulting fees of $222,000, $117,000 and $0 for the years ended December 31,2006, 2005 and 2004, respectively.

 

The Company provided management and other services totwo related parties that manage and operate the home owners associations of thevacation intervals sold at the property. As of December 31, 2006 and 2005,respectively, included in the accompanying consolidated balance sheets,respectively, is a receivable for $384,000 and $95,000 related to amounts owedfor those services.

 

During 2006, the Company entered into an agreementwith Town Center Drive & 215, LLC. to lease executive office space. Theterm of the lease is 84 months at a rate of approximately $11,508 a month. Mr.Black is the owner and manager of Town Center Drive & 215, LLC.

 

63

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**Black Gaming, LLC**

**Notes to Consolidated FinancialStatements**

 

**11.****      ****401(k) Plan and Other Benefit Plans**

 

The Company implemented a defined contribution 401(k)plan, which covers all employees who meet certain age and length of servicerequirements and allows an employer contribution up to 40% of the first 6% ofeach participating employee’s compensation. Plan participants can elect todefer before tax compensation through payroll deductions. These deferrals areregulated under Section 401(k) of the Internal Revenue Code. The Company’sportion of the matching contributions for the years ended December 31,2006, 2005 and 2004 were $238,000, 232,000, and $237,000, respectively.

 

In October 2006, the Company adopted theBlack Gaming Long Term Incentive Plan (“LTIP”). LTIP is a long-term formulabased compensation plan utilizing EBITDA, as defined, Long-term Debt, asdefined, cash and a fixed multiple to compensate senior executives forincreasing the operating performance and financial condition of the Company inthe event the executive remains with the Company. Each measurement date, whichis December 31 of each fiscal year or the date of a Change in Control, asdefined in LTIP, using an enterprise value computation, the Company determinesa theoretical value of the Company’s equity based on the fixed multiple. Seniorexecutives who participate in LTIP will receive an award each measurement datethat is a percentage of the overall increase in the theoretical equity of theCompany at the measurement date over the highest previous theoretical equitycalculation from a prior measurement date. Such award is paid out in threeequal annual installments beginning one year after the measurement date. Withthe exception of certain events as defined by LTIP, senior executives must beemployed by the Company in order to receive a payment of the award. Futurecompensation, recognized in accordance with LTIP will be accounted for usingthe intrinsic value method allowed for nonpublic entities as defined andprescribed by SFAS 123(R) “Share Based Payment”. The Company awarded $205,000in the LTIP for the fiscal year ended December 31, 2005, of which $68,000 wasrecognized as compensation expense and paid during the year ended December 31,2006 and the remainder will be recognized as compensation expense equally overyears ending December 31, 2007 and 2008, respectively. As of December 31, 2006,the Company awarded $588,000 in the LTIP for the fiscal year ended December 31,2006 which will be recognized as compensation expense equally over the yearsending December 31, 2007, 2008 and 2009, respectively.

 

**12.**       Commitments and Contingencies

** **

***Capital Leases***—During 2001, ResortsLLC signed a lease agreement with Textron Financial Corporation to lease golfcarts for the Palms golf course over a four-year period beginningDecember 2001. The aggregate monthly payments, including interest andtaxes are $2,442 a month. This lease terminated during the year ended December31, 2005. During 1997, RBG signed a lease agreement with MDW Mesquite, LLC (“MDW”)for the use of their condominium complex, to be used to sell VacationIntervals, for a period of fifty years. Mr. Black is a member of MDW. Theobligation under this capital lease provides for aggregate monthly payments,including interest and taxes of $49,800 determined using an interest rate of9.25%. On January 5, 1999, the lease agreement was amended to provide foradditional monthly rental payments of $12,750 to MDW Mesquite, LLC.

 

Effective December 15, 2004, RBG and MDW terminatedtheir lease agreement. Under the terms of the MDW, LLC operating agreement andlease termination agreement, management believes that Mr. Black does not havethe ability to exercise control or significant influence over the operations ofMDW and accordingly the Company recorded a gain relating to the leasetermination of approximately $1.3 million in the accompanying consolidatedfinancial statements for the year ended December 31, 2004.

 

Pursuant to the agreement, the rental units under theoriginal lease agreement would be converted to condominiums to be offered forsale. In total, 197 condominiums will be offered for sale for approximately$44,000 to $69,000 a unit, depending on the size of the unit. Mr. Black willreceive 6% of the net sales proceeds from the sale of the condominium units, asdefined (the “fee”). MDW also will convey to RBG three timeshare units. Duringthe sales process, MDW and RBG will share equally the rental income from theremaining rental units pending their sale (“rental income”) and share

 

64

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**Black Gaming, LLC**

**Notes to Consolidated FinancialStatements**

 

**12.**       Commitments and Contingencies (con’t)

** **

equally the expenses of the condominium project,including debt service and the fee (“project expenses”). MDW also will pay RBG44% of the net sales proceeds from the sale of the condominium units less thefair market value of the three timeshare units conveyed to RBG. RBG advancedproject expenses for a six-month period beginning on December 15, 2004 tothe extent MDW did not have sufficient funds to pay the project expenses,provided, however, that the aggregate amount of the advances would not exceed$150,000. Until the aggregate amount of any such advances plus an additionalpayment of approximately 15% of the aggregate amount of such advances is repaidto RBG, all net sales proceeds and rental income would be payable to RBG. TheCompany recorded approximately $0.9 million in other income related to thecondominium sales during the year ended December 31, 2006 and 2005,respectively. In addition, pursuant to the lease termination agreement,Management has determined under the provisions of FIN 46(R) that they are notthe primary beneficiary of MDW and accordingly have not consolidated MDW inthese consolidated financial statements. As of December 31, 2006, allcondominiums under the agreement with MDW had been sold and the Company’saffiliation with MDW had ceased. As of December 31, 2006, MDW had total assetsof $10,000 (unaudited), liabilities of $10,000 (unaudited) and members’ equityof $0 (unaudited).

 

***Operating Leases***

 

In October 2005, the Companies entered into an agreementwith Wells Fargo Financial Leasing to lease golf maintenance equipment totalingapproximately $1.3 million. The term of the lease is 36 months at a rate of$29,000 per month.

 

In May 2005, the Companies entered into a leasearrangement with Dell Financial Services to lease desktop computers andservers. The term of the lease is 18 months at a rate of approximately $29,000a month. The lease also provides for a renewal period of an additional 18months at approximately $6,000 a month.

 

During 2003, RBG signed a lease agreement with WellsFargo Equipment Finance to lease golf carts for the Casablanca golf course overa three-year period beginning November 2003. The aggregate monthlypayments, including interest and taxes are $5,500 a month.

 

As part of the acquisition of the Oasis Resort Hotel andCasino, Resorts LLC has been assigned the rights to an agreement to lease theland which contains a portion of the golf course of the Oasis Casino and Hotelfrom the state of Arizona. The lease agreement is for a term of ten years thatbegan in May 1998 at an annual rate of $26,650 and increases every yearuntil the last year of the lease when the annual lease rate is $135,750.

 

As part of the acquisition of the Casablanca, the Company has beenassigned the rights to an agreement to lease the land and water rights whichcontain the golf course of the Casablanca. The lease agreement is for a term of99 years that began in June 1995 at a monthly lease rate of $18,000. In June2005 and every 5 years thereafter, the lease rate will be adjusted based on theincrease in the Consumer Price Index, as defined.

 

During2006, the Company entered into an agreement with Town Center Drive & 215,LLC to lease executive office space. The term of the lease is 84 months at arate of approximately $11,508 a month. The lease also provides for two – fiveyear options to extend the Lease at market price. The lease also requires the Company to pay its pro rata share of realestate taxes, operating expenses, and common area costs. In addition, theCompany has received leaseincentives in connection with this lease.The Company will recognize the benefits related to the lease incentives on a straight-line basis over the applicable lease term.

 

65

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**Black Gaming, LLC**

**Notes to Consolidated FinancialStatements**

 

**12.**       Commitments and Contingencies (con’t)

 

Future minimum lease paymentsunder operating leases for the five years subsequent to December 31, 2006are as follows (in thousands):
| ** ** | ** ** | **Years ending   December 31:** | ** ** |
|------------|------------|---------------------------------|------------|
| 2007       |       | $                               | 938        |   |
| 2008       |       | 693                             |       |
| 2009       |       | 408                             |       |
| 2010       |       | 408                             |       |
| Thereafter |       | 23,566                          |       |
|       |       | $                               | 26,013     |   |

 

Rent expense for the years ended December 31,2006, 2005 and 2004 were $1.8 million, $1.4 million and $1.3 million,respectively.

 

***Workers’ Compensation Claim***—In February 2004, an employee ofResorts LLC was killed while performing maintenance work on the Palms GolfCourse. As a result of the death, the Company has recorded a liability as ofDecember 31, 2006 of approximately $107,000, which represents the Company’sobligation to the family of the deceased under their workers’ compensationpolicy and the workers’ compensation laws of the State of Nevada.

 

***Litigation***—From time to time the Company is partyto various legal proceedings, most of which relate to routine mattersincidental to the business. Management does not believe that the outcome ofsuch proceedings will have a material adverse effect on the Company’sconsolidated financial position, cash flows or results of operations.

 

***Environmental Matter***—The Company has become aware that thereis contamination present on some of its properties apparently due to pastoperations, which included a truck stop and gas station. In particular,groundwater contamination at the Oasis property (which appears to have migratedonto the CasaBlanca property) is the subject of investigation and cleanupactivities being conducted by the prior owners of the Oasis (See Note 1).Management believes that the prior owners are responsible for such mattersunder an indemnity agreement negotiated at the time the Oasis was purchased;however, there is no assurance that the Company will not incur costs related tothis matter. Moreover, it is possible that future developments could lead tomaterial environmental compliance costs or other liabilities for the Companyand these costs could have a material adverse effect on our combined financialposition or results of operations. As of December 31, 2006 and 2005,respectively, no costs were incurred in connection with this matter.

 

***Other***—In January 2006, OasisInterval Ownership, LLC entered into an agreement with Global ExchangeDevelopment Corp. to sell substantially all of the unsold time share intervalsat the Oasis Hotel and Casino.  The sale is expected to close in threeseparate closings each involving approximately one-third of the unsold time shareintervals at the Oasis Hotel and Casino. Each close is expected to occur within6 months of the preceding close. The first and second closings occurred inJanuary and June 2006, respectively.

 

**13.****      ****Rental Revenue**

 

In November 2006, the Company entered into a leaseagreement with MDC Restaurants, LLC (“MDC”), a Nevada Limited Liability Companyand franchisee of Denny’s, Inc, whereby MDC will operate a Denny’s restaurantin the location of the former coffee shop of the Oasis Hotel & Casino. Thelease is for a five year term, with one five year renewal term and fiveone-year renewal terms. The Company will receive a minimum lease payment of$78,000 annually along with a percentage of rent based on revenue as defined inthe agreement. As part of entering the lease, the Company agreed to provide atenant improvement allowance of $212,500, $106,250 which was paid as ofDecember 31, 2006. This amount will be amortized as a reduction of rentalrevenue over the term of the lease.

 

In 1990, the Company entered into a lease agreement, which was lastamended in April 1995, with Westates Theater, Inc. to lease and operatetheaters at the Virgin River Hotel/Casino/Bingo. The term of the lease is for15 years from the last amendment date. The lease 

 

66

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** **

**Black Gaming, LLC**

**Notes toConsolidated Financial Statements**

 

**13.**** ****Rental Revenue (con’t.)**

 

calls for monthly lease payments, which currentlyapproximate $10,600, in addition to a percentage rent that is calculatedannually based on 7% of gross revenue from the theater operations in excess of$800,000. Annually the monthly lease payment shall increase based on the changein the Consumer Price Index. Rental revenue for the years ended December 31,2006, 2005 and 2004 was $135,000, $143,000 and $140,000 and is included inother revenue in the accompanying statements of operations, respectively.

** **

Future minimum lease payments to the Company underoperating leases for the five years subsequent to December 31, 2006 are asfollows (in thousands):

** **

| ** ** | ** ** | **Years ending  December 31:** | ** ** |
|------------|------------|--------------------------------|------------|
| 2007       |       | $                              | 205        |   |
| 2008       |       | 205                            |       |
| 2009       |       | 205                            |       |
| 2010       |       | 120                            |       |
| Thereafter |       | 78                             |       |
|       |       | $                              | 813        |   |

** **

**14.**** ****Impairment of Long Lived Assets**

 

During 2006 the Company recorded animpairment loss of approximately $1.3 million, $0 million and$0 million in the years ended December 31, 2006, 2005 and 2004,respectively, to adjust the carrying value of land due to contested ownershiprights related to the land.

 

**15.**** ****Guarantor Financial Information**

 

At December 31, 2006, Black Gaming and all of theIssuer’s, and Issuers’ subsidiaries, each of which is directly or indirectlywholly-owned by the Issuers, are guarantors under the Foothill Facility and theindentures governing the Notes (see Note 9). These guarantees are full,unconditional and joint and several.

 

 

67

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** **

**Black Gaming, LLC**

**Notes toConsolidated Financial Statements**

 

**16.**** ****Consolidating Condensed Financial Information**

** **
| **(in thousands)**                                    | ** ** | **Black Gaming, LLC** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
|-------------------------------------------------------|------------|-----------------------|------------|-----------------------------|------------|------------------|------------|------------------|------------|
| **As of December  31, 2006**                          | ** ** | ** **            | ** ** | ** **                  | ** ** | ** **       | ** ** | ** **       | ** ** |
| **BALANCE  SHEET:**                                   | ** ** | ** **            | ** ** | ** **                  | ** ** | ** **       | ** ** | ** **       | ** ** |
|                                                  |       |                  |       |                        |       |             |       |             |       |
| Current Assets, including intercompany  accounts      |       | $                     | —     |                        | $          | 51,686           |       | $                | (29,668    | ) | $ | 22,018 |   |
| Property and equipment, net                           |       | —                |       | 122,163                     |       | —           |       | 122,163          |       |
| Assets held for sale                                  |       | —                |       | 9,116                       |       | —           |       | 9,116            |       |
| Goodwill and Other Intangibles                        |       | —                |       | 39,294                      |       | —           |       | 39,294           |       |
| Other assets, excluding intercompany  accounts        |       | (3,382                | )          | 9,103                       |       | 3,382            |       | 9,103            |       |
|                                                  |       | $                     | (3,382     | )                           | $          | 231,362          |       | $                | (26,286    | ) | $ | 201,694 |   |
|                                                  |       |                  |       |                        |       |             |       |             |       |
| Current Liabilities, including intercompany  accounts |       | $                     | —     |                        | $          | 57,723           |       | $                | (29,668    | ) | $ | 28,055 |   |
| Long-term debt, less current portion                  |       | —                |       | 176,298                     |       | —           |       | 176,298          |       |
| Gaming equipment financing, less current  portion     |       | —                |       | 723                         |       | —           |       | 723              |       |
| Members’ (Deficit) Equity                        |       | (3,382                | )          | (3,382                      | )          | 3,382            |       | (3,382           | )          |
|                                                  |       | $                     | (3,382     | )                           | $          | 231,362          |       | $                | (26,286    | ) | $ | 201,694 |   |
|                                                       |            |                       |            |                             |            |                  |            |                  |            |  |  |  |  |  |  |  |  |  |  |

 

68

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** **

**Black Gaming, LLC**

**Notes toConsolidated Financial Statements**

 

**16.**** ****Consolidating Condensed Financial Information (con’t)**

** **
| **(in thousands)**                                                                    | ** ** | **Black Gaming, LLC** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
|---------------------------------------------------------------------------------------|------------|-----------------------|------------|-----------------------------|------------|------------------|------------|------------------|------------|
| **For the year ending December 31, 2006**                                             | ** ** | ** **            | ** ** | ** **                  | ** ** | ** **       | ** ** | ** **       | ** ** |
|                                                                                  |       |                  |       |                        |       |             |       |             |       |
| **STATEMENT OF OPERATIONS**                                                           | ** ** | ** **            | ** ** | ** **                  | ** ** | ** **       | ** ** | ** **       | ** ** |
|                                                                                  |       |                  |       |                        |       |             |       |             |       |
| Net Revenues                                                                          |       | $                     | —     |                        | $          | 171,345          |       | $                | (6,300     | ) | $ | 165,045 |   |
|                                                                                  |       |                  |       |                        |       |             |       |             |       |
| Operating Expenses:                                                                   |       |                  |       |                        |       |             |       |             |       |
| Casino                                                                                |       | —                |       | 47,444                      |       | —           |       | 47,444           |       |
| Food and beverage                                                                     |       | —                |       | 25,711                      |       | —           |       | 25,711           |       |
| Hotel                                                                                 |       | —                |       | 7,090                       |       | —           |       | 7,090            |       |
| Other                                                                                 |       | —                |       | 9,325                       |       | —           |       | 9,320            |       |
| General and administrative                                                            |       | —                |       | 56,214                      |       | (6,300           | )          | 49,914           |       |
| Depreciation and amortization                                                         |       | —                |       | 16,939                      |       | —           |       | 16,939           |       |
| Impairment of long lived assets                                                       |       | —                |       | 1,350                       |       | —           |       | 1,350            |       |
| Gain/Loss on Disposal of assets                                                       |       | —                |       | 198                         |       | —           |       | 198              |       |
| Operating income                                                                      |       | —                |       | 7,079                       |       | —           |       | 7,079            |       |
|                                                                                  |       |                  |       |                        |       |             |       |             |       |
| Income from investment in subsidiary                                                  |       | (12,097               | )          | —                      |       | 12,097           |       | —           |       |
| Change in fair value of swaps                                                         |       | —                |       | 195                         |       | —           |       | 195              |       |
| Return on investment with MDW LLC                                                     |       | —                |       | 928                         |       | —           |       | 928              |       |
| Interest expense                                                                      |       | —                |       | (19,808                     | )          | —           |       | (19,808          | )          |
| Total other (expense) income                                                          |       | (12,097               | )          | (18,685                     | )          | 12,097           |       | (18,685          | )          |
| Loss (income) from continuing operations                                              |       | (12,097               | )          | (11,606                     | )          | 12,097           |       | (11,606          | )          |
| Loss from discontinued operations                                                     |       | —                |       | (247                        | )          | —           |       | (247             | )          |
|                                                                                  |       |                  |       |                        |       |             |       |             |       |
| Loss (income) before cumulative change in accounting  principle and minority interest |       | (12,097               | )          | (11,853                     | )          | 12,097           |       | (11,853          | )          |
|                                                                                  |       |                  |       |                        |       |             |       |             |       |
| Cumulative effect of change in accounting  principle                                  |       | —                |       | (196                        | )          | —           |       | (196             | )          |
|                                                                                  |       |                  |       |                        |       |             |       |             |       |
| (Loss) income before minority interest                                                |       | (12,097               | )          | (12,049                     | )     | 12,097           |       | (12,049          | )          |
|                                                                                  |       |                  |       |                        |       |             |       |             |       |
| Minority interest                                                                     |       | —                |       | (48                         | )          | —           |       | (48              | )          |
|                                                                                  |       |                  |       |                        |       |             |       |             |       |
| Net (loss) income                                                                     |       | $                     | (12,097    | )                           | $          | (12,097          | )     | $                | 12,097     |   | $ | (12,097 | ) |
|                                                                                  |       |                  |       |                        |       |             |       |             |       |
| **STATEMENT OF CASH FLOWS**                                                           | ** ** | ** **            | ** ** | ** **                  | ** ** | ** **       | ** ** | ** **       | ** ** |
|                                                                                  |       |                  |       |                        |       |             |       |             |       |
| Net cash provided by operating activities                                             |       | $                     | —     |                        | $          | 13,552           |       | $                | —     |   | $ | 13,552 |   |
| Net cash used in investing activities                                                 |       | —                |       | (12,004                     | )          | —           |       | (12,004          | )          |
| Net cash used in financing activities                                                 |       | —                |       | (6,062                      | )          | —           |       | (6,062           | )          |
|                                                                                       |            |                       |            |                             |            |                  |            |                  |            |  |  |  |  |  |  |  |  |  |

 

 

69

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**Black Gaming, LLC**

**Notes toConsolidated Financial Statements**

 

**16.**** ****Consolidating Condensed Financial Information (con’t)**

** **
| **(in  thousands)**                                   | ** ** | **Black Gaming, LLC** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
|-------------------------------------------------------|------------|-----------------------|------------|-----------------------------|------------|------------------|------------|------------------|------------|
| **As of December 31, 2005**                           | ** ** | ** **            | ** ** | ** **                  | ** ** | ** **       | ** ** | ** **       | ** ** |
|                                                  |       |                  |       |                        |       |             |       |             |       |
| **BALANCE SHEET:**                                    | ** ** | ** **            | ** ** | ** **                  | ** ** | ** **       | ** ** | ** **       | ** ** |
|                                                  |       |                  |       |                        |       |             |       |             |       |
| Current Assets, including intercompany  accounts      |       | $                     | —     |                        | $          | 35,357           |       | $                | (10,940    | ) | $ | 24,417 |   |
| Property and equipment, net                           |       | —                |       | 126,224                     |       | —           |       | 126,224          |       |
| Assets held for sale                                  |       | —                |       | 8,023                       |       | —           |       | 8,023            |       |
| Goodwill and Other Intangibles                        |       | —                |       | 42,761                      |       | —           |       | 42,761           |       |
| Other assets, excluding intercompany  accounts        |       | 6,268                 |       | 11,519                      |       | (6,268           | )          | 11,519           |       |
|                                                  |       | $                     | 6,268      |                        | $          | 223,884          |       | $                | (17,208    | ) | $ | 212,944 |   |
|                                                  |       |                  |       |                        |       |             |       |             |       |
| Current Liabilities, including intercompany  accounts |       | $                     | —     |                        | $          | 38,697           |       | $                | (10,940    | ) | $ | 27,757 |   |
| Long-term debt, less current portion                  |       | —                |       | 172,333                     |       | —           |       | 172,333          |       |
| Gaming equipment financing, less current  portion     |       | —                |       | 5,369                       |       | —           |       | 5,369            |       |
| Fair value of interest rate swaps                     |       | —                |       | 195                         |       | —           |       | 195              |       |
| Minority interest                                     |       | —                |       | 1,022                       |       | —           |       | 1,022            |       |
| Members’ Equity (Deficit)                        |       | 6,268                 |       | 6,268                       |       | (6,268           | )          | 6,268            |       |
|                                                  |       | $                     | 6,268      |                        | $          | 223,884          |       | $                | (17,208    | ) | $ | 212,944 |   |
|                                                       |            |                       |            |                             |            |                  |            |                  |            |  |  |  |  |  |  |  |  |  |  |

 

 

70

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**Black Gaming, LLC**

**Notes toConsolidated Financial Statements**

 

**16.**** ****Consolidating Condensed Financial Information (con’t)**

** **
| **(in thousands)**                        | ** ** | **Black Gaming, LLC** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
|-------------------------------------------|------------|-----------------------|------------|-----------------------------|------------|------------------|------------|------------------|------------|
| **For the year ended December 31, 2005**  | ** ** | ** **            | ** ** | ** **                  | ** ** | ** **       | ** ** | ** **       | ** ** |
|                                      |       |                  |       |                        |       |             |       |             |       |
| **STATEMENT OF OPERATIONS**               | ** ** | ** **            | ** ** | ** **                  | ** ** | ** **       | ** ** | ** **       | ** ** |
|                                      |       |                  |       |                        |       |             |       |             |       |
| Net Revenues                              |       | $                     | —     |                        | $          | 165,204          |       | $                | (6,300     | ) | $ | 158,904 |   |
|                                      |       |                  |       |                        |       |             |       |             |       |
| Operating Expenses:                       |       |                  |       |                        |       |             |       |             |       |
| Casino                                    |       | —                |       | 45,306                      |       | —           |       | 45,306           |       |
| Food and beverage                         |       | —                |       | 26,404                      |       | —           |       | 26,404           |       |
| Hotel                                     |       | —                |       | 9,610                       |       | —           |       | 9,610            |       |
| Other                                     |       | —                |       | 9,859                       |       | —           |       | 9,859            |       |
| General and administrative                |       | —                |       | 50,684                      |       | (6,300           | )          | 44,384           |       |
| Depreciation and amortization             |       | —                |       | 12,171                      |       | —           |       | 12,171           |       |
| Gain/Loss on Disposal of assets           |       | —                |       | 729                         |       | —           |       | 729              |       |
| Operating loss                            |       | —                |       | 10,441                      |       | —           |       | 10,441           |       |
|                                      |       |                  |       |                        |       |             |       |             |       |
| Income from investment in subsidiary      |       | (8,414                | )          | —                      |       | 8,414            |       | —           |       |
| Change in fair value of swaps             |       | —                |       | 1,298                       |       | —           |       | 1,298            |       |
| Return on investment with MDW LLC         |       | —                |       | 906                         |       | —           |       | 906              |       |
| Interest expense                          |       | —                |       | (20,384                     | )          | —           |       | (20,384          | )          |
| Total other (expense) income              |       | (8,414                | )          | (18,180                     | )          | 8,414            |       | (18,180          | )          |
|                                      |       |                  |       |                        |       |             |       |             |       |
| Loss (income) from continuing operations  |       | (8,414                | )          | (7,739                      | )     | 8,414            |       | (7,739           | )          |
| Loss from discontinued operations         |       | —                |       | (611                        | )          | —           |       | (611             | )          |
|                                      |       |                  |       |                        |       |             |       |             |       |
| (Loss) income before minority interest    |       | (8,414                | )          | (8,350                      | )          | 8,414            |       | (8,350           | )          |
|                                      |       |                  |       |                        |       |             |       |             |       |
| Minority interest                         |       | —                |       | (64                         | )          | —           |       | (64              | )          |
|                                      |       |                  |       |                        |       |             |       |             |       |
| Net (loss) income                         |       | $                     | (8,414     | )                           | $          | (8,414           | )          | $                | 8,414      |   | $ | (8,414 | ) |
|                                      |       |                  |       |                        |       |             |       |             |       |
| **STATEMENT OF CASH FLOWS**               | ** ** | ** **            | ** ** | ** **                  | ** ** | ** **       | ** ** | ** **       | ** ** |
|                                      |       |                  |       |                        |       |             |       |             |       |
| Net cash provided by operating activities |       | $                     | —     |                        | $          | 16,852           |       | $                | —     |   | $ | 16,852 |   |
| Net cash used in investing activities     |       | —                |       | (14,425                     | )          | —           |       | (14,425          | )          |
| Net cash used in financing activities     |       | —                |       | (3,828                      | )          | —           |       | (3,828           | )          |

 

71

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**Black Gaming, LLC**

**Notes toConsolidated Financial Statements**

 

**16.**** ****Consolidating Condensed Financial Information (con’t)**

** **
| **(in thousands)**                        | ** ** | **Black Gaming, LLC** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
|-------------------------------------------|------------|-----------------------|------------|-----------------------------|------------|------------------|------------|------------------|------------|
| **For the year ended December 31, 2004**  | ** ** | ** **            | ** ** | ** **                  | ** ** | ** **       | ** ** | ** **       | ** ** |
|                                      |       |                  |       |                        |       |             |       |             |       |
| **STATEMENT OF OPERATIONS**               | ** ** | ** **            | ** ** | ** **                  | ** ** | ** **       | ** ** | ** **       | ** ** |
|                                      |       |                  |       |                        |       |             |       |             |       |
| Net Revenues                              |       | $                     | —     |                        | $          | 160,310          |       | $                | (6,300     | ) | $ | 154,010 |   |
|                                      |       |                  |       |                        |       |             |       |             |       |
| Operating Expenses:                       |       |                  |       |                        |       |             |       |             |       |
| Casino                                    |       | —                |       | 42,999                      |       | —           |       | 42,999           |       |
| Food and beverage                         |       | —                |       | 26,064                      |       | —           |       | 26,064           |       |
| Hotel                                     |       | —                |       | 10,920                      |       | —           |       | 10,920           |       |
| Other                                     |       | —                |       | 11,833                      |       | —           |       | 11,833           |       |
| General and administrative                |       | —                |       | 47,261                      |       | (6,300           | )          | 40,961           |       |
| Depreciation and amortization             |       | —                |       | 8,180                       |       | —           |       | 8,180            |       |
| Gain/Loss on Disposal of assets           |       | —                |       | (59)                        |       | —           |       | (59              | )          |
| Operating loss                            |       | —                |       | 13,112                      |       | —           |       | 13,112           |       |
|                                      |       |                  |       |                        |       |             |       |             |       |
| Income from investment in subsidiary      |       | 2,859                 |       | —                      |       | (2,859           | )          | —           |       |
| Change in fair value of swaps             |       | —                |       | (1,493                      | )          | —           |       | (1,493           | )          |
| Gain on early extinguishment of debt      |       | —                |       | 1,279                       |       | —           |       | 1,279            |       |
| Interest expense                          |       | —                |       | (7,577                      | )          | —           |       | (7,577           | )          |
| Loss on early retirement of debt          |       | —                |       | (574                        | )          | —           |       | (574             | )          |
| Total other income (expense)              |       | 2,859                 |       | (8,365                      | )          | (2,859           | )          | (8,365           | )          |
|                                      |       |                  |       |                        |       |             |       |             |       |
| Income (loss) from continuing operations  |       | 2,859                 |       | 4,747                       |       | (2,859           | )          | 4,747            |       |
| Loss from discontinued operations         |       | —                |       | (233                        | )          | —           |       | (233             | )          |
|                                      |       |                  |       |                        |       |             |       |             |       |
| Income (loss) before minority interest    |       | 2,859                 |       | 4,514                       |       | (2,859           | )          | 4,514            |       |
|                                      |       |                  |       |                        |       |             |       |             |       |
| Minority interest                         |       | ––          |       | (1,655                      | )     | —           |       | (1,655           | )          |
|                                      |       |                  |       |                        |       |             |       |             |       |
| Net income (loss)                         |       | $                     | 2,859      |                        | $          | 2,859            |       | $                | (2,859     | ) | $ | 2,859 |   |
|                                      |       |                  |       |                        |       |             |       |             |       |
| **STATEMENT OF CASH FLOWS**               | ** ** | ** **            | ** ** | ** **                  | ** ** | ** **       | ** ** | ** **       | ** ** |
|                                      |       |                  |       |                        |       |             |       |             |       |
| Net cash provided by operating activities |       | $                     | —     |                        | $          | 16,895           |       | $                | —     |   | $ | 16,895 |   |
| Net cash used in investing activities     |       | —                |       | (3,567                      | )          | —           |       | (3,567           | )          |
| Net cash used in financing activities     |       | —                |       | (9,237                      | )          | —           |       | (9,237           | )          |
|                                           |            |                       |            |                             |            |                  |            |                  |            |  |  |  |  |  |  |  |  |  |

 

 

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| **ITEM 9.** | ** ** | **CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON  ACCOUNTING AND FINANCIAL DISCLOSURE.** |
|-------------|------------|--------------------------------------------------------------------------------------------|

 

Not applicable.

 
| **ITEM 9A.** | ** ** | **CONTROLS AND PROCEDURES.**** ** |
|--------------|------------|----------------------------------------|

### **Evaluation of Disclosure Controls**

### ** **

We evaluated theeffectiveness of our disclosure controls and procedures as of the end of the2006 fiscal year. This evaluation was done with the participation of ourmanagement, including our Chief Executive Officer and Chief Financial Officer.

 

Disclosure controls andprocedures are controls and other procedures that are designed to ensure thatinformation required to be disclosed by us in the reports that we file orsubmit under the Securities Exchange Act of 1934 are recorded, processed,summarized and reported within the time periods specified in the SEC’s rulesand forms. Disclosure controls and procedures include, without limitation,controls and procedures designed to ensure that information required to bedisclosed by us in the reports that we file under the Securities Exchange Actof 1934 is accumulated and communicated to our manager, as appropriate to allowtimely decisions regarding required disclosure.

 

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

### ** **

Our management does notexpect that our disclosure controls and procedures or our internal controlsover financial reporting will prevent all error and all fraud. A controlsystem, no matter how well conceived and operated, can provide only reasonable,but not absolute, assurance that the objectives of a control system are met. Further,any control system reflects limitations on resources, and the benefits of acontrol system must be considered relative to its costs. Because of theinherent limitations in all control systems, no evaluation of controls canprovide absolute assurance that all control issues and instances of fraud, ifany, within us have been detected. These inherent limitations include therealities that judgments in decision-making can be faulty and that breakdownscan occur because of simple error or mistake. Additionally, controls can becircumvented by the individual acts of some persons, by collusion of two ormore people, or by management override of a control. The design of a controlsystem is also based upon certain assumptions about the likelihood of futureevents, there can be no assurance that any design will succeed in achieving itsstated goals under all potential future conditions; over time, controls maybecome inadequate because of changes in conditions, or the degree of compliancewith the policies or procedures may deteriorate. Because of the inherentlimitations in a cost-effective control system, misstatements due to error orfraud may occur and may not be detected.

 

### **Conclusions**

### ** **

Based on this evaluation,our Chief Executive Officer and Chief Financial Officer have evaluated ourdisclosure controls and procedures (as defined in the Securities Exchange Actof 1934 Rules 13a-15(e) and 15d-15(e)) as of December 31, 2006, and haveconcluded that they are effective to timely alert them to material informationrelating to the Company required to be included in the reports that we file orsubmit under the Securities Exchange Act of 1934.

 

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### **Changes in Internal Controls**

### ** **

There were no changes in ourinternal controls over financial reporting that occurred during our last fiscalquarter, *i.e.*, the quarter endedDecember 31, 2006, that have materially affected, or are reasonably likely tomaterially affect, our internal controls over financial reporting.

 

## **ITEM9B.**  OTHER INFORMATION.

## ** **

Not applicable.

 

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# **PART III**

# ** **

## **ITEM10.**       DIRECTORS ANDEXECUTIVE OFFICERS OF THE REGISTRANT.

## ** **

**Directors and ExecutiveOfficers**

** **

Our executive officers anddirectors consist of the following:

 

| **Name**             | ** ** | **Age** | ** ** | **Black Gaming, LLC**   |
|----------------------|------------|---------|------------|-----------------------------------|
|                 |       |    |       |                              |
| Robert R. Black, Sr. |       | 54      |       | Majority  Member and Sole Manager |
|                 |       |    |       |                              |
| Curt Mayer           |       | 38      |       | Chief Financial  Officer          |
|                 |       |    |       |                              |
| Jonathan Lowenhar    |       | 33      |       | Chief  Operating Officer          |

 

*Robert R.Black, Sr.*Mr. Black has been involved in all phases ofthe Nevada real estate industry since 1967. Additionally, Mr. Black isthe managing member or member of several business entities which primarilyrelate to real estate development. Currently, Mr. Blackserves as Chairman of the Board of Diversified Interest, Inc., afull-service real estate entity he founded in 1979. Since 1997, Mr. Blackhas served as Commander of the Nellis Support Team, a team organized to supportthe men, women and missions of Nellis Air Force Base by interacting with thelocal business and government community in order to raise funds to support theair force base and military personnel needs.

 

Since August 2006 Mr. Blackhas been the sole Manager of Black Gaming, LLC. Since December 2004, Mr. Blackhas been Chairman of the Board, Chief Executive Officer and President of VirginRiver Casino Corporation and B & B B, Inc. Mr. Black wasSecretary and a Director of Virgin River Casino Corporation from July 1988 toDecember 2004. Mr. Black was Secretary of B & B B, Inc. fromDecember 1990 to December 2004 and a Director of B & B B,Inc. from December 1989 to December 2004. Mr. Black has been the soleManager of RBG, LLC since February 1997.

 

*Curt Mayer.*Mr. Mayer has served as Chief Financial Officer to Black Gaming,LLC since August 2006. Mr. Mayer has served as Chief Financial Officer toVirgin River Casino Corporation, RBG, LLC and B & B B, Inc.since May 2002. From July 1992 to May 2002, Mr. Mayer wasemployed by the accounting firm of Arthur Andersen, LLP, most recently as aSenior Audit Manager. From 1995 to 2002, Mr. Mayer worked in the firm’sLas Vegas office providing audit services to the hospitality and gamingindustry.

 

*Jonathan Lowenhar*. Mr. Lowenharhas served as Chief Operating Officer to Black Gaming, LLC since August 2006. Mr.Lowenhar has served as Chief Operating Officer to Virgin River CasinoCorporation, RBG, LLC and B & B B, Inc. since April 2005,after consulting for the companies for several months. From 1999 to 2004, Mr.Lowenhar was employed by Harrah’s Entertainment, Inc., in Las Vegas, Nevada,most recently as Corporate VicePresident Loyalty Marketing. While employed by Harrah’s, he managed Harrah’scasino and VIP marketing strategy as well as Harrah’s revenue management system.Mr. Lowenhar received his B.S. from Cornell University and is a 2005 graduateof the Berkeley-Columbia Executive Masters in Business Administration program.

 

**Key Employees**

** **

*Anthony A. George*. Mr. Georgehas served as the General Manager of Black Gaming, LLC since August2006. From December 2005 to August 2006, Mr. George served as the AssistantGeneral Manager for

 

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each of the CasaBlanca, theOasis and the Virgin River. From 2001 to December 2005, Mr. George servedas the General Manager of the Oasis. From 1994 to 2001, Mr. George wasemployed by the Oasis as the director of its Race and Sports book.

 

*Scott W. DeAngelo*. Mr. DeAngelohas served as the Vice President of Marketing and Sales for Black Gaming, LLCsince August 2006. From April 2005 to August 2006, Mr. DeAngelo served as theVice President of Marketing and Sales for each of the CasaBlanca, the Oasis andthe Virgin River. From December 2004 to April 2005, Mr. DeAngelo served as aConsultant with Acxiom Corporation. From August 2004 to December 2004, Mr.DeAngelo served as a Consultant with Cerenti. From February 2004 to August2004, Mr. DeAngelo served as the Vice President of Marketing for Harrah’s NorthKansas City. From May 2000 to February 2004, Mr. DeAngelo served as aConsultant for McKinsey & Company, Inc.

 

**Code of Ethics**

 

We have not yet adopted acode of ethics which applies to our principle executive officer, principlefinancial officer, principle accounting officer or controller, or personsperforming similar functions because of our limited size.

 

## **ITEM11.**       EXECUTIVECOMPENSATION.

## ** **

**Compensation Philosophy**

 

Our primary goal with respect to executive compensationis to attract, retain and motivate the most qualified and dedicated executives,who possess the high-quality skills and talent required for the success of thebusiness, to tie annual and long-term incentive compensation to achievement ofcertain performance objectives for us and the individual executives, and toencourage executive performance that contributes to our long-term growth. Sincewe are not a publicly held company, we are not required to form acompensation committee comprised of independent directors, as required byapplicable laws and regulations, including the Sarbanes-Oxley Act, andapplicable listing requirements.

 

To achieve our executive compensation objectives, weimplement and maintain compensation plans and policies that ensure thatexecutive compensation is fair, reasonable and competitive, and that rewardexecutives’ contributions to our overall short and long-term growth. We useshort-term compensation (base salaries and annual cash bonuses) and long-termincentive compensation, to achieve our goal of driving long-term growth. Ourcompensation policy links each executive’s earnings opportunity with our shortand long-term performance. To maintain this link, we base performance on theachievement of pre-determined financial targets and operational goals measuredby metrics such as operating income and growth, as well as each executive’sindividual contributions and customer service scores obtained from independentthird parties.

 

**Setting Executive Compensation**

 

In setting compensation, we evaluate individuals ontheir executive performance with the goal of setting compensation at levels webelieve are comparable with executives in other companies of similar size, withsimilar revenues and in similar industries, while taking into account ourrelative performance and our own strategic goals.

 

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**Elements****of Compensation**

 

For the fiscal year ended December 31, 2006, ourcompensation components for the named executive officers included the followingelements:

 

•  Base salary;

 

•  Annual bonus; and

 

•  Long-term incentivecompensation.

 

*Base Salary*

 

We pay base salaries to our named executive officers andall other employees to compensate them for their services during the fiscalyear. Base salaries for our executives are established based on the scope oftheir responsibilities, taking into account competitive market compensationpaid by other companies for similar positions. Generally, we believe thatexecutive base salaries should be targeted near the median of the range ofsalaries for executives in similar positions with similar responsibilities atcompanies of similar size, with similar revenues and in similar industries, inline with our compensation philosophy. Base salaries are reviewed annually, andexecutives are eligible for performance based increases based on the individualresponsibilities and performance as it relates to the pre-determined financialtargets that we set.

 

*Annual Bonus*

 

We award annual bonuses to the named executive officersand to other employees. The annual incentive bonuses are intended to compensateofficers for achieving financial and operational goals and for achievingindividual annual performance objectives. When we decide to award a bonus, wedetermine the pool of eligible employees and the amount that those employeeswill be eligible to receive under the plan. Our plan includes various incentivelevels based on the participant’s accountability and impact on our operations,and target award opportunities are established as a percentage of base salary,ranging from 2.5% of base salary to 30% of base salary for our named executiveofficers. In addition, discretionary bonus amounts may be paid to namedexecutives based on individual performance.

 

Each year, we set minimum, targets and maximum levelsfor corporate and individual performance goals, and payment of awards is basedupon the achievement of those goals for that year. Upon completion of thefiscal year, we assess our performance and individual performance with respectto those goals, and an overall percentage amount for the corporate financialgoals is calculated. The annual bonus is paid in cash and is ordinarily paid ina single installment in the February following the completion of a given fiscalyear.

 

*Long-Term Incentive Compensation*

 

In October 2006, we adopted the Black Gaming Long TermIncentive Plan (“LTIP”).  LTIP is a long-term formula based compensationplan utilizing EBITDA, as defined, Long-term Debt, as defined, cash and a fixedmultiple to compensate senior executives for increasing our operatingperformance and financial condition in the event the executive remains withus.  Future compensation, commencing in the fourth quarter of the yearended December 31, 2006, recognized in accordance with LTIP will be accountedfor using the intrinsic value method allowed for nonpublic entities as definedand prescribed by SFAS 123(R) “Share Based Payment”. This incentive planfosters the long-term perspective necessary for the continued success in ourbusiness.

 

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*Post-Termination Compensation*

 

Inorder for us to attract and retain well-qualified executives and key personneland to provide ourselves and each executive certain security of continuity ofmanagement in the event of a change in control of the Company, we entered intoemployment security agreements with certain of our executive officers,including Messrs. Lowenhar and Mayer.

 

Weentered into an executive employment agreement with Jonathan Lowenhar effectiveas of April 1, 2005, where we agreed to pay Mr. Lowenhar a base salary of$275,000 per year effective April 1, 2005 for four years. Pursuant to theagreement, Mr. Lowenhar is subject to a non-solicitation, non-compete duringthe terms of the agreement, and for a period of two years after the agreementis terminated for cause or for certain specified reasons. We have agreed to payMr. Lowenhar an amount equal to the greater of $500,000 or 1% of the sale priceof Virgin River Casino Corporation, RBG, LLC and Casablanca Resorts, LLC, orcollectively the Operating Companies, if Mr. Black ceases to own less than 50%of the beneficial interest in the Operating Companies or if there is a sale ofsubstantially all of the assets of the Operating Companies

 

Weentered into an executive employment agreement with Curt Mayer effective as ofJanuary 1, 2006, where we agreed to pay Mr. Mayer a base salary of $212,000 peryear effective January 1, 2006 and an additional annual $100,000 bonuscommencing on January 1, 2006. We have also agreed to pay Mr. Mayer a paymentequal to one year of his salary and bonus if Mr. Black, or an entity controlledby Mr. Black, ceases to control B & B B, Inc., Virgin RiverCasino Corporation, or RBG, LLC.

 

*Perquisites and Other Personal Benefits*

 

Weprovide our named executive officers with certain perquisites and otherpersonal benefits that the we believe are reasonable and consistent with ouroverall compensation philosophy to attract, retain and motivate the mostqualified and dedicated employees for key positions.

 

Wedo not issue stock or option awards to our executives. We also do not providenon-equity incentive plan compensation, do not have a pension plan and do notoffer a nonqualified deferred compensation program. We have a 401(k) plan forour employees; however, our named executives do not participate in the plan.

 

Thenamed executive officers are provided access to term life insurance policies,long-term disability insurance policies, contributions to our 401(k) plan, andparticipation in the plans and programs described above. In certain instancesand on a case-by-case basis, we may reimburse relocation expenses and payrelocation bonuses to executives who are required, due to promotions orreorganizations, to move to another location. Additionally, we may pay specialone-time bonuses to certain executives when their performance far-exceeds anytargets or goals. Such bonuses are not common and are not paid through anyformal compensation plan.

 

**Summary Compensation Table**

 

Thefollowing table sets forth the cash and non-cash compensation for each of thelast three fiscal years awarded to or earned by our Chief Executive Officer,Chief Financial Officer and our three other most highly compensated executivesas of December 31, 2006.

 

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Summary Compensation Table

 
| ** **                      | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **All Other**    | ** ** | ** ** | ** ** |
|---------------------------------|------------|------------|------------|------------|------------|------------|------------|------------------|------------|------------|------------|
| ** **                      | ** ** | ** ** | ** ** | **Salary** | ** ** | **Bonus**  | ** ** | **Compensation** | ** ** | **Total**  | ** ** |
| **Name and Principal Position** | ** ** | **Year**   | ** ** | **($)**    | ** ** | **($)**    | ** ** | **($)**          | ** ** | **($)**    | ** ** |
| Robert S.  Black, Sr.           |       | 2006       |       | 525,385    |       | —     |       | 1,078,639        | (1), (2)   | 1,604,024  |       |
| Chief  Executive Officer        |       | 2005       |       | 500,000    |       | —     |       | 2,938,812        | (3)        | 3,438,812  |       |
|                            |       | 2004       |       | —     |       | —     |       | 220,000          | (4)        | 220,000    |       |
|                            |       |       |       |       |       |       |       |             |       |       |       |
| Curt Mayer                      |       | 2006       |       | 231,749    |       | 119,491    |       | —           |       | 351,240    |       |
| Chief  Financial Officer        |       | 2005       |       | 207,692    |       | 100,000    |       | —           |       | 307,692    |       |
|                            |       | 2004       |       | 186,102    |       | 2,130      |       | —           |       | 188,232    |       |
|                            |       |       |       |       |       |       |       |             |       |       |       |
| Jonathan  Lowenhar(5)           |       | 2006       |       | 308,009    |       | 172,006    |       | —           |       | 480,015    |       |
| Chief  Operating Officer        |       | 2005       |       | 190,385    |       | 135,000    |       | —           |       | 325,385    |       |
|                            |       | 2004       |       | —     |       | —     |       | —           |       | —     |       |
|                            |       |       |       |       |       |       |       |             |       |       |       |
| Anthony A.  George              |       | 2006       |       | 188,058    |       | 67,821     |       | —           |       | 255,879    |       |
| General  Manager                |       | 2005       |       | 178,831    |       | 48,000     |       | —           |       | 226,831    |       |
|                            |       | 2004       |       | 157,703    |       | 6,088      |       | —           |       | 163,791    |       |
|                            |       |       |       |       |       |       |       |             |       |       |       |
| Scott DeAngelo(6)               |       | 2006       |       | 194,167    |       | 72,829     |       | —           |       | 266,996    |       |
| Vice  President of Marketing    |       | 2005       |       | 141,154    |       | 20,000     |       | —           |       | 161,154    |       |
|                            |       | 2004       |       | —     |       | —     |       | —           |       | —     |       |

 

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(1)   Management fees are paid at the direction of Mr. Black and are accruedquarterly. Pursuant to the terms of the indentures governing the notes and the agreementgoverning our senior secured credit facility, so long as no default hasoccurred and is continuing, we may pay Mr. Black management fees up to 5% ofour consolidated EBITDA (as that term is defined in the indentures governingthe notes and the agreement governing our senior secured credit facility) forthe immediately preceding fiscal year. Mr. Black has advised us that it ishis present intention to charge us and collect management fees in the maximumamount permitted under the indentures and our senior secured credit facility. Inaddition to management fees, commencing January 1, 2005, we have paidMr. Black a salary at an annualized rate of $500,000. AlthoughMr. Black has sole authority to set his own salary, he has advised us thathis salary will not exceed industry standards.

 

(2)   Representing $1,068,639 inmanagement fees, $0 in dividends and distributions paid to Mr. Black by us and$10,000 in perquisites provided to Mr. Black and his wife in the form ofcompensatory use of hotel rooms, the Company limousine, golf and spa services,meals and Company tickets for sporting events.

 

(3)   Representing $1,155,000 in management fees and $1,783,812 in dividendsand distributions paid to Mr. Black by us.

 

(4)   Represents $0 in management fees and $220,000 in dividends anddistributions paid to Mr. Black by us.

 

(5)   In April 2005, Mr. Lowenhar assumed the position of Chief OperatingOfficer.

 

(6)   In April 2005, Mr. DeAngelo assumed the position of Vice President ofMarketing.

 

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** **

**Employment Agreements**

 

We entered into an executive employment agreement with JonathanLowenhar effective as of April 1, 2005, where we agreed to pay Mr. Lowenhar abase salary of $275,000 per year effective April 1, 2005 for four years.Pursuant to the agreement, Mr. Lowenhar is subject to a non-solicitation, non-competeduring the terms of the agreement, and for a period of two years after theagreement is terminated for cause or for certain specified reasons. We haveagreed to pay Mr. Lowenhar an amount equal to the greater of $500,000 or 1% ofthe sale price of Virgin River Casino Corporation, RGB, LLC and CasablancaResorts, LLC, or collectively the Operating Companies, if Mr. Black ceases toown less than 50% of the beneficial interest in the Operating Companies or ifthere is a sale of substantially all of the assets of the Operating Companies.

 

We entered into an executive employment agreement with Curt Mayereffective as of January 1, 2006, where we agreed to pay Mr. Mayer a base salaryof $212,000 per year effective January 1, 2006 and an additional annual$100,000 bonus commencing on January 1, 2006. We have also agreed to pay Mr.Mayer a payment equal to one year of his salary and bonus if Mr. Black, or anentity controlled by Mr. Black, ceases to control B & B B, Inc., VirginRiver Casino Corporation, or RBG, LLC.

 

**Compensation Committee Interlocks and Insider Participation**

 

We do not have a compensation committee. However, Mr. Black, Mr. Mayerand Mr. Lowenhar participate in the discussions and deliberations concerningthe compensation of our executive officers.

 

**THE FOLLOWING REPORT OF THE MANAGEMENT BOARDSHALL NOT BE DEEMED TO BE SOLICITING MATERIAL OR TO BE FILED WITH THE SEC UNDERTHE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934 ORINCORPORATED BY REFERENCE IN ANY DOCUMENT SO FILED.**

 

**Management Board Compensation Report**

 

Our management board has reviewed and discussed the above CompensationDiscussion and Analysis with our management and determined that theCompensation Discussion and Analysis be included in this annual report.

 

 
| March 30, 2007 |   | MANAGEMENT BOARD     |
|----------------|--------|----------------------|
|           |   |                 |
|           |   | Robert R. Black, Sr. |

 

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## **ITEM12.**       SECURITY OWNERSHIP OFCERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

## ** **

We are wholly owned byRobert R. Black, Sr., our Manager and Majority Member, and hisaffiliates, with the exception of a 0.97% ownership interest held by a minorityowner. The following table sets forth our beneficial ownership. As of December 31,2006, no rights exist to purchase any additional ownership interest in us.

 

**Black Gaming, LLC**

** **

| **Title of Class**   | ** ** | **Name and Address of Beneficial Owner(1)**                   | ** ** | **Membership  Interest** | ** ** | **Percent of  Class** | ** ** |
|----------------------|------------|---------------------------------------------------------------|------------|--------------------------|------------|-----------------------|------------|
| Membership  Interest |       | Robert R. Black,  Sr. (2)                                     |       | 99.03                    | %          | 99.03                 | %          |
| Membership  Interest |       | Curt Mayer                                                    |       | 0                        |       | 0                     | %          |
| Membership  Interest |       | Jonathan  Lowenhar                                            |       | 0                        |       | 0                     | %          |
| Membership  Interest |       | Anthony A.  George                                            |       | 0                        |       | 0                     | %          |
| Membership  Interest |       | Scott Deangelo                                                |       | 0                        |       | 0                     | %          |
| Membership  Interest |       | All executive officers  and directors as a group  (5 persons) |       | 99.03                    | %          | 99.03                 | %          |

 

----

(1)   Theaddress for each individual listed is Black Gaming, LLC, 10777 W. Twain Ave.,Las Vegas, Nevada 89135.

 

(2)   Ownedby Robert R. Black, Sr. as trustee of the Robert R. Black Sr. GamingProperties Trust u/a/d May 24, 2004.

 

## **ITEM13.**       CERTAIN RELATIONSHIPSAND RELATED TRANSACTIONS.

## ** **

We believe that all of thetransactions discussed below are on terms at least as favorable to us as wouldhave been obtained from an unrelated third party.

 

*Wingnuts,Inc.* Wingnuts,Inc. is a company that owns an airplane used by us. Wingnuts, Inc. is owned bythe sole shareholder of the Black Trust along with various former shareholdersof ours. Wingnuts, Inc. charged us for business usage of the airplane usinghourly rates for actual air time. Total charges for the years endedDecember 31, 2006, 2005 and 2004 were $0, $0 and $70,000, respectively.

 

*MJBDevelopment.* MJBDevelopment is a real estate construction company owned by a former shareholderof ours which provided construction services associated with our hotelfacilities. When performing construction services, the actual costs of construction,overhead charges, and a profit are charged to us. In addition to constructionservices, MJB Development has also leased containers for storage to us.  Total charges for construction and leasing ofstorage containers totaled $0, $2,000 and $23,000 during the years endedDecember 31, 2006, 2005 and 2004, and are included in the accompanyingconsolidated statements of operations. In addition, during the year endedDecember 31, 2005, we paid MJB Development $68,000 to purchase previouslyleased storage containers.

 

*MDWMesquite, LLC.*MDWMesquite, LLC (“MDW”) is a Nevada limited-liability company in which the soleshareholder of the Black Trust has an interest. MDW owns a condominium complexlocated in Mesquite, Nevada. We 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 condominiumcomplex were utilized by the CasaBlanca for hotel and apartment purposes. OnDecember 15, 2004, pursuant to a termination agreement, we terminated ourlease with MDW. The rent payments paid by us to MDW during the years endedDecember 31, 2006, 2005, and 2004 were $0, $0 and $739,000, respectively,and are included in the consolidated statements of operations. We recordedapproximately $0.9 million, $0.9 million, and $0 in other incomerelated to the condominium sales during the years ended December 31, 2006,2005 and 2004, respectively. In addition, pursuant to the lease terminationagreement, we owed MDW $0 and $16,000 at December 31, 2006 and 2005,respectively.

 

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*VirginRiver Foodmart, Inc.*Virgin River Foodmart, Inc., a Nevada corporation, (“Foodmart”) isowned by the sole shareholder of the Black Trust and former shareholders ofVRCC. Pursuant to a lease agreement dated November 1996, VRCC leased toFoodmart certain real property and the structures and improvements containedthereon for the purposes of operating the Virgin River Food Mart. The term ofthe lease was for 30 years at approximately $18,500 a month with Foodmarthaving the option to extend the lease for two additional ten year periods.Pursuant to the Buyout, the real property, structures and improvementspreviously leased to Foodmart were not acquired by the Black Trust, but weredistributed to the shareholders of VRCC; therefore the lease between VRCC andFoodmart was terminated. Lease payments made to VRCC were $0, $0 and $222,000for the years ended December 31, 2006, 2005 and 2004, respectively, andare included in the accompanying consolidated statements of operations.

 

In addition, participants in our Slot Program are ableto redeem their points for gasoline at the Foodmart. Foodmart charges us theretail amount of gas purchased with player points. For the years endedDecember 31, 2006, 2005 and 2004, Foodmart has charged our $45,000,$351,000 and $456,000 respectively, for gasoline purchased with points from ourSlot Program.

 

*Black,LoBello & Sparks.* Tisha Black, a partner at the law firm of Black, LoBello & Sparksis the daughter of Robert R. Black, Sr. We retain Black, LoBello & Sparksas outside legal counsel, and Black, LoBello & Sparks has received legalfees for legal services in the amount of $303,000, $131,000 and $196,000 forthe years ended December 31, 2006, 2005 and 2004, respectively.

 

*Robert R.Black, Sr.* We payMr. Black management fees for his management of our business. We paid Mr. Blackmanagement fees in the amount of $0, $1.2 million and $0 for the fiscalyears ended December 31, 2004, 2005 and 2006, respectively.  We have recorded, but not paid, a liabilityof $1.2 million associated with Mr. Black’s management fee at December 31, 2006.

 

Management fees are paid at the direction ofMr. Black and are accrued quarterly. Pursuant to the terms of theindentures governing the notes and the agreement governing our senior securedcredit facility, so long as no default has occurred and is continuing, we maypay Mr. Black management fees up to 5% of our consolidated EBITDA (as thatterm is defined in the indentures governing the notes and the agreementgoverning our senior secured credit facility) for the immediately precedingfiscal year. Mr. Black has advised us that it is his present intention tocharge us and collect management fees in the maximum amount permitted under theindentures and our senior secured credit facility.

 

In addition to management fees, commencingJanuary 1, 2005, we have paid Mr. Black a salary at an annualizedrate of $500,000. Although Mr. Black has sole authority to set the amountof his salary, he has advised us that his salary will not exceed industrystandards.

 

*R. Black,Inc.*Concurrentlywith the closing of the old notes offering, Robert R. Black, Sr. and his affiliatemade a $16.0 million equity contribution to us. Robert R. Black, Sr. madea $1.0 million equity contribution to us and R. Black, Inc. made a$15.0 million equity contribution to us. To finance the $15.0 millionequity contribution, R. Black, Inc. issued a $15.0 million 8% convertiblesenior secured note to Michael J. Gaughan, which was amended in December 2006.The convertible note is secured by 331/3% of the equity interests directly andindirectly owned by Robert R. Black, Sr. in the issuers of the notes and inBlack Gaming, LLC. The convertible note will mature in four years provided thatthe convertible note issuer may elect up to three one-year extensions and,effective upon each extension, the interest rate would increase 1% per annum.Notwithstanding the convertible note issuer’s election to extend the maturity,the holder of the convertible note may require the convertible note issuer tothen satisfy the note, but in such event, at the convertible note issuer’soption, the convertible note may be satisfied either in cash or in shares ofcommon stock (or any conversion thereof) representing a 331/3% fully-diluted interest (decreased in proportion toany principal paid in cash) in the common stock of each of the issuers andBlack Gaming, LLC.

 

*CasablancaResorts, LLC.*Casablanca Resorts, LLC provided management and other services to the PeppermillPalm Property Owners Association and the Grand Destination Owners Association,which manage and operate the home owners associations of the vacation intervalssold at the properties. As of December 31, 2006 and 2005, respectively,included in the accompanying consolidated balance sheets, respectively, is areceivable for $384,000 and $95,000 related to amounts owed for those services.

 

*GamingResearch Inc.*GamingResearch is a consulting firm retained to perform marketing research for us.The principal of Gaming Research is the father of our chief operating officer.Gaming research received consulting fees of $222,000, $117,000 and $0 for theyears ended December 31, 2006, 2005 and 2004, respectively.

 

*TownCenter Drive & 215, LLC.*During 2006, we entered into an agreement with TownCenter Drive & 215, LLC to lease executive office space. The term of thelease is 84 months at a rate of approximately $11,508 a month. Mr. Blackis the owner and manager of Town Center Drive & 215, LLC. The lease commencementdate was February 10, 2007, and we did not make any payments under thelease in 2006.

 

82

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** **

**Policy for Related PartyTransactions**

 

Wereview all related party transactions on a case by case basis and approve anysuch transaction in accordance with Nevada corporate law.  In addition,the notes prohibit us from entering into certain transactions with certainrelated parties unless it is determined that the terms of the transaction arefair and reasonable to us, and no less favorable than could have been obtainedin an arm’s length transaction with an unrelated party.  The notes requireadditional approvals before we may enter into certain related transactions inwhich the consideration to either party in the transaction would exceedspecified thresholds.

 

## **ITEM14.**       PRINCIPAL ACCOUNTINGFEES AND SERVICES.

## ** **

The aggregate accounting fees billed and servicesprovided by Ernst & Young LLP, our principal accountant, for the yearsended December 31, 2006 and 2005 are as follows:

 

| ** **             | ** ** | **2006** | ** ** | **2005** | ** ** |
|------------------------|------------|----------|------------|----------|------------|
|                   |       |     |       |     |       |
| Audit  fees(1)         |       | $        | 354,000    |     | $          | 213,000 |   |
| Audit-related  fees(2) |       | $        | —     |     | $          | — |   |
| Tax fees(3)            |       | $        | —     |     | $          | — |   |
| All other  fees(4)     |       | $        | —     |     | $          | 261,700 |   |
|                   |       |     |       |     |       |
| Total fees             |       | $        | 354,000    |     | $          | 474,700 |   |

 

----

(1)   Represents the aggregate feesErnst & Young LLP billed us in each of the last two fiscal years forprofessional services for the audits of our annual financial statements andreview of financial statements included in our reports on Form 10-Q or servicesthat are normally provided by Ernst & Young LLP in connection with thosefilings. In the year ended December 31, 2006, we were billed $18,000 inaudit fees related to our quarterly reports and $300,000 related to our annualreport. In the year ended December 31, 2005, we were billed $54,000 in auditfees related to our quarterly reports, and $195,000 related to our annualreport.

 

(2)   Represents the aggregatefees Ernst & Young LLP billed us in each of the last two fiscal years forassurance and related services that are reasonably related to the performanceof the audit.

 

(3)   Represents the aggregatefees Ernst & Young LLP billed us in each of the last two fiscal years forprofessional services rendered by the principal accountant for tax compliance,tax advice, and tax planning.

 

(4)   Represents the aggregatefees Ernst & Young LLP billed us in each of the last two fiscal years forother than the items described in 1 – 3 above. The majority of “other” fees,specifically $261,700, represent fees billed to us for assistance related to theoffering of the old notes and the registration statement on Form S-4, declaredeffective by the SEC on September 30, 2005.

 

Wedo not have an audit committee or a pre-approval policy with respect to anyfees paid to Ernst & Young LLP, our principal accountant.

 

83

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# ** **

# **PART IV**

# ** **

## **ITEM 15.****       EXHIBITS and FINANCIAL STATEMENT SCHEDULES.**

##  

(a)   List thefollowing documents filed as part of the report:

 

(1)   All financial statements.Included in “Item 8. Financial Statements and Supplementary Data” above.

 

(2)   Financial Statement Schedules.Schedule II - Valuation and Qualifying Accounts

 

(3)   Exhibit Index.

 

See exhibits listed on theExhibit Index following the signature page of this Annual Report, where saidExhibit Index is incorporated herein by reference.

 

(b)    Exhibits.Included as exhibits are the items listed in the Exhibit Index.

 

(c)    Financial Statement Schedules

 

 

 

84

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**SCHEDULE II — VALUATION ANDQUALIFYING ACCOUNTS**

**(in thousands)**

** **
| ** **                          | ** ** | **Balance at**   | ** ** | **Provision for** | ** ** | **Write-offs,** | ** ** | **Balance at** | ** ** |
|-------------------------------------|------------|------------------|------------|-------------------|------------|-----------------|------------|----------------|------------|
| ** **                          | ** ** | **Beginning of** | ** ** | **Doubtful**      | ** ** | **net of**      | ** ** | **End of**     | ** ** |
| **Description**                     | ** ** | **Period**       | ** ** | **Accounts**      | ** ** | **Recoveries**  | ** ** | **Period**     | ** ** |
| **Allowance for Doubtful Accounts** | ** ** | ** **       | ** ** | ** **        | ** ** | ** **      | ** ** | ** **     | ** ** |
| Year Ended December 31, 2006        |       | $                | 725        |              | $          | 435             |       | $              | (441       | ) | $ | 719 |   |
| Year Ended December 31, 2005        |       | $                | 631        |              | $          | 129             |       | $              | (35        | ) | $ | 725 |   |
| Year Ended December 31, 2004        |       | $                | 624        |              | $          | 301             |       | $              | (294       | ) | $ | 631 |   |

 

 

85

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## **SIGNATURES**

##  

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

 
| ** **            | **BLACK GAMING, LLC** |
|-----------------------|-----------------------|
|                  | (Registrant)          |
|                  |                  |   |
|                  |                  |   |
|                  | By:                   | /s/ Robert R. Black, Sr. |
| Date:  March 30, 2007 |                  | Robert R. Black, Sr. |
|                  | Its:                  | Manager |

 

Pursuant to the requirementsof the Securities and Exchange Act of 1934, this report has been signed by thefollowing persons in the capacities and on the dates indicated. 

 
| **Signature**                   | ** ** | **Title**                      | ** ** | **Date**       |
|---------------------------------|------------|--------------------------------|------------|----------------|
|                            |       |                           |       |           |
|  /s/ Robert R. Black,  Sr. |       | Manager                        |       | March 30, 2007 |
|  Robert R. Black, Sr.      |       | (Principal Executive  Officer) |       |           |
|                            |       |                           |       |           |
|                            |       |                           |       |           |
|  /s/ Curt Mayer            |       | Chief Financial Officer        |       | March 30, 2007 |
|  Curt Mayer                |       | (Principal Financial and       |       |           |
|                            |       | Accounting Officer)            |       |           |

##  

86

----

 

## **SIGNATURES**

##  

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

 
| ** **            | **VIRGIN RIVER CASINO CORPORATION** |
|-----------------------|-------------------------------------|
|                  | (Registrant)                        |
|                  |                                |   |
|                  |                                |   |
|                  | By:                                 | /s/ Robert R. Black, Sr. |
| Date:  March 30, 2007 |                                | Robert R. Black, Sr. |
|                  | Its:                                | Chairman of the Board,  Chief Executive Officer and  President |

 

Pursuant to the requirementsof the Securities and Exchange Act of 1934, this report has been signed by thefollowing persons in the capacities and on the dates indicated. 

 
| **Signature**                   | ** ** | **Title**                        | ** ** | **Date**       |
|---------------------------------|------------|----------------------------------|------------|----------------|
|                            |       |                             |       |           |
|  /s/ Robert R. Black,  Sr. |       | Chairman of the Board,  Chief    |       | March 30, 2007 |
|  Robert R. Black, Sr.      |       | Executive Officer and  President |       |           |
|                            |       | (Principal Executive  Officer)   |       |           |
|                            |       |                             |       |           |
|                            |       |                             |       |           |
|  /s/ Curt Mayer            |       | Chief Financial Officer          |       | March 30, 2007 |
|  Curt Mayer                |       | (Principal Financial and         |       |           |
|                            |       | Accounting Officer)              |       |           |

 

87

----

 

## **SIGNATURES**

##  

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

 

 
| ** **            | **RBG, LLC** |
|-----------------------|--------------|
|                  | (Registrant) |
|                  |         |   |
|                  |         |   |
|                  | By:          | /s/ Robert R. Black, Sr. |
| Date:  March 30, 2007 |         | Robert R. Black, Sr. |
|                  | Its:         | Manager |

 

Pursuant to the requirementsof the Securities and Exchange Act of 1934, this report has been signed by thefollowing persons in the capacities and on the dates indicated. 

 
| **Signature**                   | ** ** | **Title**                      | ** ** | **Date**       |
|---------------------------------|------------|--------------------------------|------------|----------------|
|                            |       |                           |       |           |
|  /s/ Robert R. Black,  Sr. |       | Manager                        |       | March 30, 2007 |
|  Robert R. Black, Sr.      |       | (Principal Executive  Officer) |       |           |
|                            |       |                           |       |           |
|                            |       |                           |       |           |
|  /s/ Curt Mayer            |       | Chief Financial Officer        |       | March 30, 2007 |
|  Curt Mayer                |       | (Principal Financial and       |       |           |
|                            |       | Accounting Officer)            |       |           |

 

88

----

##  

## **SIGNATURES**

##  

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

 
| ** **            | **B & B B, Inc.** |
|-----------------------|-----------------------|
|                  | (Registrant)          |
|                  |                  |   |
|                  |                  |   |
|                  | By:                   | /s/ Robert R. Black, Sr. |
| Date:  March 30, 2007 |                  | Robert R. Black, Sr. |
|                  | Its:                  | Chairman of the Board,  Chief Executive Officer and  President |

 

Pursuant to the requirementsof the Securities and Exchange Act of 1934, this report has been signed by thefollowing persons in the capacities and on the dates indicated. 

 
| **Signature**                   | ** ** | **Title**                        | ** ** | **Date**       |
|---------------------------------|------------|----------------------------------|------------|----------------|
|                            |       |                             |       |           |
|  /s/ Robert R. Black,  Sr. |       | Chairman of the Board,  Chief    |       | March 30, 2007 |
|  Robert R. Black, Sr.      |       | Executive Officer and  President |       |           |
|                            |       | (Principal Executive  Officer)   |       |           |
|                            |       |                             |       |           |
|                            |       |                             |       |           |
|  /s/ Curt Mayer            |       | Chief Financial Officer          |       | March 30, 2007 |
|  Curt Mayer                |       | (Principal Financial and         |       |           |
|                            |       | Accounting Officer)              |       |           |

 

89

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##  

## **EXHIBIT INDEX**

 
| **Index No.** | ** ** | **Description**                                                                                                                                                                                                                                    |
|---------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|          |       |                                                                                                                                                                                                                                               |
| 3.1           |       | Articles  of Organization of Black Gaming, LLC filed August 4, 2006.                                                                                                                                                                               |
|          |       |                                                                                                                                                                                                                                               |
| 3.2           |       | Amendment  to Articles of Organization of Black Gaming, LLC filed December 15, 2006.                                                                                                                                                               |
|          |       |                                                                                                                                                                                                                                               |
| 3.3           |       | Articles  of Incorporation of Virgin River Casino Corporation filed July 1, 1988,  incorporated by reference to registrant’s Registration Statement on Form S-4,  as filed with the Securities and Exchange Commission on March 8, 2005.      |
|          |       |                                                                                                                                                                                                                                               |
| 3.4           |       | Articles  of Organization of RBG, LLC filed February 18, 1997, incorporated by  reference to registrant’s Registration Statement on Form S-4, as filed with  the Securities and Exchange Commission on March 8, 2005.                         |
|          |       |                                                                                                                                                                                                                                               |
| 3.5           |       | Articles  of Incorporation of B & B B, Inc. filed December 7, 1989,  incorporated by reference to registrant’s Registration Statement on Form S-4,  as filed with the Securities and Exchange Commission on March 8, 2005. |
|          |       |                                                                                                                                                                                                                                               |
| 3.6           |       | Articles  of Organization of Casablanca Resorts, LLC filed February 6, 2001,  incorporated by reference to registrant’s Registration Statement on Form S-4,  as filed with the Securities and Exchange Commission on March 8, 2005.           |
|          |       |                                                                                                                                                                                                                                               |
| 3.7           |       | Articles  of Organization of Oasis Interval Ownership, LLC filed May 31, 2001,  incorporated by reference to registrant’s Registration Statement on Form S-4,  as filed with the Securities and Exchange Commission on March 8, 2005.         |
|          |       |                                                                                                                                                                                                                                               |
| 3.8           |       | Articles  of Organization of Oasis Interval Management, LLC filed May 31, 2001,  incorporated by reference to registrant’s Registration Statement on Form S-4,  as filed with the Securities and Exchange Commission on March 8, 2005.        |
|          |       |                                                                                                                                                                                                                                               |
| 3.9           |       | Articles  of Incorporation of Oasis Recreational Properties, Inc. filed May 23, 2001,  incorporated by reference to registrant’s Registration Statement on Form S-4,  as filed with the Securities and Exchange Commission on March 8, 2005.  |
|          |       |                                                                                                                                                                                                                                               |
| 3.10          |       | Articles  of Incorporation of R. Black, Inc. filed February 19, 1997.                                                                                                                                                                              |
|          |       |                                                                                                                                                                                                                                               |
| 3.11          |       | Operating  Agreement of Black Gaming, LLC adopted December 31, 2006.                                                                                                                                                                               |
|          |       |                                                                                                                                                                                                                                               |
| 3.12          |       | By-laws  of Virgin River Casino Corporation adopted July 14, 1988, incorporated by  reference to registrant’s Registration Statement on Form S-4, as filed with  the Securities and Exchange Commission on March 8, 2005.                     |
|          |       |                                                                                                                                                                                                                                               |
| 3.13          |       | Operating  Agreement of RBG, LLC adopted March 17, 1997, incorporated by reference to  registrant’s Registration Statement on Form S-4, as filed with the Securities  and Exchange Commission on March 8, 2005.                               |
|          |       |                                                                                                                                                                                                                                               |
| 3.14          |       | By-laws  of B & B B, Inc. adopted December 8, 1989, incorporated by  reference to registrant’s Registration Statement on Form S-4, as filed with  the Securities and Exchange Commission on March 8, 2005.                 |
|          |       |                                                                                                                                                                                                                                               |
| 3.15          |       | Operating  Agreement of Casablanca Resorts, LLC adopted May 31, 2001, incorporated by  reference to registrant’s Registration Statement on Form S-4, as filed with  the Securities and Exchange Commission on March 8, 2005.                  |

 

 

90

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| **Index No.** | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|---------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 3.16          |       | Operating  Agreement of Oasis Interval Ownership, LLC adopted June 13, 2001, incorporated  by reference to registrant’s Registration Statement on Form S-4, as filed  with the Securities and Exchange Commission on March 8, 2005.                                                                                                                                                                                                                                                                                                                    |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 3.17          |       | Operating  Agreement of Oasis Interval Management, LLC adopted June 6, 2001,  incorporated by reference to registrant’s Registration Statement on Form S-4,  as filed with the Securities and Exchange Commission on March 8, 2005.                                                                                                                                                                                                                                                                                                                    |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 3.18          |       | By-laws  of Oasis Recreational Properties, Inc. adopted June 13, 2001, incorporated by  reference to registrant’s Registration Statement on Form S-4, as filed with  the Securities and Exchange Commission on March 8, 2005.                                                                                                                                                                                                                                                                                                                          |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 3.19          |       | By-laws  of R. Black, Inc. adopted February 19, 1997.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 4.1           |       | Agreement  for Purchase and Sale or Redemption of Equity Interests dated November 22,  2004 by and among 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 R. Moore, Robert R. Black, Sr.,  Virgin River Casino Corporation and B & B B, Inc.,  incorporated by reference to registrant’s Registration Statement on Form S-4,  as filed with the Securities and Exchange Commission on March 8, 2005. |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 4.2           |       | Agreement  for Purchase and Sale or Redemption of Equity Interests dated December 9,  2004 by and among Scott M. Nielson, Robert R. Black, Sr. and  B & B B, Inc., incorporated by reference to registrant’s  Registration Statement on Form S-4, as filed with the Securities and Exchange  Commission on March 8, 2005.                                                                                                                                                                                                           |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 4.3           |       | Indenture  dated as of December 20, 2004 between Virgin River Casino Corporation, RBG,  LLC and B & B B, Inc., certain guarantors and The Bank of  New York Trust Company, N.A. relating to Series A and Series B 9% Senior  Secured Notes due 2012, incorporated by reference to registrant’s  Registration Statement on Form S-4, as filed with the Securities and Exchange  Commission on March 8, 2005.                                                                                                                         |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 4.4           |       | Indenture  dated as of December 20, 2004 between Virgin River Casino Corporation, RBG,  LLC and B & B B, Inc., certain guarantors and The Bank of  New York Trust Company, N.A. relating to Series A and Series B 123⁄4% Senior  Subordinated Discount Notes due 2012, incorporated by reference to  registrant’s Registration Statement on Form S-4, as filed with the Securities  and Exchange Commission on March 8, 2005.                                                                                                    |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 4.5           |       | Form  of 123⁄4% Series B Senior Subordinated Discount Notes due 2012 (included as  part of Indenture at Exhibit A), incorporated by reference to registrant’s  Registration Statement on Form S-4, as filed with the Securities and Exchange  Commission on March 8, 2005.                                                                                                                                                                                                                                                                          |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 4.6           |       | Registration  Rights Agreement dated as of December 20, 2004, by and among Virgin River  Casino Corporation, RBG, LLC, B & B B, Inc., certain  subsidiaries and Jefferies & Company, Inc., incorporated by reference to  registrant’s Registration Statement on Form S-4, as filed with the Securities  and Exchange Commission on March 8, 2005.                                                                                                                                                                               |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 4.7           |       | Purchase  Agreement dated as of December 10, 2004 by and among by and among Virgin  River Casino Corporation, RBG, LLC, B & B B, Inc., certain  subsidiaries, certain pledgors and Jefferies & Company, Inc.,  incorporated by reference to registrant’s Registration Statement on Form S-4,  as filed with the Securities and Exchange Commission on March 8, 2005.                                                                                                                                                            |

 

 

91

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| **Index No.** | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|---------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 4.8           |       | Senior  Secured Notes Security Agreement dated December 20, 2004, by and among Virgin  River Casino Corporation, RBG, LLC, B & B B, Inc., certain  subsidiaries and The Bank of New York Trust Company, N.A., as collateral  agent, incorporated by reference to registrant’s Registration Statement on  Form S-4, as filed with the Securities and Exchange Commission on March 8,  2005.                                               |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 4.9           |       | Parent  Pledge Agreement dated December 20, 2004 by R. Black, Inc. and The Robert R.  Black, Sr. Gaming Properties Trust in favor of The Bank of New York Trust  Company, N.A., as collateral agent, incorporated by reference to registrant’s  Registration Statement on Form S-4, as filed with the Securities and Exchange  Commission on March 8, 2005.                                                                                                 |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 4.10          |       | Trademark  Security Agreement dated December 20, 2004, by and among Virgin River Casino  Corporation, RBG, LLC, B & B B, Inc., certain subsidiaries  and The Bank of New York Trust Company, N.A., incorporated by reference to  registrant’s Registration Statement on Form S-4, as filed with the Securities  and Exchange Commission on March 8, 2005.                                                                                |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 4.11          |       | Credit  Agreement dated December 20, 2004, by and among Virgin River Casino  Corporation, RBG, LLC, B & B B, Inc., certain subsidiaries,  Wells Fargo Foothill, Inc. as the arranger and administrative agent and the  other lending parties thereto, incorporated by reference to registrant’s  Registration Statement on Form S-4, as filed with the Securities and Exchange  Commission on March 8, 2005.                             |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 4.12          |       | Security  Agreement dated December 20, 2004 B & B B, Inc.,  Casablanca Resorts, LLC, Oasis Interval Management, LLC, Oasis Interval  Ownership, LLC, Oasis Recreational Properties, Inc., RBG, LLC and Virgin  River Casino Corporation and Wells Fargo Foothill, Inc., as agent,  incorporated by reference to registrant’s Registration Statement on Form S-4,  as filed with the Securities and Exchange Commission on March 8, 2005. |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 4.13          |       | Parent  Pledge Agreement dated December 20, 2004 by and among Robert R. Black, Sr.,  The Robert R. Black, Sr. Gaming Properties Trust, R. Black, Inc. in favor of  Wells Fargo Foothill Inc., incorporated by reference to registrant’s  Registration Statement on Form S-4, as filed with the Securities and Exchange  Commission on March 8, 2005.                                                                                                        |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 4.14          |       | Trademark  Security Agreement dated December 20, 2004 by and among  B & B B, Inc., RBG, LLC, Virgin River Casino Corporation,  certain subsidiaries and Wells Fargo Foothill, Inc., incorporated by  reference to registrant’s Registration Statement on Form S-4, as filed with  the Securities and Exchange Commission on March 8, 2005.                                                                                               |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 4.15          |       | Bailee  Agreement dated December 20, 2004 by and among Wells Fargo Foothill, Inc.,  The Bank of New York Trust Company, N.A., Nevada Title Company, Robert R.  Black, Sr., R. Black, Inc. and Virgin River Casino Corporation, incorporated  by reference to registrant’s Registration Statement on Form S-4, as filed  with the Securities and Exchange Commission on March 8, 2005.                                                                       |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 4.16          |       | Intercompany  Subordination Agreement dated December 20, 2004 by and among  B & B B, Inc., RBG, LLC, Virgin River Casino Corporation,  certain subsidiaries and Wells Fargo Foothill, Inc., incorporated by  reference to registrant’s Registration Statement on Form S-4, as filed with  the Securities and Exchange Commission on March 8, 2005.                                                                                       |

 

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| **Index No.** | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|---------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 4.17          |       | Intercreditor  and Lien Subordination Agreement dated December 20, 2004 by and among  B & B B, Inc., RBG, LLC, Virgin River Casino Corporation,  certain subsidiaries and Wells Fargo Foothill, Inc., Wells Fargo Foothill,  Inc. and The Bank of New York Trust Company, N.A., incorporated by reference  to registrant’s Registration Statement on Form S-4, as filed with the Securities  and Exchange Commission on March 8, 2005.                                                                                                       |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 4.18          |       | Leasehold  and Fee Deed of Trust, Security Agreement and Fixture Filing with Assignment  of Rents (Nevada) dated as of December 20, 2004 and made by Virgin River  Casino Corporation, RBG, LLC, Casablanca Resorts, LLC and Oasis Interval  Ownership, LLC to Nevada Title Company, as trustee, for the benefit of The  Bank of New York Trust Company, N.A., incorporated by reference to  registrant’s Registration Statement on Form S-4, as filed with the Securities  and Exchange Commission on March 8, 2005.                                           |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 4.19          |       | Leasehold  and Fee Deed of Trust, Security Agreement and Fixture Filing with Assignment  of Rents (Arizona) dated as of December 20, 2004 and made by Oasis  Recreational Properties, Inc. to Transnation Title Insurance Company, as  trustee, for the benefit of The Bank of New York Trust Company, N.A.,  incorporated by reference to registrant’s Registration Statement on Form S-4,  as filed with the Securities and Exchange Commission on March 8, 2005.                                                                                             |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 4.20          |       | Leasehold  and Fee Deed of Trust, Fixture Filing with Assignment of Rents and Leases,  and Security Agreement (Nevada) dated as of December 20, 2004 and made by and  from RBG, LLC, Virgin River Casino Corporation, Casablanca Resorts, LLC,  B & B B, Inc., and Oasis Interval Ownership, LLC to Nevada  Title Company, as trustee, for the benefit of Wells Fargo Foothill, Inc.,  incorporated by reference to registrant’s Registration Statement on Form S-4,  as filed with the Securities and Exchange Commission on March 8, 2005. |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 4.21          |       | Leasehold  and Fee Deed of Trust, Assignment of Rents and Leases, Security Agreement and  Fixture Filing (Arizona) dated as of December 20, 2004 and made by and from  Oasis Recreational Properties, Inc. to Transnation Title Insurance Company,  as trustee, for the benefit of Wells Fargo Foothill, Inc., incorporated by  reference to registrant’s Registration Statement on Form S-4, as filed with  the Securities and Exchange Commission on March 8, 2005.                                                                                           |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 4.22          |       | Assignment  of Entitlements, Contracts, Rents and Revenues (Nevada) dated December 16,  2004 by and between Virgin River Casino Corporation, RBG, LLC, Casablanca  Resorts, LLC, Oasis Interval Ownership, LLC, B & B B, Inc.  and The Bank of New York Trust Company, N.A., incorporated by reference to  registrant’s Registration Statement on Form S-4, as filed with the Securities  and Exchange Commission on March 8, 2005.                                                                                                          |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 4.23          |       | Assignment  of Entitlements, Contracts, Rents and Revenues (Arizona) dated December 17,  2004 by and between Oasis Recreational Properties, Inc. and The Bank of New  York Trust Company, N.A., incorporated by reference to registrant’s  Registration Statement on Form S-4, as filed with the Securities and Exchange  Commission on March 8, 2005.                                                                                                                                                                                                          |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 4.24          |       | Assignment  of Entitlements, Contracts, Rents and Revenues (Nevada) dated December 20,  2004 and made by and between Virgin River Casino Corporation, RBG, LLC,  Casablanca Resorts, LLC, B & B B, Inc. and Oasis Interval  Ownership, LLC and Wells Fargo Foothill, Inc., incorporated by reference to registrant’s  Registration Statement on Form S-4, as filed with the Securities and Exchange  Commission on March 8, 2005.                                                                                                            |

 

93

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| **Index No.** | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                              |
|---------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 4.25          |       | Assignment  of Entitlements, Contracts, Rents and Revenues (Arizona) dated December 20,  2004 and made by and between Oasis Recreational Properties, Inc. and Wells  Fargo Foothill, Inc., incorporated by reference to registrant’s Registration  Statement on Form S-4, as filed with the Securities and Exchange Commission  on March 8, 2005.                                                                       |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 4.26          |       | Collateral  Assignment of Notes and Deeds of Trust dated December 16, 2004 by and between  Oasis Interval Ownership, LLC and The Bank of New York Trust Company, N.A.,  incorporated by reference to registrant’s Registration Statement on Form S-4,  as filed with the Securities and Exchange Commission on March 8, 2005.                                                                                           |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 4.27          |       | Collateral  Assignment of Notes and Deeds of Trust dated December 20, 2004 by and between  Oasis Recreational Properties, Inc. and Wells Fargo Foothill, Inc.,  incorporated by reference to registrant’s Registration Statement on Form S-4,  as filed with the Securities and Exchange Commission on March 8, 2005.                                                                                                   |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 4.28          |       | Estoppel  Certificate Consent and Agreement dated December 20, 2004 by River View Limited  Liability Company and RBG, LLC, for the benefit of The Bank of New York, as  collateral agent, and Wells Fargo Foothill, Inc., as arranger and  administrative agent, incorporated by reference to registrant’s Registration  Statement on Form S-4, as filed with the Securities and Exchange Commission  on March 8, 2005. |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 4.29          |       | Convertible  Senior Secured Note Purchase Agreement dated December 20, 2004 by and between  R. Black, Inc., Robert R. Black Sr., Trustee of the Robert R. Black, Sr.  Gaming Properties Trust u/a/d May 24, 2004 and Michael Gaughan, incorporated  by reference to registrant’s Pre-Effective Amendment No. 1 to Form S-4, as  filed with the Securities and Exchange Commission on May 2, 2005.                       |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 4.30          |       | Convertible  Note Pledge Agreement dated December 20, 2004 by and between Robert R. Black  Sr., Trustee of the Robert R. Black, Sr. Gaming Properties Trust u/a/d May  24, 2004 and Michael Gaughan, incorporated by reference to registrant’s  Pre-Effective Amendment No. 1 to Form S-4, as filed with the Securities and  Exchange Commission on May 2, 2005.                                                        |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 4.31          |       | Convertible  Promissory Note dated December 20, 2004 made by R. Black, Inc. in favor of  Michael J. Gaughan, incorporated by reference to registrant’s Pre-Effective  Amendment No. 1 to Form S-4, as filed with the Securities and Exchange  Commission on May 2, 2005.                                                                                                                                                |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.1          |       | Letter  dated November 12, 2004 between Curt C. Mayer and Robert R. Black, Sr.  regarding employment of Mr. Mayer by B& BB Inc., Virgin River Casino  Corporation, Inc. and RBG, LLC, incorporated by reference to registrant’s  Pre-Effective Amendment No. 2 to Form S-4, as filed with the Securities and  Exchange Commission on May 26, 2005.                                                                  |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.2          |       | Executive  Employment Agreement dated April 1, 2005 made by Virgin River Casino  Corporation, RBG, LLC and Casablanca Resorts, LLC with Jonathan Lowenhar,  incorporated by reference to registrant’s Form 10-K/A, as filed with the  Securities and Exchange Commission on April 25, 2006.                                                                                                                             |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.3          |       | Lease  Buy-Out and Condominium Conversion Management Agreement dated January 24,  2005 by and between MDW Mesquite, LLC, RBG, LLC and Robert R. Black, Sr.,  incorporated by reference to registrant’s Pre-Effective Amendment No. 1 to  Form S-4, as filed with the Securities and Exchange Commission on May 2,  2005.                                                                                                |

 

94

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| **Index No.** | ** ** | **Description**                                                                                                                                                                                                                                                                              |
|---------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|          |       |                                                                                                                                                                                                                                                                                         |
| 10.4          |       | Executive  Employment Agreement dated January 1, 2006 made by Virgin River Casino  Corporation, RBG, LLC and Casablanca Resorts, LLC with Curt Mayer,  incorporated by reference to registrant’s Form 10-Q, as filed with the  Securities and Exchange Commission on November 14, 2006. |
|          |       |                                                                                                                                                                                                                                                                                         |
| 10.5          |       | Black  Gaming Long-term Incentive Plan, effective as of October 1, 2006,  incorporated by reference to registrant’s Form 10-Q, as filed with the Securities  and Exchange Commission on November 14, 2006.                                                                              |
|          |       |                                                                                                                                                                                                                                                                                         |
| 10.6          |       | Agreement  and Plan of Reorganization dated December 31, 2006, incorporated by reference  to registrant’s Current Report of Form 8-K, as filed with the Securities and  Exchange Commission on January 3, 2007.                                                                         |
|          |       |                                                                                                                                                                                                                                                                                         |
| 10.7          |       | Guarantee  for the Senior Secured Notes dated December 31, 2006, incorporated by  reference to registrant’s Current Report of Form 8-K, as filed with the  Securities and Exchange Commission on January 3, 2007.                                                                       |
|          |       |                                                                                                                                                                                                                                                                                         |
| 10.8          |       | Guarantee  for the Senior Subordinated Notes dated December 31, 2006, incorporated by  reference to registrant’s Current Report of Form 8-K, as filed with the  Securities and Exchange Commission on January 3, 2007.                                                                  |
|          |       |                                                                                                                                                                                                                                                                                         |
| 10.9          |       | First  Supplemental Indenture for the Senior Secured Notes dated December 31, 2006,  incorporated by reference to registrant’s Current Report of Form 8-K, as  filed with the Securities and Exchange Commission on January 3, 2007.                                                    |
|          |       |                                                                                                                                                                                                                                                                                         |
| 10.10         |       | First  Supplemental Indenture for the Senior Subordinated Notes dated December 31,  2006, incorporated by reference to registrant’s Current Report of Form 8-K,  as filed with the Securities and Exchange Commission on January 3, 2007.                                               |
|          |       |                                                                                                                                                                                                                                                                                         |
| 10.11         |       | Joinder  to the Registration Rights Agreement dated December 31, 2006, incorporated by  reference to registrant’s Current Report of Form 8-K, as filed with the  Securities and Exchange Commission on January 3, 2007.                                                                 |
|          |       |                                                                                                                                                                                                                                                                                         |
| 10.12         |       | Security  Agreement Supplement dated December 31, 2006, incorporated by reference to  registrant’s Current Report of Form 8-K, as filed with the Securities and  Exchange Commission on January 3, 2007.                                                                                |
|          |       |                                                                                                                                                                                                                                                                                         |
| 10.13         |       | Pledged  Interests Addendum dated December 31, 2006, incorporated by reference to  registrant’s Current Report of Form 8-K, as filed with the Securities and Exchange  Commission on January 3, 2007.                                                                                   |
|          |       |                                                                                                                                                                                                                                                                                         |
| 10.14         |       | Consent  by the Bank of New York Trust Company, N.A., dated December 31, 2006,  incorporated by reference to registrant’s Current Report of Form 8-K, as  filed with the Securities and Exchange Commission on January 3, 2007.                                                         |
|          |       |                                                                                                                                                                                                                                                                                         |
| 10.15         |       | Amended  and Restated Parent Pledge Agreement dated December 31, 2006, incorporated by  reference to registrant’s Current Report of Form 8-K, as filed with the  Securities and Exchange Commission on January 3, 2007.                                                                 |
|          |       |                                                                                                                                                                                                                                                                                         |
| 10.16         |       | General  Continuing Guaranty dated December 31, 2006, incorporated by reference to  registrant’s Current Report of Form 8-K, as filed with the Securities and  Exchange Commission on January 3, 2007.                                                                                  |

 

95

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| **Index No.** | ** ** | **Description**                                                                                                                                                                                                        |
|---------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|          |       |                                                                                                                                                                                                                   |
| 10.17         |       | Joinder  Agreement and Amendment dated December 31, 2006, incorporated by reference to  registrant’s Current Report of Form 8-K, as filed with the Securities and  Exchange Commission on January 3, 2007.        |
|          |       |                                                                                                                                                                                                                   |
| 10.18         |       | Consent  by Wells Fargo Foothill, Inc., dated December 31, 2006, incorporated by  reference to registrant’s Current Report of Form 8-K, as filed with the  Securities and Exchange Commission on January 3, 2007. |
|          |       |                                                                                                                                                                                                                   |
| 10.19         |       | Joinder  to Bailee Agreement dated December 31, 2006, incorporated by reference to  registrant’s Current Report of Form 8-K, as filed with the Securities and  Exchange Commission on January 3, 2007.            |
|          |       |                                                                                                                                                                                                                   |
| 21.1          |       | List  of Subsidiaries of the Registrant.                                                                                                                                                                               |
|          |       |                                                                                                                                                                                                                   |
| 31.1          |       | Certification  of Robert R. Black, Sr. under Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                            |
|          |       |                                                                                                                                                                                                                   |
| 31.2          |       | Certification  of Curt Mayer under Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                      |
|          |       |                                                                                                                                                                                                                   |
| 32.1          |       | Certification  of Robert R. Black, Sr. pursuant to Section 906 of the Sarbanes-Oxley Act of  2002.                                                                                                                     |
|          |       |                                                                                                                                                                                                                   |
| 32.2          |       | Certification  of Curt Mayer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                |

 

96

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