UNITED
STATES




SECURITIES
AND EXCHANGE COMMISSION




WASHINGTON,
D.C. 20549




FORM 10-Q




x
            Quarterly
      Report Pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934For
      the quarterly period ended June 30, 2008.oro
            Transition
      Report Pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934







For
the transition period from
                     
to




Commission
File Number: 333-88829




DIAMOND
      JO, LLC
            
            PENINSULA
              GAMING,
      LLC
            
            PENINSULA
              GAMING
    CORP.(Exact
      name of registrants
              as
      specified in their charter)
            
            (Exact
      name of registrants
              as
      specified in their charter)
            
            (Exact
      name of registrants
              as
      specified in their charter)DELAWARE
            
            DELAWARE
            
            DELAWARE(State
      or other jurisdiction of
              incorporation
      or organization)
            
            (State
      or other jurisdiction of
              incorporation
      or organization)
            
            (State
      or other jurisdiction of
              incorporation
      or organization)42-1483875
            
            20-0800583
            
            25-1902805(I.R.S.
      Employer
              Identification
      No.)
            
            (I.R.S.
      Employer
              Identification
      No.)
            
            (I.R.S.
      Employer
              Identification
      No.)







3rd
Street Ice Harbor, PO Box 1750


Dubuque,
Iowa 52001


(563)
583-7005


(Address,
including zip code, and telephone number, including area code, of principal
executive offices)




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 twelve 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 o  No x




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer," "accelerated
filer" and "smaller reporting company" in Rule 12b-2 of the Exchange
Act.:





Large Accelerated Filer o        Accelerated
Filer o        Non-Accelerated
Filer    x    Smaller
reporting company o





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




All of
the common equity interests of Peninsula Gaming, LLC (the “Company”) are held by
Peninsula Gaming Partners, LLC. All of the common equity interests of Diamond
Jo, LLC, The Old Evangeline Downs, L.L.C., Diamond Jo Worth Holdings, LLC and
Peninsula Gaming Corp. are held by the Company. All of the common equity
interests of Diamond Jo Worth, LLC and Diamond Jo Worth Corp. are held by
Diamond Jo Worth Holdings, LLC.























PENINSULA
GAMING, LLC


INDEX TO
FORM 10-Q


PagePart I - Financial Information
            3Item 1 - Financial Statements
            3Peninsula
      Gaming, LLC:Condensed Consolidated Balance Sheets (Unaudited) as of
      June 30, 2008 and December 31, 2007
            3Condensed Consolidated Statements of Operations
      (Unaudited) for the Three and Six Months Ended June 30, 2008 and
      2007
            4Condensed Consolidated Statements of Cash Flows
      (Unaudited) for the Six Months Ended June 30, 2008 and
      2007
            5Notes to Condensed Consolidated Financial Statements
      (Unaudited)
            6Item 2 - Management’s Discussion and Analysis of
      Financial Condition and Results of Operations
            25Item 3 - Quantitative and Qualitative Disclosures
      About Market Risk
            34Item 4 - Controls and Procedures
            34Part II - Other Information
            35Item 1 - Legal Proceedings
            35Item 1A - Risk Factors
            35Item 2 - Unregistered Sales of Equity Securities and Use of
      Proceeds
            35Item 3 - Defaults Upon Senior
Securities
            35Item 4 - Submission of Matters to a Vote of Security
      Holders
            35Item 5 - Other Information
            36Item 6 - Exhibits
            36Signatures
            37










2





PART I.FINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS






PENINSULA
GAMING, LLC


CONDENSED
CONSOLIDATED BALANCE SHEETS (UNAUDITED)


(in
thousands)




June 30,
              2008
            
            
            December 31,
              2007ASSETSCURRENT
      ASSETS:Cash
      and cash equivalents
            
            $
            32,476
            
            
            $
            42,100Restricted
      cash—purse settlements
            
            
            7,426
            
            
            
            4,902Accounts
      receivable, net
            
            
            6,562
            
            
            
            3,000Receivables
      from affiliates
            
            
            157
            
            
            
            -Inventories
            
            
            1,006
            
            
            
            911Prepaid
      expenses and other assets
            
            
            1,612
            
            
            
            1,375Total
      current assets
            
            
            49,239
            
            
            
            52,288PROPERTY
      AND EQUIPMENT, NET
            
            
            214,587
            
            
            
            188,812OTHER
      ASSETS:Deferred
      financing costs, net of amortization of $12,325 and $10,325,
      respectively
            
            
            20,590
            
            
            
            21,785Goodwill
            
            
            53,083
            
            
            
            53,083Licenses
      and other intangibles
            
            
            38,272
            
            
            
            37,016Deposits
      and other assets
            
            
            4,784
            
            
            
            6,452Investment
      available for sale
            
            
            11,711
            
            
            
            12,491Total
      other assets
            
            
            128,440
            
            
            
            130,827TOTAL
            
            $
            392,266
            
            
            $
            371,927LIABILITIES
      AND MEMBER’S DEFICITCURRENT
      LIABILITIES:Accounts
      payable
            
            $
            4,838
            
            
            $
            3,489Construction
      payable
            
            
            11,907
            
            
            
            4,884Purse
      settlement payable
            
            
            9,977
            
            
            
            6,723Accrued
      payroll and payroll taxes
            
            
            4,623
            
            
            
            5,618Accrued
      interest
            
            
            7,793
            
            
            
            7,797Other
      accrued expenses
            
            
            11,543
            
            
            
            9,800Payable
      to affiliates
            
            
            3,419
            
            
            
            3,921Current
      maturities of long-term debt and leases
            
            
            2,292
            
            
            
            3,147Total
      current liabilities
            
            
            56,392
            
            
            
            45,379LONG-TERM
      LIABILITIES:83¤4% senior secured notes,
      net of discount
            
            
            253,008
            
            
            
            252,78911%
      senior secured notes, net of discount
            
            
            115,061
            
            
            
            116,35813%
      senior notes, net of discount
            
            
            6,865
            
            
            
            6,853Term
      loan
            
            
            937
            
            
            
            -Notes
      and leases payable, net of discount
            
            
            1,326
            
            
            
            1,887Obligation
      under Minimum Assessment Agreement
            
            
            3,944
            
            
            
            -Other
      liabilities
            
            
            6,612
            
            
            
            8,283Total
      long-term liabilities
            
            
            387,753
            
            
            
            386,170Total
      liabilities
            
            
            444,145
            
            
            
            431,549COMMITMENTS
      AND CONTINGENCIESMEMBER’S
      DEFICIT:Common
      member’s interest
            
            
            9,000
            
            
            
            9,000Accumulated
      deficit
            
            
            (57,828
            )
            
            
            (66,424
            )Accumulated
      other comprehensive loss
            
            
            (3,051
            )
            
            
            (2,198
            )Total
      member’s deficit
            
            
            (51,879
            )
            
            
            (59,622
            )TOTAL
            
            $
            392,266
            
            
            $
            371,927





See notes
to condensed consolidated financial statements (unaudited).







3





PENINSULA
GAMING, LLC


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)


(in
thousands)




Three Months
              Ended
              June 30, 2008
            
            
            Three Months
              Ended
              June 30, 2007
            
            
            Six Months
              Ended
              June 30, 2008
            
            
            Six Months
              Ended
              June 30, 2007REVENUES:Casino
            
            $
            58,663
            
            
            $
            57,320
            
            
            $
            115,083
            
            
            $
            110,184Racing
            
            
            6,399
            
            
            
            6,658
            
            
            
            9,716
            
            
            
            10,120Video
      poker
            
            
            1,598
            
            
            
            1,057
            
            
            
            3,156
            
            
            
            2,194Food
      and beverage
            
            
            4,432
            
            
            
            4,253
            
            
            
            8,188
            
            
            
            7,672Other
            
            
            3,189
            
            
            
            2,936
            
            
            
            5,881
            
            
            
            5,299Less
      promotional allowances
            
            
            (5,408
            )
            
            
            (5,234
            )
            
            
            (10,074
            )
            
            
            (10,140
            )Total
      net revenues
            
            
            68,873
            
            
            
            66,990
            
            
            
            131,950
            
            
            
            125,329EXPENSES:Casino
            
            
            24,909
            
            
            
            24,308
            
            
            
            49,089
            
            
            
            46,647Racing
            
            
            5,253
            
            
            
            5,356
            
            
            
            8,162
            
            
            
            8,273Video
      poker
            
            
            1,203
            
            
            
            863
            
            
            
            2,329
            
            
            
            1,692Food
      and beverage
            
            
            3,433
            
            
            
            3,345
            
            
            
            6,330
            
            
            
            6,069Other
            
            
            2,081
            
            
            
            1,977
            
            
            
            3,503
            
            
            
            3,228Selling,
      general and administrative
            
            
            3,585
            
            
            
            15,844
            
            
            
            15,579
            
            
            
            26,865Depreciation
      and amortization
            
            
            5,067
            
            
            
            5,105
            
            
            
            9,930
            
            
            
            10,054Pre-opening
      expense
            
            
            31
            
            
            
            160
            
            
            
            127
            
            
            
            243Development
      expense
            
            
            (648
            )
            
            
            139
            
            
            
            (609
            )
            
            
            1,784Affiliate
      management fees
            
            
            1,467
            
            
            
            1,417
            
            
            
            2,837
            
            
            
            2,572Loss
      on disposal of assets
            
            
            120
            
            
            
            16
            
            
            
            223
            
            
            
            97Total
      expenses
            
            
            46,501
            
            
            
            58,530
            
            
            
            97,500
            
            
            
            107,524INCOME
      FROM OPERATIONS
            
            
            22,372
            
            
            
            8,460
            
            
            
            34,450
            
            
            
            17,805OTHER
      INCOME (EXPENSE):Interest
      income
            
            
            608
            
            
            
            576
            
            
            
            1,352
            
            
            
            1,299Interest
      expense, net of amounts capitalized
            
            
            (10,072
            )
            
            
            (9,989
            )
            
            
            (20,336
            )
            
            
            (19,611
            )Total
      other expense
            
            
            (9,464
            )
            
            
            (9,413
            )
            
            
            (18,984
            )
            
            
            (18,312
            )NET
      INCOME (LOSS)
            
            $
            12,908
            
            
            $
            (953
            )
            
            $
            15,466
            
            
            $
            (507
            )







See notes
to condensed consolidated financial statements (unaudited).







4





PENINSULA
GAMING, LLC


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


(in thousands)




Six Months
      Ended
              June 30,
      2008
            
            
            Six Months
              Ended
              June 30,
      2007CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      (loss) income
            
            $
            15,466
            
            
            $
            (507
            )Adjustments
      to reconcile net (loss) income to net cash flows from operating
      activities:Depreciation
      and amortization
            
            
            9,930
            
            
            
            10,054Non-cash
      interest
            
            
            2,530
            
            
            
            2,061Non-cash
      equity based and other compensation
            
            
            (4,737
            )
            
            
            7,505Loss
      on disposal of assets
            
            
            223
            
            
            
            97Changes
      in operating assets and liabilities:Restricted
      cash — purse settlements
            
            
            (2,524
            )
            
            
            (1,255
            )Receivables
            
            
            (1,962
            )
            
            
            (1,810
            )Inventories
            
            
            (95
            )
            
            
            (356
            )Prepaid
      expenses and other assets
            
            
            (1,100
            )
            
            
            (1,010
            )Accounts
      payable
            
            
            4,803
            
            
            
            3,262Accrued
      expenses
            
            
            (1,850
            )
            
            
            2,906Payable/receivable
      - affiliates
            
            
            (659
            )
            
            
            947Net
      cash flows from operating activities
            
            
            20,025
            
            
            
            21,894CASH
      FLOWS FROM INVESTING ACTIVITIES:Increase
      in cash value of life insurance for premiums paid
            
            
            (104
            )
            
            
            (121
            )Proceeds
      from restricted cash
            
            
            -
            
            
            
            12,981Business
      acquisition and licensing costs
            
            
            (1,258
            )
            
            
            (1,254
            )Construction
      project development costs
            
            
            (20,051
            )
            
            
            (23,544
            )Purchase
      of property and equipment
            
            
            (4,084
            )
            
            
            (3,779
            )Proceeds
      from sale of property and equipment
            
            
            -
            
            
            
            22Net
      cash flows from investing activities
            
            
            (25,497
            )
            
            
            (15,695
            )CASH
      FLOWS FROM FINANCING ACTIVITIES:Deferred
      financing costs
            
            
            (159
            )
            
            
            (385
            )Principal
      payments on debt
            
            
            (2,883
            )
            
            
            (5,114
            )Proceeds
      from senior credit facilities
            
            
            4,500
            
            
            
            —Payments
      on senior credit facilities
            
            
            (4,500
            )
            
            
            —Proceeds
      from term loan
            
            
            1,023
            
            
            
            —Member
      distributions
            
            
            (2,133
            )
            
            
            (4,304
            )Net
      cash flows from financing activities
            
            
            (4,152
            )
            
            
            (9,803
            )NET
      DECREASE IN CASH AND CASH EQUIVALENTS
            
            
            (9,624
            )
            
            
            (3,604
            )CASH
      AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
            
            
            42,100
            
            
            
            56,921CASH
      AND CASH EQUIVALENTS AT END OF PERIOD
            
            $
            32,476
            
            
            $
            53,317SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATION:Cash
      paid during the period for interest
            
            $
            18,757
            
            
            $
            17,714SUPPLEMENTAL
      SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:Property
      additions acquired, but not paid
            
            $
            12,094
            
            
            $
            4,475Property
      and equipment acquired in exchange for obligation under Minimum Assessment
      Agreement
            
            
            3,506
            
            
            
            -Property
      and equipment purchased in exchange for indebtedness
            
            
            -
            
            
            
            3,399


See notes
to condensed consolidated financial statements (unaudited).







5





PENINSULA
GAMING, LLC




NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)




1.  Organization and Basis of
Presentation






Peninsula
Gaming, LLC (“PGL” or the “Company”), a Delaware limited liability company
organized in 1999, is a holding company with no independent operations whose
primary assets are cash and its equity interests in its wholly owned
subsidiaries. PGL’s subsidiaries consist of: (i) Diamond Jo, LLC, a
Delaware limited liability company (“DJL”), which owns and operates the Diamond
Jo riverboat casino in Dubuque, Iowa; (ii) The Old Evangeline Downs,
L.L.C., a Louisiana limited liability company (“EVD”), which owns and operates
the Evangeline Downs Racetrack and Casino, or racino, in St. Landry Parish,
Louisiana and four off-track betting (“OTB”) parlors in Louisiana;
(iii) Diamond Jo Worth Holdings, LLC, a Delaware limited liability company
(“DJWH”), and (iv) Peninsula Gaming Corp. (“PGC”), a Delaware corporation
with no assets or operations formed solely to facilitate the offering of the
Company’s 8 3/4% senior secured notes due 2012 (the “Peninsula Gaming Notes”) in
March 2004. DJWH is a holding company with no independent operations whose
sole assets are its equity interests in its wholly owned subsidiaries. DJWH’s
subsidiaries consist of: (i) Diamond Jo Worth, LLC, a Delaware limited
liability company (“DJW”), which owns and operates the Diamond Jo casino in
Worth County, Iowa and (ii) DJW Corp. (“DJWC”), a Delaware corporation with
no assets or operations formed solely to facilitate the offering by DJW of its
11% senior secured notes due 2012 (the “DJW Notes”). The Company is a wholly
owned subsidiary of Peninsula Gaming Partners, LLC, a Delaware limited liability
company (“PGP”).




In the
opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments, consisting only of normal recurring entries
unless otherwise disclosed, necessary to present fairly the financial
information of the Company for the interim periods presented and have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The interim results reflected in the financial
statements are not necessarily indicative of results expected for the full year
or other periods.




The
financial statements contained herein should be read in conjunction with the
audited financial statements and accompanying notes to the financial statements
included in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2007. Accordingly, footnote disclosure which would
substantially duplicate the disclosure in the audited financial statements has
been omitted in the accompanying unaudited financial statements.







2.  Summary of Significant
Accounting Policies






Investment—In
October 2007, DJW purchased approximately $23 million principal amount of 7.5 %
Urban Renewal Tax Increment Revenue Bonds, Taxable Series 2007 (“City
Bonds”).  This investment is the Company’s only investment, is
classified as available-for-sale, and is recorded at fair value.  The
fair value of the investment at June 30, 2008 and December 31, 2007 was
approximately $11.7 million and $12.5 million, respectively.  The
estimate of the fair value of the investment is based on current market rates
and estimates of market conditions for instruments with similar terms,
maturities, and degrees of risk.





The
investment has experienced a market decline of $3.1 million since its
purchase.  The Company considers the market decline to be temporary
due primarily to movements in interest rates and has the positive intent and
ability to hold the investment until recovery.  The Company will
continue to monitor this investment.





Development
expense—Costs associated with new business opportunities are expensed as
incurred unless the cost is capitalizable and management believes it is probable
the project will be completed. For the six months ended June 30, 2007, the
Company incurred development expenses associated with the development of DJL’s
proposed new casino.  During the six months ended June 30, 2007, DJL
expensed $1.4 million as development expense associated with its charitable
obligations under the Offer to Purchase Real Estate, Acceptance and Lease, dated
September 27, 2006 (“Historical Society Agreement”) between DJL and the Dubuque
County Historical Society (“Historical Society”) and $0.3 million of other
development cost associated with the proposed project.  As part of the
Historical Society Agreement, in December 2007, DJL expensed an additional $1.3
million to development expense related to its unconditional obligation to
contribute the Diamond Jo vessel to the Historical Society.  In June
2008, DJL and the Historical Society reached an amended agreement wherein DJL
would sell the vessel with the proceeds to be split evenly between DJL and the
Historical Society.  Based on this agreement, DJL reduced its
outstanding obligation to the Historical Society by 50% of the estimated
proceeds expected to be received upon the sale of the Diamond Jo vessel with a
corresponding credit to development expense on the Company’s statement of
operations.







6





Use of
Estimates—The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting periods. Actual results could differ
from those estimates. Significant estimates involve the fair values of equity
based compensation, an embedded derivative, the DJW investment in City Bonds,
the periodic review of the carrying value of assets for impairment, the
estimated useful lives for depreciable assets, and the estimated
liabilities for the EVD sales tax contingency, slot club awards, customer legal
disputes and self insured medical and workers compensation claims.




In
addition, an estimated loss from a loss contingency is recorded when information
available prior to issuance of the financial statements indicates that it is
probable that a liability has been incurred at the date of the financial
statements and the amount of the loss can be reasonably estimated. Accounting
for contingencies such as legal matters requires the use of judgment. Many of
these legal contingencies can take years to be resolved. An adverse outcome
could have a material impact on financial condition, results of operations, and
cash flows.





Recently Issued
Accounting Standards— In May 2008, the Financial Accounting Standards
Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No.
162, The Hierarchy of
Generally Accepted Accounting Principles(“GAAP”) (“SFAS 162”). The
purpose of the new standard is to provide a consistent framework for determining
what accounting principles should be used when preparing U.S. GAAP financial
statements. Previous guidance did not properly rank the accounting literature.
The new standard is effective 60 days following the Securities and Exchange
Commission’s approval of the Public Company Accounting Oversight Board
amendments to AU Section 411, The Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles. The adoption of
SFAS 162 is not expected to have a material effect on the Company’s financial
statements.





In March
2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities, an amendment of FASB Statement No.
133 (“SFAS 161”). SFAS 161 requires, among other things, enhanced
disclosure about the volume and nature of derivative and hedging activities and
a tabular summary showing the fair value of derivative instruments included in
the balance sheet and statement of operations. SFAS 161 also requires expanded
disclosure of contingencies included in derivative instruments related to
credit-risk. SFAS 161 is effective for fiscal years and interim periods
beginning after November 15, 2008. The Company is currently evaluating the
impact of SFAS 161’s disclosure requirements on the Company’s financial
statements.





In
December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (“SFAS
141R”). SFAS 141R significantly changes the way companies account for business
combinations and will generally require more assets acquired and liabilities
assumed to be measured at their acquisition-date fair value. Under SFAS 141R,
legal fees and other transaction-related costs are expensed as incurred and are
no longer included as a cost of acquiring the business. SFAS 141R also requires,
among other things, acquirers to estimate the acquisition-date fair value of any
contingent consideration and to recognize any subsequent changes in the fair
value of contingent consideration in earnings. In addition, restructuring costs
the acquirer expected, but was not obligated to incur, will be recognized
separately from the business acquisition. SFAS 141R applies to the Company
prospectively for business combinations occurring on or after January 1, 2009.
The Company expects SFAS 141R will have an impact on accounting for business
combinations, but the effect will be dependent upon any potential future
acquisition.





In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities (“SFAS 159”). SFAS 159 permits entities
to choose to measure certain eligible financial assets and financial liabilities
at fair value (the fair value option). SFAS 159 also establishes presentation
and disclosure requirements designed to facilitate comparisons between entities
that choose different measurement attributes for similar types of assets and
liabilities. Unrealized gains and losses on items for which the fair value
option is elected would be reported in earnings. As of January 1, 2008 the
Company chose not to elect the fair value option for any eligible financial
assets or liabilities existing at that date. The Company will consider whether
to elect the fair value option for new eligible financial assets or liabilities
entered into in the future on an instrument by instrument basis.




In
September 2006, the FASB issued SFASNo. 157, Fair Value Measurements
(“SFAS 157”). SFAS 157 defines fair value, establishes a methodology for
measuring fair value, and expands the required disclosure for fair value
measurements. In February 2008, the FASB issued FASB Staff Position No. FAS
157-2, “Effective Date of FASB Statement No. 157,” which amends SFAS
No. 157 by delaying its effective date by one year for non-financial assets
and non-financial liabilities, except for items that are recognized or disclosed
at fair value in the financial statements on a recurring basis. Therefore,
beginning





7





on
January 1, 2008, this standard applies prospectively to fair value measurements
of financial instruments and recurring fair value measurements of non-financial
assets and non-financial liabilities. On January 1, 2009, the standard will also
apply to all other fair value measurements. The Company adopted SFAS No. 157 on
January 1, 2008, as required, for financial instruments and recurring fair value
measurements of non-financial assets and liabilities. See Note 5 for additional
information on fair value measurements and disclosures.







3.
Property and Equipment




Property
and equipment at June 30, 2008 and December 31, 2007 is summarized as
follows (in thousands):




June 30,
              2008
            
            
            December 31,
              2007Land
      and land improvements
            
            $
            18,173
            
            
            $
            18,170Buildings
      and improvements
            
            
            137,256
            
            
            
            137,669Riverboat
      and improvements
            
            
            10,817
            
            
            
            8,442Furniture,
      fixtures and equipment
            
            
            70,274
            
            
            
            65,077Computer
      equipment
            
            
            9,319
            
            
            
            8,842Vehicles
            
            
            426
            
            
            
            379Construction
      in progress
            
            
            50,715
            
            
            
            18,188Subtotal
            
            
            296,980
            
            
            
            256,767Accumulated
      depreciation
            
            
            (82,393
            )
            
            
            (67,955
            )Property
      and equipment, net
            
            $
            214,587
            
            
            $
            188,812







Depreciation
and amortization expense for each of the three months ended June 30, 2008 and
2007 was $5.1 million.  Depreciation and amortization expense for the
six months ended June 30, 2008 and 2007 was $9.9 million and $10.1 million,
respectively.




The
Company capitalizes interest costs associated with debt incurred in connection
with significant construction projects. The amount capitalized during the three
months ended June 30, 2008 and 2007 was $0.6 million and $0.2 million,
respectively.  The amount capitalized during the six months ended June
30, 2008 and 2007 was $0.9 million and $0.6 million, respectively.





In
connection with DJL’s proposed casino development, DJL began accelerating
depreciation on long-lived assets with a net book value of approximately $4.5
million that will either be contributed to the Historical Society or will not be
utilized at its new casino facility.  Accelerated depreciation on
these assets began during the fourth quarter of 2006 and DJL will continue to
depreciate the remaining net book value of those assets, less their estimated
fair market value at the date of contribution or estimated net realizable value,
through the period that DJL estimates commencing operations at the new facility.
Depreciation expense for each of the three months ended June 30, 2008 and 2007
increased by approximately $0.3 million as a result of accelerated depreciation
on these assets.  Depreciation expense for each of the six months
ended June 30, 2008 and 2007 increased by approximately $0.5 million as a result
of accelerated depreciation on these assets.





Included
in the total amount of depreciation and amortization expense for the three and
six months ended June 30, 2008 is an impairment charge of approximately $0.2
million associated with long-lived assets at DJW’s waste water treatment
facility.  DJW is currently in discussions with a third party to sell
the waste water treatment facility assets that it owns.  Based on the
current purchase price offer, the carrying value of the waste water treatment
facility assets, together with the related obligations and costs associated with
selling the assets, are not expected to be recovered by the expected purchase
price.  The assets were written down by the amount the carrying value
of the assets exceeded their estimated fair market value.





4.
Debt




Long-term
debt consists of the following (in thousands):







8










June 30,
              2008
            
            
            December 31,
              20078
      3⁄4% senior secured notes due April 15, 2012, net of discount of $1,992
      and $2,211, respectively, secured by substantially all the assets of PGL,
      DJL and EVD and the equity of
              DJL
      and EVD
            
            $
            253,008
            
            
            $
            252,78911%
      senior secured notes of DJW due April 15, 2012, net of discount of
      $679 and $762, respectively, secured by substantially all the assets of
      DJW and a pledge of equity of DJW and DJWC
            
            
            115,061
            
            
            
            116,35813%
      senior notes of EVD due March 1, 2010 with contingent interest, net
      of discount
              of
      $45 and $57, respectively
            
            
            6,865
            
            
            
            6,853$65,000
      revolving line of credit under a loan and security agreement of DJL and
      EVD with
              Wells
      Fargo Foothill, Inc., interest rate at prime plus a margin of 0.25% with a
      floor of 6.0% (current rate of 6.0% at June 30, 2008), maturing January
      15, 2012, secured by substantially all assets of DJL and
    EVD
            
            
            —
            
            
            
            —$5,000
      revolving line of credit under a loan and security agreement of DJW,
      interest rate at prime less a margin of 1.0% with a floor of 5.0% (current
      rate of 5.0% at June 30, 2008), maturing March 1, 2010, secured by
      substantially all the assets of DJW and guaranteed by the Company’s Chief
      Executive Officer
            
            
            —
            
            
            
            —Term
      loan under a loan and security agreement of PGL, DJL and EVD with American
      Trust & Savings Bank, interest rate at prime (current rate of 5.0% at
      June 30, 2008 through December 31, 2008 and 6.5% thereafter), maturing
      December 1, 2013, secured by certain assets of DJL
            
            
            1,023
            
            
            
            —Notes
      payable and capital lease obligations, net of discount of $30 and $103,
      respectively,
              interest
      rate at 7 1⁄4% — 8 3⁄4%, due 2008 — 2011
            
            
            3,532
            
            
            
            5,034Total
      debt
            
            
            379,489
            
            
            
            381,034Less
      current portion
            
            
            (2,292
            )
            
            
            (3,147
            )Total
      long term debt
            
            $
            377,197
            
            
            $
            377,887







On June
30, 2008, DJL and EVD (the “Borrowers”) entered into a Fifth Amendment to Loan
and Security Agreement (the “Fifth Amendment”) with Wells Fargo Foothill, Inc.
(“Wells Fargo”), as the arranger and agent for the lenders thereunder, which
amends the $65.0 million senior secured credit facility (“ PGL Credit
Facility”).


The Fifth
Amendment provides, among other things, that:


●
              The
      term of the PGL Credit Facility is extended to January 15,
      2012;
  ●
              Capital
      expenditures will be permitted, in addition to those otherwise previously
      permitted by the terms of the PGL Credit Facility, in an aggregate amount
      not to exceed (i) $25,000,000 by EVD in connection with the project to
      design, develop, construct, equip and operate the new hotel project
      adjacent to EVD’s casino and racetrack in Opelousas, Louisiana, including
      the remodeling of the existing casino exterior, casino floors and
      restaurants, (ii) $8,000,000 by EVD to develop an off-track betting parlor
      in St. Martin Parish, Louisiana, and (iii) $85,000,000 by DJL in
      connection with the project to design, develop, construct, equip and
      operate the Dubuque Casino;
  ●
              The
      applicable margin for advances made under the PGL Credit Facility with
      respect to base rate loans and LIBOR rate loans was increased to (i) 0.50%
      and 3.00%, respectively, where Combined EBITDA for the applicable 12-month
      period is less than $40,000,000, (ii) 0.25% and 2.50%, respectively, where
      Combined EBITDA for the applicable 12-month period is greater than or
      equal to $40,000,000 but less than $52,000,000, (iii) 0.00% and 2.25%,
      respectively, where Combined EBITDA for the applicable 12-month period is
      greater than or equal to $52,000,000, but less than $62,000,000 and (iv)
      0.00% and 2.00%, respectively, where Combined EBITDA for the applicable
      12-month period is greater than
$62,000,000.
  9
 ●
              The
      prepayment premium for early termination by the Borrowers has been reduced
      to $1,300,000 for the period starting from the date of the Fifth Amendment
      to the first anniversary of such date, $650,000 for the period starting
      from the first anniversary of the date of the Fifth Amendment to the
      second anniversary, and $0 during the period of time from and including
      the date that is the second anniversary of the date of the Fifth
      Amendment;
  ●
              The
      resetting of restrictions related to permitted investments, restricted
      payments and indebtedness;
  ●
              All
      obligations shall have a minimum interest rate of 6.00% per
      annum;
  ●
              In
      certain instances, the Borrowers will be permitted to make payments in
      accordance with its management agreements, but in no event will the
      payments in any fiscal year exceed than the lesser of (i) 5% of Combined
      EBITDA for the immediately preceding fiscal year and (ii)
      $4,000,000;
  ●
              An
      increase in the required minimum Combined EBITDA of the Borrowers to
      $40,000,000 for the twelve month period ended on June 30, 2008 and on the
      last day of each fiscal quarter ended thereafter;
  and
  ●
              Commencing
      March 1, 2009, Borrowers must establish a reserve against available
      borrowings under the PGL Credit Facility at a rate of $575,833.33 times
      the number of months that have elapsed during the period commencing on
      February 1, 2009 and ending on February 28, 2010. The reserve shall be
      released upon the repayment of EVD’s outstanding 13% senior notes due
      March 1, 2010.
  In
connection with execution of the Fifth Amendment, the Borrowers also entered
into a fee letter by which Wells Fargo may syndicate up to $25.0 million of the
advances under the PGL Credit Facility, subject to certain terms and
conditions.


On May 1,
2008, PGL, DJL and EVD (collectively, the “FF&E Borrowers”) entered into a
Loan and Security Agreement (“Term Loan”) with American Trust & Savings Bank
(“Bank”).  The Term Loan allows the FF&E Borrowers to request
advances of up to $8.0 million during the period May 1, 2008 through December
31, 2008 (the “Draw Down Period”) to finance the purchase of certain furniture,
fixtures and equipment related to DJL’s new casino development. No principal
payments are due during the Draw Down Period and interest shall accrue on all
advances at a rate equal to the Wall Street Journal Prime Rate per annum and is
payable the first of each month in arrears.  Commencing on January 1,
2009 and continuing through December 1, 2013 (the “Term Period”), the FF&E
Borrowers shall pay principal in equal monthly installments, plus accrued
interest, with the first principal payment due on February 1, 2009. Interest
during the Term Period shall be calculated at a rate of 6.5% per
annum.  As of June 30, 2008, DJL had outstanding advances of
approximately $1.0 million under the Term Loan.





On August
31, 2006, DJW entered into the First Supplemental Indenture to the Indenture,
dated as of July 19, 2005, requiring among other things, DJW to offer to buy
back a portion of DJW’s 11% senior secured notes due 2012 (“DJW Notes”) on a
semi-annual basis at a premium of 7.5%, beginning March 31, 2007, with 50% of
Excess Cash Flow (as defined therein) (“Excess Cash Flow
Amount”).  DJW redeemed $1.4 million principal amount of DJW Notes,
plus applicable premium and accrued interest, in May 2008 based on the Excess
Cash Flow provision.




As of
June 30, 2008, the Company had no outstanding advances under the PGL Credit
Facility. As of June 30, 2008, DJW had no outstanding advances under its $5.0
million senior secured credit facility (“DJW Credit Facility”). In addition, as
of June 30, 2008, the Company had outstanding letters of credit under the PGL
Credit Facility and the DJW Credit Facility of approximately $0.9 and $0.7
million, respectively, resulting in available borrowings thereunder of $64.1 and
$4.3 million, respectively.




The
Company’s 8 3⁄4% senior secured notes due 2012 (“Peninsula Gaming Notes”), the DJW
Notes, the PGL Credit Facility and the DJW Credit Facility each contain various
restrictive covenants, all with which the Company was in compliance with as of
June 30, 2008.





10








5.
Fair Value Measurements




The
Company adopted SFAS 157 on January 1, 2008. Under generally accepted accounting
principles, certain assets and liabilities must be measured at fair value, and
SFAS 157 defines fair value and details the disclosures that are required
for items measured at fair value. SFAS 157 defines fair value as the price that
would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date (an exit price).
The standard outlines a valuation framework and creates a fair value hierarchy
in order to increase the consistency and comparability of fair value
measurements and the related disclosures.





The
Company has two financial instruments that must be measured at fair value in the
financial statements under the new fair value standard: (i) an available for
sale investment and (ii) a derivative. The Company currently does not have
non-financial assets and non-financial liabilities that are required to be
measured at fair value on a recurring basis.





SFAS 157
establishes a valuation hierarchy for disclosure of the inputs to valuation used
to measure fair value.  This hierarchy prioritizes the inputs into
three broad levels.  The three levels are as follows:





Level
1-Inputs are unadjusted quoted prices in active markets for identical assets or
liabilities that the Company has the ability to access at the measurement
date;





Level
2-Inputs include quoted prices for similar assets and liabilities in active
markets, quoted prices for identical or similar assets or liabilities in markets
that are not active, inputs other than quoted prices that are observable for the
asset or liability (i.e., interest rates, yield curves, etc.), and inputs that
are derived principally from or corroborated by observable market data by
correlation or other means (market corroborated inputs); and





Level
3-Unobservable inputs that reflect the Company’s estimate about the assumptions
that market participants would use in pricing the asset or liability. The
Company develops these inputs based on the best information available, including
its own data.




In
accordance with the fair value hierarchy described above, the following table
shows the fair value of the Company’s financial assets and liabilities that are
required to be measured at fair value as of June 30, 2008, which are classified
as “Investment available for sale” and “Other long-term liabilities/Other
accrued liabilities (short-term portion)” (in thousands):





Fair
      Value Measurements at June 30, 2008 UsingTotal
      Carrying Value at
              June
      30, 2008
            
            
            Quoted
      prices in active markets
              (Level
      1)
            
            
            Significant
      other observable inputs
              (Level
      2)
            
            
            Significant
      unobservable inputs
              (Level
      3)Investment
      available for sale
            
            $
            11,711
            
            
            $
            -
            
            
            $
            -
            
            
            $
            11,711Derivative
      liability
            
            
            (1,125
            )
            
            
            -
            
            
            
            -
            
            
            
            (1,125
            )








The
following table summarizes the changes in fair value of our Level 3 assets and
liabilities (in thousands):


Fair
      Value Measurements of Assets and Liabilities Using Level 3
      InputsInvestment
      available for sale
            
            
            Derivative
              liabilityBalance
      at beginning of the year
            
            $
            12,491
            
            
            $
            (1,252
            )Total
      gains (losses) (realized or unrealized):Included
      in earnings
            
            
            73
            
            
            
            24Included
      in other comprehensive income (loss)
            
            
            (853
            )
            
            
            -Transfers
      in or out of Level 3
            
            
            -
            
            
            
            -





11








Purchases,
      sales, issuances and settlements
            
            
            -
            
            
            
            103Ending
      balance at June 30, 2008
            
            $
            11,711
            
            
            $
            (1,125
            )Gains
      (losses) for 2008 included in earnings attributable to the change
      in
            
            Included
      in interest income
            
            
            Included
      in interest expenseunrealized
      gains or losses relating to assets/liabilities still held at the reporting
      date
            
            $
            73
            
            
            $
            24




DJW holds
an investment in a single municipal bond issuance that is classified as
available for sale and is recorded at fair value.  DJW is the only
holder of this instrument and there is no quoted market price for this
instrument.  The estimate of the fair value of such investment was
determined using a combination of current market rates and estimates of market
conditions for instruments with similar terms, maturities, and degrees of risk
and, due to the unique nature of the bond, estimates from two independent
sources of what market participants would use in pricing the
bond.  Unrealized gains and losses on this instrument resulting from
changes in the fair value of the instrument are not charged to earnings, but
rather are recorded as other comprehensive income (loss) in the member’s deficit
section of the Company’s balance sheet.  The discount associated
with this investment is netted with the investment on the balance sheet and is
being accreted over the life of the investment using the effective interest
method. The accretion of such discount is included in interest income on the
statement of operations.




Under the
indenture governing the DJW Notes, DJW must offer to buy back a portion of the
DJW Notes on a semi-annual basis with 50% of Excess Cash Flow (as defined
therein) at a premium of 7.5%. Such obligation was determined to be an embedded
derivative and was fair valued and separated from the DJW Notes at date of
issuance since it was not clearly and closely related to the DJW
notes.  The fair value of the put option was determined to be the
present value of the estimated premium payments through the maturity of the DJW
Notes. The estimated premium payments are calculated using estimated future cash
flows developed by the Company to estimate the portion of the DJW Notes that
would be subject to the contingent put option, yields of comparable financial
instruments, the remaining date to maturity of the DJW Notes and based on
historical experience that the holders of the notes will elect to be paid the
contingent put option. The fair value of the put option is revalued at the end
of each reporting period with a corresponding charge (benefit) to interest
expense.





6.  Comprehensive
Income (Loss)





Comprehensive
income (loss) consists of the following (in thousands):





Three
      Months Ended June 30, 2008
            
            
            Three
      Months Ended June 30, 2007
            
            
            Six
      Months Ended June 30, 2008
            
            
            Six
      Months Ended June 30, 2007Net
      income (loss)
            
            $
            12,908
            
            
            $
            (953
            )
            
            $
            15,466
            
            
            $
            (507
            )Unrealized
      loss on available for sale securities
            
            
            (853
            )
            
            
            -
            
            
            
            (853
            )
            
            
            -Comprehensive
      income (loss)
            
            $
            12,055
            
            
            $
            (953
            )
            
            $
            14,613
            
            
            $
            (507
            )







7. 
Commitments and Contingencies






Under the
Company’s and PGP’s operating agreements, the Company and PGP have agreed,
subject to certain exceptions, to indemnify and hold harmless PGP and PGP’s
members from liabilities incurred as a result of their positions as sole manager
of the Company and as members of PGP, respectively.




In
October 2003, EVD filed a Petition for Declaratory Judgment in St. Landry
Parish, Louisiana, naming as opposing parties the Secretary of the Department of
Revenue and Taxation for the State of Louisiana (the “Department”), the St.
Landry Parish School Board and the City of Opelousas. EVD sought a judgment
declaring that sales taxes were not due to the defendants on purchases made by
EVD and its contractors in connection with the construction and furnishing of
the Evangeline Downs Racetrack and Casino, which was constructed in St. Landry
Parish in 2003-2004. EVD’s action was based on Louisiana statutory law which
provides that racetracks are not required to pay taxes and fees other than those
provided in the racing statutes, and that taxes and fees provided in the racing
statutes are in lieu of, among other things, all state and local sales taxes.
The St. Landry Parish School Board and the City of Opelousas questioned the
application of the racing statutes to the construction and furnishing of the
casino portion of the facility, thereby leading to the filing of this action.
Subsequently, the Department adopted a similar position as the St. Landry Parish
School Board and the City of Opelousas.





12








On
February 20, 2008, EVD and the Department entered into a Settlement Agreement
(the “Settlement Agreement”) which settled tax disputes between EVD and the
Department arising out of audits conducted by the Department of the taxable
years ended December 31, 2002, 2003 and 2004.  The Department and EVD
also reached an agreement regarding the payment of additional sales tax by EVD
for tax years beginning on or after January 2005 for which EVD paid $0.3 million
to the Department for the tax years 2005 - 2007.  The sales and use
tax dispute with St. Landry Parish and the City of Opelousas remains open. EVD
has accrued management’s best estimate of all sales and use taxes that may be
due to St. Landry Parish or the City of Opelousas as of June 30,
2008.




In
October 2005, EVD filed a request to arbitrate certain claims against the
general contractor of its racino relating to improper construction of the horse
racetrack at the racino. In March 2008, EVD and the general contractor agreed in
principal to a settlement agreement whereby EVD agreed to pay the general
contractor approximately $0.8 million to settle all claims related to the
arbitration.  The formal agreement was executed in the second quarter of
2008.  Accordingly, in the second quarter of 2008 EVD recorded an $0.8
million reduction in the $1.6 million liability for unpaid billings from the
contractor previously recorded on the Company’s consolidated balance sheet with
a corresponding reduction in property and equipment.




Other
than as described above, neither the Company nor its subsidiaries are parties to
any pending legal proceedings other than litigation arising in the normal course
of business. Management does not believe that adverse determinations in any or
all such other litigation would have a material adverse effect on the Company’s
financial condition, results of operations or cash flows.





On
September 25, 2007, DJL entered into a bonded construction contract
with Conlon Construction Company (“Conlon”) for the construction of
its new casino.  The construction contract is based on a cost
plus fee arrangement and establishes a guaranteed maximum price of approximately
$19.3 million for site preparation and certain preliminary construction costs
for the Diamond Jo casino in Dubuque, Iowa.   On April 19, 2008 and
June 6, 2008, DJL entered into two separate change orders with Conlon providing
for, among other things, an aggregate increase in the guaranteed maximum price
of the construction contract to approximately $62.8 million for the site
preparation and construction costs for the project. The total estimated cost of
the project is estimated to be approximately $84.0 million.





8. 
Related Party Transactions






During
the three months ended June 30, 2008 and 2007 and the six months ended June 30,
2008 and 2007, the Company recorded distributions of $1.3 million, $3.8 million,
$2.1 million and $4.3 million, respectively, to PGP primarily for
(i) certain consulting and financial advisory services related to PGP’s
development expenses, (ii) board fees and actual out-of-pocket expenses
incurred by members of the board of managers of PGP in their capacity as board
members and (iii) tax, accounting, legal and administrative costs and
expenses related to PGP. These amounts were recorded as member
distributions.




During
the three months ended June 30, 2008 and 2007 and the six months ended June 30,
2008 and 2007, the Company expensed $0.1 million, $0.1 million, $0.2 million and
$0.2 million, respectively, as affiliate management fees, related to other
compensation and board fees payable to board members of PGP representing
services provided to PGL.




In
accordance with a management services agreement between OED Acquisition LLC
(“OEDA”), a wholly owned subsidiary of PGP, and EVD, under which EVD pays to
OEDA a base management fee of 0.44% of net revenue (less net food and beverage
revenue) plus an incentive fee based on earnings before interest, taxes,
depreciation, amortization and non-recurring charges, EVD expensed $0.2 million,
$0.2 million, $0.5 million and $0.4 million in affiliate management fees payable
to OEDA during the three months ended June 30, 2008 and 2007 and the six months
ended June 30, 2008 and 2007, respectively.




In
accordance with a management services agreement between DJW and PGP under which
DJW pays to PGP a base management fee of 1.75% of net revenue (less net food and
beverage revenue) plus an incentive fee ranging from 3% to 5% based on earnings
before interest, taxes, depreciation, amortization and non-recurring charges,
DJW expensed management fees of $0.7 million, $0.6 million, $1.2 million and
$1.1 million during the three months ended June 30, 2008 and 2007 and the six
months ended June 30, 2008 and 2007, respectively, related to this
agreement.




EVD and
PGP are parties to a consulting agreement with a board member of PGP. Under the
consulting agreements, EVD and DJW must each pay the board member a fee equal to
2.5% of EVD’s and DJW’s earnings before interest, taxes, depreciation,
amortization and non-recurring charges during the preceding calendar year. Under
the consulting agreements,







13





the board
member is also entitled to reimbursement of reasonable business expenses as
approved by the board of managers of PGP. EVD expensed $0.3 million, $0.3
million, $0.5 million and $0.5 million of affiliate management fees during the
three months ended June 30, 2008 and 2007 and the six months ended June 30, 2008
and 2007, respectively, under the consulting agreement. DJW expensed $0.2
million, $0.2 million, $0.4 million and $0.4 million of affiliate management
fees for the three months ended June 30, 2008 and 2007 and the six months ended
June 30, 2008 and 2007, respectively, related to the consulting
agreement.




On a
quarterly basis, the Company estimates the fair value of all incentive units
granted under PGP’s Amended and Restated 2004 Incentive Unit Plan (the “IUP”)
that have a put option and compares that value to the value of such incentive
units at the date of grant. Any appreciation or depreciation in the value of the
incentive units is expensed or credited to an expense based on the percentage of
the grant vested. The Company (credited) expensed $(6.9) million, $5.8 million,
$(4.9) million and $7.3 million during the three months ended June 30, 2008 and
2007 and the six months ended June 30, 2008 and 2007, respectively, with respect
to these incentive units. As of June 30, 2008, there was approximately
$2.9 million of compensation expense related to nonvested awards which has
not been recognized in the consolidated statement of operations. Based on the
intrinsic value of these awards at June 30, 2008, approximately $0.6 million of
the unrecognized value of awards is scheduled to vest over the next three months
unless vested earlier pursuant to the terms of the awards.  The
remaining $2.3 million is scheduled to vest upon a change in control of the
Company.





9.
Segment Information




The
Company is organized around geographical areas and operates three reportable
segments: (1) Diamond Jo Dubuque operations, which comprise the Diamond Jo
casino operations in Dubuque, Iowa, (2) Diamond Jo Worth operations, which
comprise the Diamond Jo Worth casino operations in Worth County, Iowa, and
(3) Evangeline Downs operations, which comprise the casino, racetrack and
OTBs operated by EVD in Louisiana.




The
accounting policies for each segment are the same as those described in Note 2
above and in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2007. The Company evaluates performance and allocates
resources based upon, among other considerations, segment operating earnings (as
defined below).




The
tables below present information about reported segments as of and for the three
and six months ended June 30, 2008 and 2007 (in thousands):




Net Revenues
      From External Customers
              Three Months Ended June 30,
            
            
            Net Revenues
      From External Customers
              Six Months Ended June 30,2008
            
            
            2007
            
            
            2008
            
            
            2007Diamond
      Jo Dubuque
            
            $
            10,466
            
            
            $
            10,293
            
            
            $
            20,091
            
            
            $
            20,363Diamond
      Jo Worth
            
            
            22,059
            
            
            
            20,723
            
            
            
            42,218
            
            
            
            36,956Evangeline
      Downs
            
            
            36,348
            
            
            
            35,974
            
            
            
            69,641
            
            
            
            68,010Total
            
            $
            68,873
            
            
            $
            66,990
            
            
            $
            131,950
            
            
            $
            125,329










14








Segment Operating Earnings
              Three Months Ended June 30, (1)
            
            
            Segment Operating Earnings
              Six Months Ended June 30, (1)2008
            
            
            2007
            
            
            2008
            
            
            2007General
      corporate
            
            $
            5,550
            
            
            $
            (6,863
            )
            
            $
            2,569
            
            
            $
            (9,138
            )Diamond
      Jo Dubuque
            
            
            3,455
            
            
            
            3,300
            
            
            
            6,303
            
            
            
            6,284Diamond
      Jo Worth
            
            
            8,780
            
            
            
            8,150
            
            
            
            16,564
            
            
            
            14,712Evangeline
      Downs
            
            
            10,624
            
            
            
            10,710
            
            
            
            21,522
            
            
            
            20,697Total
      Segment Operating Earnings (1)
            
            
            28,409
            
            
            
            15,297
            
            
            
            46,958
            
            
            
            32,555General
      corporate:Depreciation
      and amortization
            
            
            (11
            )
            
            
            (11
            )
            
            
            (23
            )
            
            
            (22
            )Affiliate
      management fees
            
            
            (90
            )
            
            
            (113
            )
            
            
            (175
            )
            
            
            (191
            )Interest
      income
            
            
            4
            
            
            
            258
            
            
            
            68
            
            
            
            509Diamond
      Jo Dubuque:Depreciation
      and amortization
            
            
            (765
            )
            
            
            (1,208
            )
            
            
            (1,560
            )
            
            
            (2,387
            )Pre-opening
      expense
            
            
            (32
            )
            
            
            (23
            )
            
            
            (87
            )
            
            
            (23
            )Development
      expense
            
            
            649
            
            
            
            (83
            )
            
            
            641
            
            
            
            (1,716
            )Loss
      on disposal of assets
            
            
            (55
            )
            
            
            (15
            )
            
            
            (48
            )
            
            
            (76
            )Interest
      expense, net
            
            
            (2,311
            )
            
            
            (2,561
            )
            
            
            (4,829
            )
            
            
            (5,073
            )Diamond
      Jo Worth:Depreciation
      and amortization
            
            
            (2,296
            )
            
            
            (1,716
            )
            
            
            (4,424
            )
            
            
            (3,004
            )Pre-opening
      expense
            
            
            —
            
            
            
            (137
            )
            
            
            (32
            )
            
            
            (196
            )Affiliate
      management fees
            
            
            (872
            )
            
            
            (793
            )
            
            
            (1,654
            )
            
            
            (1,414
            )Loss
      on disposal of assets
            
            
            (21
            )
            
            
            —
            
            
            
            (48
            )
            
            
            —Interest
      expense, net
            
            
            (3,032
            )
            
            
            (2,938
            )
            
            
            (5,991
            )
            
            
            (5,445
            )Evangeline
      Downs:Depreciation
      and amortization
            
            
            (1,995
            )
            
            
            (2,170
            )
            
            
            (3,923
            )
            
            
            (4,641
            )Pre-opening
      expense
            
            
            1
            
            
            
            —
            
            
            
            (8
            )
            
            
            (24
            )Development
      expense
            
            
            (1
            )
            
            
            (56
            )
            
            
            (32
            )
            
            
            (68
            )Affiliate
      management fees
            
            
            (505
            )
            
            
            (511
            )
            
            
            (1,008
            )
            
            
            (967
            )Loss
      on disposal of assets
            
            
            (44
            )
            
            
            (1
            )
            
            
            (127
            )
            
            
            (21
            )Interest
      expense, net
            
            
            (4,125
            )
            
            
            (4,172
            )
            
            
            (8,232
            )
            
            
            (8,303
            )Net
      (loss) income
            
            $
            12,908
            
            
            $
            (953
            )
            
            $
            15,466
            
            
            $
            (507
            )








(1)
            Segment
      operating earnings is defined as net income (loss) plus depreciation and
      amortization, pre-opening expense, development expense, affiliate
      management fees, loss on disposal of assets, and interest expense, net,
      less gain on disposal of assets.




Total AssetsJune 30,
              2008
            
            
            December 31,
              2007General
      corporate
            
            $
            654
            
            
            $
            12,469Diamond
      Jo Dubuque
            
            
            135,938
            
            
            
            102,617Diamond
      Jo Worth
            
            
            101,709
            
            
            
            104,079Evangeline
      Downs
            
            
            153,965
            
            
            
            152,762Total
            
            $
            392,266
            
            
            $
            371,927





Cash Expenditures for Additions to
              Long-Lived Assets
              Six
      Months EndedJune 30, 2008
            
            
            June 30, 2007General
      corporate
            
            $
            7
            
            
            $
            4Diamond
      Jo Dubuque
            
            
            17,232
            
            
            
            3,311Diamond
      Jo Worth
            
            
            2,067
            
            
            
            21,228Evangeline
      Downs
            
            
            6,087
            
            
            
            4,034Total
            
            $
            25,393
            
            
            $
            28,577







10.  Fair Value of Financial
Instruments






The fair
value of the Company’s financial instruments consisting of cash and cash
equivalents, restricted cash, receivables, and payables approximate their
recorded amounts due to the short term nature of the instruments. The fair value
and recorded







15





amounts
for the Company’s investment and debt instruments at June 30, 2008 and
December 31, 2007 are as follows (in thousands):




June 30, 2008
            
            
            December 31, 2007Fair Value
            
            
            Recorded
              Amount
            
            
            Fair Value
            
            
            Recorded
              AmountInvestment
      available for sale
            
            $
            11,711
            
            
            $
            11,711
            
            
            $
            12,491
            
            
            $
            12,4918
      3⁄4% senior secured
      notes
            
            
            228,703
            
            
            
            253,008
            
            
            
            254,363
            
            
            
            252,78911%
      senior secured notes
            
            
            115,740
            
            
            
            115,061
            
            
            
            117,120
            
            
            
            116,35813%
      senior secured notes
            
            
            6,910
            
            
            
            6,865
            
            
            
            6,910
            
            
            
            6,853Term
      loan
            
            
            1,023
            
            
            
            1,023
            
            
            
            -
            
            
            
            -Notes
      payable, capital lease obligations and other financial
      instruments
            
            
            4,176
            
            
            
            4,146
            
            
            
            5,823
            
            
            
            5,720Derivative
      liability
            
            
            1,125
            
            
            
            1,125
            
            
            
            1,252
            
            
            
            1,252Obligation
      under Minimum Assessment Agreement
            
            
            3,944
            
            
            
            3,944
            
            
            
            -
            
            
            
            -







Fair
value information is based on current market interest rates and estimates of
market conditions for instruments with similar terms, maturities, and degrees of
risk and, for the investment available for sale, on estimates from two brokers
of what market participants would use to price the investment.





11.  Subsequent
Event




In the
third quarter of 2008, DJL entered into agreements with various slot machine
manufacturers to finance the purchase of 287 slot machines related to the new
casino development for a total cost of approximately $4.8 million. Terms of the
financings range from 12 to 24 months with a stated interest rate of zero
percent.






12.  Consolidating
Financial Statements




The
Company, DJL and PGC (which has no assets or operations) are co-issuers of the
Peninsula Gaming Notes. EVD is a guarantor of the Peninsula Gaming Notes, and
the equity of DJL and EVD is pledged as collateral securing obligations under
the Peninsula Gaming Notes. In July 2005, in connection with the offering
of the DJW Notes, DJW was designated as an “unrestricted subsidiary” under the
indenture governing the Peninsula Gaming Notes and the liens on the assets and
equity of DJW under the Peninsula Gaming Notes were released. Consolidating
financial information of the co-issuers, the guarantor and the non-guarantor is
presented on the following pages.





16





CONSOLIDATING
BALANCE SHEETS





At June 30, 2008(in thousands)
            
            Parent
              Co-Issuer -
              PGL
            
            
            Subsidiary
              Co-Issuer -
              DJL
            
            
            Subsidiary
              Guarantor -
              EVD
            
            
            Subsidiary
              Non-
              Guarantor -
              DJW
            
            
            Consolidating
              Adjustments
            
            
            ConsolidatedASSETSCURRENT
      ASSETS:Cash
      and cash equivalents
            
            $
            (8
            )
            
            $
            8,422
            
            
            $
            8,559
            
            
            $
            15,503
            
            
            
            
            
            $
            32,476Restricted
      cash-purse settlements
            
            
            
            
            
            
            
            
            
            
            7,426
            
            
            
            
            
            
            
            
            
            
            7,426Accounts
      receivable
            
            
            
            
            
            
            1,964
            
            
            
            4,063
            
            
            
            535
            
            
            
            
            
            
            6,562Receivables
      from affiliates
            
            
            
            
            
            
            1,213
            
            
            
            60
            
            
            
            97
            
            
            $
            (1,213
            )
            
            
            157Inventories
            
            
            
            
            
            
            243
            
            
            
            326
            
            
            
            437
            
            
            
            
            
            
            
            1,006Prepaid
      expenses and other assets
            
            
            46
            
            
            
            428
            
            
            
            728
            
            
            
            410
            
            
            
            
            
            
            
            1,612Total
      current assets
            
            
            38
            
            
            
            12,270
            
            
            
            21,162
            
            
            
            16,982
            
            
            
            (1,213
            )
            
            
            49,239PROPERTY
      AND
              EQUIPMENT,
      NET
            
            
            63
            
            
            
            55,632
            
            
            
            93,805
            
            
            
            65,087
            
            
            
            
            
            
            
            214,587OTHER
      ASSETS:Investment
      in subsidiaries
            
            
            (51,127
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            51,127Deferred
      financing costs
            
            
            
            
            
            
            12,127
            
            
            
            4,587
            
            
            
            3,876
            
            
            
            
            
            
            
            20,590Goodwill
            
            
            
            
            
            
            53,083
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            53,083Licenses
      and other intangibles
            
            
            
            
            
            
            
            
            
            
            34,253
            
            
            
            4,019
            
            
            
            
            
            
            
            38,272Deposits
      and other assets
            
            
            553
            
            
            
            4,039
            
            
            
            158
            
            
            
            34
            
            
            
            
            
            
            
            4,784Investment
      available for sale
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            11,711
            
            
            
            
            
            
            
            11,711Total
      other assets
            
            
            (50,574
            )
            
            
            69,249
            
            
            
            38,998
            
            
            
            19,640
            
            
            
            51,127
            
            
            
            128,440TOTAL
            
            $
            (50,473
            )
            
            $
            137,151
            
            
            $
            153,965
            
            
            $
            101,709
            
            
            $
            49,914
            
            
            $
            392,266LIABILITIES
      AND MEMBER’S DEFICITCURRENT
      LIABILITIES:Accounts
      payable
            
            $
            37
            
            
            $
            528
            
            
            $
            3,654
            
            
            $
            619
            
            
            
            
            
            
            $
            4,838Construction
      payable
            
            
            
            
            
            
            11,218
            
            
            
            507
            
            
            
            182
            
            
            
            
            
            
            
            11,907Purse
      settlement payable
            
            
            
            
            
            
            
            
            
            
            9,977
            
            
            
            
            
            
            
            
            
            
            
            9,977Accrued
      payroll and payroll taxes
            
            
            1,317
            
            
            
            1,187
            
            
            
            1,028
            
            
            
            1,091
            
            
            
            
            
            
            
            4,623Accrued
      interest
            
            
            
            
            
            
            1,936
            
            
            
            3,198
            
            
            
            2,659
            
            
            
            
            
            
            
            7,793Other
      accrued expenses
            
            
            52
            
            
            
            2,441
            
            
            
            6,686
            
            
            
            2,364
            
            
            
            
            
            
            
            11,543Payable
      to affiliates
            
            
            
            
            
            
            
            
            
            
            2,844
            
            
            
            1,788
            
            
            $
            (1,213
            )
            
            
            3,419Current
      maturities of long-term debt and leases
            
            
            
            
            
            
            101
            
            
            
            571
            
            
            
            1,620
            
            
            
            
            
            
            
            2,292Total
      current liabilities
            
            
            1,406
            
            
            
            17,411
            
            
            
            28,465
            
            
            
            10,323
            
            
            
            (1,213
            )
            
            
            56,392LONG-TERM
      LIABILITIES8
      3⁄4% senior secured notes,
              net
      of discount
            
            
            
            
            
            
            101,759
            
            
            
            151,249
            
            
            
            
            
            
            
            
            
            
            
            253,00811%
      senior secured notes, net
              of
      discount
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            115,061
            
            
            
            
            
            
            
            115,06113%
      senior notes, net
              of
      discount
            
            
            
            
            
            
            
            
            
            
            6,865
            
            
            
            
            
            
            
            
            
            
            
            6,865Term
      loan
            
            
            
            
            
            
            937
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            937Notes
      and leases payable, net
              of
      discount
            
            
            
            
            
            
            5
            
            
            
            1,156
            
            
            
            165
            
            
            
            
            
            
            
            1,326Obligation
      under Minimum Assessment Agreement
            
            
            
            
            
            
            3,944
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            3,944Other
      liabilities
            
            
            
            
            
            
            4,669
            
            
            
            
            
            
            
            1,943
            
            
            
            
            
            
            
            6,612Total
      long-term liabilities
            
            
            
            
            
            
            111,314
            
            
            
            159,270
            
            
            
            117,169
            
            
            
            
            
            
            
            387,753Total
      liabilities
            
            
            1,406
            
            
            
            128,725
            
            
            
            187,735
            
            
            
            127,492
            
            
            
            (1,213
            )
            
            
            444,145MEMBER’S
      EQUITY (DEFICIT)
            
            
            (51,879
            )
            
            
            8,426
            
            
            
            (33,770
            )
            
            
            (25,783
            )
            
            
            51,127
            
            
            
            (51,879
            )TOTAL
            
            $
            (50,473
            )
            
            $
            137,151
            
            
            $
            153,965
            
            
            $
            101,709
            
            
            $
            49,914
            
            
            $
            392,266










17








At December
      31, 2007(in thousands)
            
            Parent
              Co-Issuer -
              PGL
            
            
            Subsidiary
              Co-Issuer -
              DJL
            
            
            Subsidiary
              Guarantor -
              EVD
            
            
            Subsidiary
              Non-
              Guarantor -
              DJW
            
            
            Consolidating
              Adjustments
            
            
            ConsolidatedASSETSCURRENT
      ASSETS:Cash
      and cash equivalents
            
            $
            11,908
            
            
            $
            4,606
            
            
            $
            11,834
            
            
            $
            13,752
            
            
            
            
            
            $
            42,100Restricted
      cash-purse settlements
            
            
            
            
            
            
            
            
            
            
            4,902
            
            
            
            
            
            
            
            
            
            
            4,902Accounts
      receivable
            
            
            
            
            
            
            355
            
            
            
            1,932
            
            
            
            713
            
            
            
            
            
            
            3,000Receivables
      from affiliates
            
            
            
            
            
            
            1,198
            
            
            
            
            
            
            
            17
            
            
            $
            (1,215
            )Inventories
            
            
            
            
            
            
            218
            
            
            
            313
            
            
            
            380
            
            
            
            
            
            
            
            911Prepaid
      expenses and other assets
            
            
            23
            
            
            
            303
            
            
            
            697
            
            
            
            352
            
            
            
            
            
            
            
            1,375Total
      current assets
            
            
            11,931
            
            
            
            6,680
            
            
            
            19,678
            
            
            
            15,214
            
            
            
            (1,215
            )
            
            
            52,288PROPERTY
      AND
              EQUIPMENT,
      NET
            
            
            79
            
            
            
            25,935
            
            
            
            93,804
            
            
            
            68,994
            
            
            
            
            
            
            
            188,812OTHER
      ASSETS:Investment
      in subsidiaries
            
            
            (70,383
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            70,383Deferred
      financing costs
            
            
            
            
            
            
            12,356
            
            
            
            5,099
            
            
            
            4,330
            
            
            
            
            
            
            
            21,785Goodwill
            
            
            
            
            
            
            53,083
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            53,083Licenses
      and other intangibles
            
            
            
            
            
            
            
            
            
            
            33,995
            
            
            
            3,021
            
            
            
            
            
            
            
            37,016Deposits
      and other assets
            
            
            459
            
            
            
            5,761
            
            
            
            186
            
            
            
            46
            
            
            
            
            
            
            
            6,452Investment
      available for sale
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            12,491
            
            
            
            
            
            
            
            12,491Total
      other assets
            
            
            (69,924
            )
            
            
            71,200
            
            
            
            39,280
            
            
            
            19,888
            
            
            
            70,383
            
            
            
            130,827TOTAL
            
            $
            (57,914
            )
            
            $
            103,815
            
            
            $
            152,762
            
            
            $
            104,096
            
            
            $
            69,168
            
            
            $
            371,927LIABILITIES
      AND MEMBER’S DEFICITCURRENT
      LIABILITIES:Accounts
      payable
            
            $
            33
            
            
            $
            402
            
            
            $
            2,603
            
            
            $
            451
            
            
            
            
            
            
            $
            3,489Construction
      payable
            
            
            
            
            
            
            1,772
            
            
            
            2,465
            
            
            
            647
            
            
            
            
            
            
            
            4,884Purse
      settlement payable
            
            
            
            
            
            
            
            
            
            
            6,723
            
            
            
            
            
            
            
            
            
            
            
            6,723Accrued
      payroll and payroll taxes
            
            
            1,605
            
            
            
            1,309
            
            
            
            1,454
            
            
            
            1,250
            
            
            
            
            
            
            
            5,618Accrued
      interest
            
            
            
            
            
            
            1,925
            
            
            
            3,182
            
            
            
            2,690
            
            
            
            
            
            
            
            7,797Other
      accrued expenses
            
            
            70
            
            
            
            1,722
            
            
            
            5,460
            
            
            
            2,548
            
            
            
            
            
            
            
            9,800Payable
      to affiliates
            
            
            
            
            
            
            
            
            
            
            2,516
            
            
            
            2,620
            
            
            $
            (1,215
            )
            
            
            3,921Current
      maturities of long-term debt and leases
            
            
            
            
            
            
            14
            
            
            
            571
            
            
            
            2,562
            
            
            
            
            
            
            
            3,147Total
      current liabilities
            
            
            1,708
            
            
            
            7,144
            
            
            
            24,974
            
            
            
            12,768
            
            
            
            (1,215
            )
            
            
            45,379LONG-TERM
      LIABILITIES8
      3⁄4% senior secured notes,
              net
      of discount
            
            
            
            
            
            
            101,671
            
            
            
            151,118
            
            
            
            
            
            
            
            
            
            
            
            252,78911%
      senior secured notes, net
              of
      discount
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            116,358
            
            
            
            
            
            
            
            116,35813%
      senior notes, net
              of
      discount
            
            
            
            
            
            
            
            
            
            
            6,853
            
            
            
            
            
            
            
            
            
            
            
            6,853Notes
      and leases payable, net
              of
      discount
            
            
            
            
            
            
            12
            
            
            
            1,166
            
            
            
            709
            
            
            
            
            
            
            
            1,887Other
      liabilities
            
            
            
            
            
            
            6,195
            
            
            
            
            
            
            
            2,088
            
            
            
            
            
            
            
            8,283Total
      long-term liabilities
            
            
            
            
            
            
            107,878
            
            
            
            159,137
            
            
            
            119,155
            
            
            
            
            
            
            
            386,170Total
      liabilities
            
            
            1,708
            
            
            
            115,022
            
            
            
            184,111
            
            
            
            131,923
            
            
            
            (1,215
            )
            
            
            431,549MEMBER’S
      DEFICIT
            
            
            (59,622
            )
            
            
            (11,207
            )
            
            
            (31,349
            )
            
            
            (27,827
            )
            
            
            70,383
            
            
            
            (59,622
            )TOTAL
            
            $
            (57,914
            )
            
            $
            103,815
            
            
            $
            152,762
            
            
            $
            104,096
            
            
            $
            69,168
            
            
            $
            371,927




















18















CONSOLIDATING
STATEMENTS OF OPERATIONS




Three Months Ended June 30, 2008Parent
            
            
            Subsidiary
            
            
            Subsidiary
            
            
            Subsidiary
              Non-Co-Issuer -
            
            
            Co-Issuer -
            
            
            Guarantor -
            
            
            Guarantor -
            
            
            Consolidating(in thousands)
            
            PGL
            
            
            DJL
            
            
            EVD
            
            
            DJW
            
            
            Adjustments
            
            
            ConsolidatedREVENUES:Casino
            
            
            
            
            $
            10,687
            
            
            $
            27,496
            
            
            $
            20,480
            
            
            
            
            
            $
            58,663Racing
            
            
            
            
            
            
            
            
            
            6,399
            
            
            
            
            
            
            
            
            
            
            6,399Video
      poker
            
            
            
            
            
            
            
            
            
            1,598
            
            
            
            
            
            
            
            
            
            
            1,598Food
      and beverage
            
            
            
            
            
            635
            
            
            
            2,785
            
            
            
            1,012
            
            
            
            
            
            
            4,432Affiliate
      management fee income
            
            
            
            
            
            708
            
            
            
            
            
            
            
            
            
            
            $
            (708
            )Other
            
            
            
            
            
            567
            
            
            
            390
            
            
            
            2,232
            
            
            
            
            
            
            
            3,189Less
      promotional allowances
            
            
            
            
            
            (1,423
            )
            
            
            (2,320
            )
            
            
            (1,665
            )
            
            
            
            
            
            
            (5,408
            )Total
      net revenues
            
            
            
            
            
            11,174
            
            
            
            36,348
            
            
            
            22,059
            
            
            
            (708
            )
            
            
            68,873EXPENSES:Casino
            
            
            
            
            
            4,593
            
            
            
            13,177
            
            
            
            7,139
            
            
            
            
            
            
            
            24,909Racing
            
            
            
            
            
            
            
            
            
            5,253
            
            
            
            
            
            
            
            
            
            
            
            5,253Video
      poker
            
            
            
            
            
            
            
            
            
            1,203
            
            
            
            
            
            
            
            
            
            
            
            1,203Food
      and beverage
            
            
            
            
            
            547
            
            
            
            2,071
            
            
            
            815
            
            
            
            
            
            
            
            3,433Other
            
            
            
            
            
            3
            
            
            
            70
            
            
            
            2,008
            
            
            
            
            
            
            
            2,081Selling,
      general and
              administrative
            
            $
            (1,274
            )
            
            
            1,868
            
            
            
            3,950
            
            
            
            3,317
            
            
            
            (4,276
            )
            
            
            3,585Depreciation
      and amortization
            
            
            11
            
            
            
            765
            
            
            
            1,995
            
            
            
            2,296
            
            
            
            
            
            
            
            5,067Pre-opening
      expense
            
            
            
            
            
            
            32
            
            
            
            (1
            )
            
            
            
            
            
            
            
            
            
            
            31Development
      expense
            
            
            
            
            
            
            (649
            )
            
            
            1
            
            
            
            
            
            
            
            
            
            
            
            (648
            )Affiliate
      management fees
            
            
            90
            
            
            
            
            
            
            
            1,213
            
            
            
            872
            
            
            
            (708
            )
            
            
            1,467Loss
      on disposal of assets
            
            
            
            
            
            
            55
            
            
            
            44
            
            
            
            21
            
            
            
            
            
            
            
            120Corporate
      expense allocation
            
            
            
            
            
            
            (1,425
            )
            
            
            (1,426
            )
            
            
            (1,425
            )
            
            
            4,276Total
      expenses
            
            
            (1,173
            )
            
            
            5,789
            
            
            
            27,550
            
            
            
            15,043
            
            
            
            (708
            )
            
            
            46,501INCOME
      (LOSS) FROM OPERATIONS
            
            
            1,173
            
            
            
            5,385
            
            
            
            8,798
            
            
            
            7,016
            
            
            
            
            
            
            
            22,372OTHER
      INCOME (EXPENSE):Interest
      income
            
            
            4
            
            
            
            7
            
            
            
            61
            
            
            
            536
            
            
            
            
            
            
            
            608Interest
      expense, net of amounts capitalized
            
            
            
            
            
            
            (2,318
            )
            
            
            (4,186
            )
            
            
            (3,568
            )
            
            
            
            
            
            
            (10,072
            )Income
      from equity investment in subsidiaries
            
            
            11,731
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (11,731
            )Total
      other income (expense)
            
            
            11,735
            
            
            
            (2,311
            )
            
            
            (4,125
            )
            
            
            (3,032
            )
            
            
            (11,731
            )
            
            
            (9,464
            )NET
      INCOME
            
            $
            12,908
            
            
            $
            3,074
            
            
            $
            4,673
            
            
            $
            3,984
            
            
            $
            (11,731
            )
            
            $
            12,908





19








Three Months Ended June 30, 2007Parent
            
            
            Subsidiary
            
            
            Subsidiary
            
            
            Subsidiary
              Non-Co-Issuer -
            
            
            Co-Issuer -
            
            
            Guarantor -
            
            
            Guarantor -
            
            
            Consolidating(in thousands)
            
            PGL
            
            
            DJL
            
            
            EVD
            
            
            DJW
            
            
            Adjustments
            
            
            ConsolidatedREVENUES:Casino
            
            
            
            
            $
            10,283
            
            
            $
            27,586
            
            
            $
            19,451
            
            
            
            
            
            $
            57,320Racing
            
            
            
            
            
            
            
            
            
            6,658
            
            
            
            
            
            
            
            
            
            
            6,658Video
      poker
            
            
            
            
            
            
            
            
            
            1,057
            
            
            
            
            
            
            
            
            
            
            1,057Food
      and beverage
            
            
            
            
            
            629
            
            
            
            2,866
            
            
            
            758
            
            
            
            
            
            
            4,253Affiliate
      management fee income
            
            
            
            
            
            724
            
            
            
            
            
            
            
            
            
            
            $
            (724
            )Other
            
            
            
            
            
            587
            
            
            
            350
            
            
            
            1,999
            
            
            
            
            
            
            
            2,936Less
      promotional allowances
            
            
            
            
            
            (1,206
            )
            
            
            (2,543
            )
            
            
            (1,485
            )
            
            
            
            
            
            
            (5,234
            )Total
      net revenues
            
            
            
            
            
            11,017
            
            
            
            35,974
            
            
            
            20,723
            
            
            
            (724
            )
            
            
            66,990EXPENSES:Casino
            
            
            
            
            
            4,467
            
            
            
            12,918
            
            
            
            6,923
            
            
            
            
            
            
            
            24,308Racing
            
            
            
            
            
            
            
            
            
            5,356
            
            
            
            
            
            
            
            
            
            
            
            5,356Video
      poker
            
            
            
            
            
            
            
            
            
            863
            
            
            
            
            
            
            
            
            
            
            
            863Food
      and beverage
            
            
            
            
            
            608
            
            
            
            2,056
            
            
            
            681
            
            
            
            
            
            
            
            3,345Other
            
            
            
            
            
            65
            
            
            
            75
            
            
            
            1,837
            
            
            
            
            
            
            
            1,977Selling,
      general and
              administrative
            
            $
            1,889
            
            
            
            1,853
            
            
            
            3,996
            
            
            
            3,132
            
            
            
            4,974
            
            
            
            15,844Depreciation
      and amortization
            
            
            11
            
            
            
            1,208
            
            
            
            2,170
            
            
            
            1,716
            
            
            
            
            
            
            
            5,105Pre-opening
      expense
            
            
            
            
            
            
            23
            
            
            
            
            
            
            
            137
            
            
            
            
            
            
            
            160Development
      expense
            
            
            
            
            
            
            83
            
            
            
            56
            
            
            
            
            
            
            
            
            
            
            
            139Affiliate
      management fees
            
            
            113
            
            
            
            
            
            
            
            1,235
            
            
            
            793
            
            
            
            (724
            )
            
            
            1,417Loss
      on disposal of assets
            
            
            
            
            
            
            15
            
            
            
            1
            
            
            
            
            
            
            
            
            
            
            
            16Corporate
      expense allocation
            
            
            
            
            
            
            1,688
            
            
            
            1,643
            
            
            
            1,643
            
            
            
            (4,974
            )Total
      expenses
            
            
            2,013
            
            
            
            10,010
            
            
            
            30,369
            
            
            
            16,862
            
            
            
            (724
            )
            
            
            58,530INCOME
      (LOSS) FROM OPERATIONS
            
            
            (2,013
            )
            
            
            1,007
            
            
            
            5,605
            
            
            
            3,861
            
            
            
            
            
            
            
            8,460OTHER
      INCOME (EXPENSE):Interest
      income
            
            
            258
            
            
            
            87
            
            
            
            73
            
            
            
            158
            
            
            
            
            
            
            
            576Interest
      expense, net of amounts capitalized
            
            
            
            
            
            
            (2,648
            )
            
            
            (4,245
            )
            
            
            (3,096
            )
            
            
            
            
            
            
            (9,989
            )Income
      from equity investment in subsidiaries
            
            
            802
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (802
            )Total
      other income (expense)
            
            
            1,060
            
            
            
            (2,561
            )
            
            
            (4,172
            )
            
            
            (2,938
            )
            
            
            (802
            )
            
            
            (9,413
            )NET
      INCOME (LOSS)
            
            $
            (953
            )
            
            $
            (1,554
            )
            
            $
            1,433
            
            
            $
            923
            
            
            $
            (802
            )
            
            $
            (953
            )










20








Six Months Ended June 30, 2008Parent
            
            
            Subsidiary
            
            
            Subsidiary
            
            
            Subsidiary
              Non-Co-Issuer -
            
            
            Co-Issuer -
            
            
            Guarantor -
            
            
            Guarantor -
            
            
            Consolidating(in thousands)
            
            PGL
            
            
            DJL
            
            
            EVD
            
            
            DJW
            
            
            Adjustments
            
            
            ConsolidatedREVENUES:Casino
            
            
            
            
            $
            20,148
            
            
            $
            55,562
            
            
            $
            39,373
            
            
            
            
            
            $
            115,083Racing
            
            
            
            
            
            
            
            
            
            9,716
            
            
            
            
            
            
            
            
            
            
            9,716Video
      poker
            
            
            
            
            
            
            
            
            
            3,156
            
            
            
            
            
            
            
            
            
            
            3,156Food
      and beverage
            
            
            
            
            
            1,203
            
            
            
            5,017
            
            
            
            1,968
            
            
            
            
            
            
            8,188Affiliate
      management fee
              income
            
            
            
            
            
            1,395
            
            
            
            
            
            
            
            
            
            
            $
            (1,395
            )Other
            
            
            
            
            
            1,244
            
            
            
            804
            
            
            
            3,833
            
            
            
            
            
            
            
            5,881Less
      promotional allowances
            
            
            
            
            
            (2,504
            )
            
            
            (4,614
            )
            
            
            (2,956
            )
            
            
            
            
            
            
            (10,074
            )Total
      net revenues
            
            
            
            
            
            21,486
            
            
            
            69,641
            
            
            
            42,218
            
            
            
            (1,395
            )
            
            
            131,950EXPENSES:Casino
            
            
            
            
            
            9,032
            
            
            
            26,052
            
            
            
            14,005
            
            
            
            
            
            
            
            49,089Racing
            
            
            
            
            
            
            
            
            
            8,162
            
            
            
            
            
            
            
            
            
            
            
            8,162Video
      poker
            
            
            
            
            
            
            
            
            
            2,329
            
            
            
            
            
            
            
            
            
            
            
            2,329Food
      and beverage
            
            
            
            
            
            1,099
            
            
            
            3,650
            
            
            
            1,581
            
            
            
            
            
            
            
            6,330Other
            
            
            
            
            
            7
            
            
            
            130
            
            
            
            3,366
            
            
            
            
            
            
            
            3,503Selling,
      general and administrative
            
            $
            (420
            )
            
            
            3,650
            
            
            
            7,796
            
            
            
            6,702
            
            
            
            (2,149
            )
            
            
            15,579Depreciation
      and amortization
            
            
            23
            
            
            
            1,560
            
            
            
            3,923
            
            
            
            4,424
            
            
            
            
            
            
            
            9,930Pre-opening
      expense
            
            
            
            
            
            
            87
            
            
            
            8
            
            
            
            32
            
            
            
            
            
            
            
            127Development
      expense
            
            
            
            
            
            
            (641
            )
            
            
            32
            
            
            
            
            
            
            
            
            
            
            
            (609
            )Affiliate
      management fees
            
            
            175
            
            
            
            
            
            
            
            2,403
            
            
            
            1,654
            
            
            
            (1,395
            )
            
            
            2,837Loss
      on disposal of assets
            
            
            
            
            
            
            48
            
            
            
            127
            
            
            
            48
            
            
            
            
            
            
            
            223Corporate
      expense allocation
            
            
            
            
            
            
            (718
            )
            
            
            (713
            )
            
            
            (718
            )
            
            
            2,149Total
      expenses
            
            
            (222
            )
            
            
            14,124
            
            
            
            53,899
            
            
            
            31,094
            
            
            
            (1,395
            )
            
            
            97,500INCOME
      (LOSS) FROM OPERATIONS
            
            
            222
            
            
            
            7,362
            
            
            
            15,742
            
            
            
            11,124
            
            
            
            
            
            
            
            34,450OTHER
      INCOME (EXPENSE):Interest
      income
            
            
            68
            
            
            
            45
            
            
            
            135
            
            
            
            1,104
            
            
            
            
            
            
            
            1,352Interest
      expense, net of amounts capitalized
            
            
            
            
            
            
            (4,874
            )
            
            
            (8,367
            )
            
            
            (7,095
            )
            
            
            
            
            
            
            (20,336
            )Income
      from equity investment
              in
      subsidiaries
            
            
            15,176
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (15,176
            )Total
      other income (expense)
            
            
            15,244
            
            
            
            (4,829
            )
            
            
            (8,232
            )
            
            
            (5,991
            )
            
            
            (15,176
            )
            
            
            (18,984
            )NET
      INCOME
            
            $
            15,466
            
            
            $
            2,533
            
            
            $
            7,510
            
            
            $
            5,133
            
            
            $
            (15,176
            )
            
            $
            15,466














21








Six Months Ended June 30, 2007Parent
            
            
            Subsidiary
            
            
            Subsidiary
            
            
            Subsidiary
              Non-Co-Issuer -
            
            
            Co-Issuer -
            
            
            Guarantor -
            
            
            Guarantor -
            
            
            Consolidating(in thousands)
            
            PGL
            
            
            DJL
            
            
            EVD
            
            
            DJW
            
            
            Adjustments
            
            
            ConsolidatedREVENUES:Casino
            
            
            
            
            $
            20,265
            
            
            $
            54,901
            
            
            $
            35,018
            
            
            
            
            
            $
            110,184Racing
            
            
            
            
            
            
            
            
            
            10,120
            
            
            
            
            
            
            
            
            
            
            10,120Video
      poker
            
            
            
            
            
            
            
            
            
            2,194
            
            
            
            
            
            
            
            
            
            
            2,194Food
      and beverage
            
            
            
            
            
            1,210
            
            
            
            5,153
            
            
            
            1,309
            
            
            
            
            
            
            7,672Affiliate
      management fee
              income
            
            
            
            
            
            1,345
            
            
            
            
            
            
            
            
            
            
            $
            (1,345
            )Other
            
            
            
            
            
            1,252
            
            
            
            813
            
            
            
            3,234
            
            
            
            
            
            
            
            5,299Less
      promotional allowances
            
            
            
            
            
            (2,364
            )
            
            
            (5,171
            )
            
            
            (2,605
            )
            
            
            
            
            
            
            (10,140
            )Total
      net revenues
            
            
            
            
            
            21,708
            
            
            
            68,010
            
            
            
            36,956
            
            
            
            (1,345
            )
            
            
            125,329EXPENSES:Casino
            
            
            
            
            
            8,993
            
            
            
            25,387
            
            
            
            12,267
            
            
            
            
            
            
            
            46,647Racing
            
            
            
            
            
            
            
            
            
            8,273
            
            
            
            
            
            
            
            
            
            
            
            8,273Video
      poker
            
            
            
            
            
            
            
            
            
            1,692
            
            
            
            
            
            
            
            
            
            
            
            1,692Food
      and beverage
            
            
            
            
            
            1,195
            
            
            
            3,728
            
            
            
            1,146
            
            
            
            
            
            
            
            6,069Other
            
            
            
            
            
            115
            
            
            
            143
            
            
            
            2,970
            
            
            
            
            
            
            
            3,228Selling,
      general and administrative
            
            $
            2,629
            
            
            
            3,776
            
            
            
            8,090
            
            
            
            5,861
            
            
            
            6,509
            
            
            
            26,865Depreciation
      and amortization
            
            
            22
            
            
            
            2,387
            
            
            
            4,641
            
            
            
            3,004
            
            
            
            
            
            
            
            10,054Pre-opening
      expense
            
            
            
            
            
            
            23
            
            
            
            24
            
            
            
            196
            
            
            
            
            
            
            
            243Development
      expense
            
            
            
            
            
            
            1,716
            
            
            
            68
            
            
            
            
            
            
            
            
            
            
            
            1,784Affiliate
      management fees
            
            
            191
            
            
            
            
            
            
            
            2,312
            
            
            
            1,414
            
            
            
            (1,345
            )
            
            
            2,572Loss
      on disposal of assets
            
            
            
            
            
            
            76
            
            
            
            21
            
            
            
            
            
            
            
            
            
            
            
            97Corporate
      expense allocation
            
            
            
            
            
            
            2,257
            
            
            
            2,126
            
            
            
            2,126
            
            
            
            (6,509
            )Total
      expenses
            
            
            2,842
            
            
            
            20,538
            
            
            
            56,505
            
            
            
            28,984
            
            
            
            (1,345
            )
            
            
            107,524INCOME
      (LOSS) FROM OPERATIONS
            
            
            (2,842
            )
            
            
            1,170
            
            
            
            11,505
            
            
            
            7,972
            
            
            
            
            
            
            
            17,805OTHER
      INCOME (EXPENSE):Interest
      income
            
            
            509
            
            
            
            209
            
            
            
            151
            
            
            
            430
            
            
            
            
            
            
            
            1,299Interest
      expense, net of amounts capitalized
            
            
            
            
            
            
            (5,282
            )
            
            
            (8,454
            )
            
            
            (5,875
            )
            
            
            
            
            
            
            (19,611
            )Income
      from equity investment
              in
      subsidiaries
            
            
            1,826
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (1,826
            )Total
      other income (expense)
            
            
            2,335
            
            
            
            (5,073
            )
            
            
            (8,303
            )
            
            
            (5,445
            )
            
            
            (1,826
            )
            
            
            (18,312
            )NET
      INCOME (LOSS)
            
            $
            (507
            )
            
            $
            (3,903
            )
            
            $
            3,202
            
            
            $
            2,527
            
            
            $
            (1,826
            )
            
            $
            (507
            )










22




CONSOLIDATING
STATEMENTS OF CASH FLOWS




Six Months Ended June 30, 2008(in thousands)
            
            Parent
              Co-Issuer -
              PGL
            
            
            Subsidiary
              Co-Issuer -
              DJL
            
            
            Subsidiary
              Guarantor -
              EVD
            
            
            Subsidiary
              Non-
              Guarantor -
              DJW
            
            
            Consolidating
              Adjustments
            
            
            ConsolidatedCASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      income
            
            $
            15,466
            
            
            $
            2,533
            
            
            $
            7,510
            
            
            $
            5,133
            
            
            $
            (15,176
            )
            
            $
            15,466Adjustments
      to reconcile net income to net cash flows from
      operating activities:Depreciation
      and amortization
            
            
            23
            
            
            
            1,560
            
            
            
            3,923
            
            
            
            4,424
            
            
            
            
            
            
            
            9,930Non-cash
      interest
            
            
            
            
            
            
            1,062
            
            
            
            948
            
            
            
            520
            
            
            
            
            
            
            
            2,530Non-cash
      equity based and other compensation
            
            
            (4,737
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (4,737
            )Corporate
      expense allocation
            
            
            2,149
            
            
            
            (718
            )
            
            
            (713
            )
            
            
            (718
            )Loss
      on disposal of assets
            
            
            
            
            
            
            48
            
            
            
            127
            
            
            
            48
            
            
            
            
            
            
            
            223Income
      from equity investment in subsidiaries
            
            
            (15,176
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            15,176Changes
      in operating assets and liabilities:Restricted
      cash — purse settlements
            
            
            
            
            
            
            
            
            
            
            (2,524
            )
            
            
            
            
            
            
            
            
            
            
            (2,524
            )Receivables
            
            
            
            
            
            
            (9
            )
            
            
            (2,131
            )
            
            
            178
            
            
            
            
            
            
            
            (1,962
            )Receivables
      from affiliates
            
            
            
            
            
            
            (15
            )
            
            
            (60
            )
            
            
            (80
            )
            
            
            155Payables
      to affiliates
            
            
            
            
            
            
            
            
            
            
            328
            
            
            
            (832
            )
            
            
            (155
            )
            
            
            (659
            )Inventories
            
            
            
            
            
            
            (25
            )
            
            
            (13
            )
            
            
            (57
            )
            
            
            
            
            
            
            (95
            )Prepaid
      expenses and other
              assets
            
            
            (13
            )
            
            
            (1,038
            )
            
            
            (3
            )
            
            
            (46
            )
            
            
            
            
            
            
            (1,100
            )Accounts
      payable
            
            
            4
            
            
            
            378
            
            
            
            4,288
            
            
            
            133
            
            
            
            
            
            
            
            4,803Accrued
      expenses
            
            
            (306
            )
            
            
            (1,475
            )
            
            
            392
            
            
            
            (461
            )
            
            
            
            
            
            
            (1,850
            )Net
      cash flows from operating activities
            
            
            (2,590
            )
            
            
            2,301
            
            
            
            12,072
            
            
            
            8,242
            
            
            
            
            
            
            
            20,025CASH
      FLOWS FROM INVESTING ACTIVITIES:Increase
      in cash value of life insurance for premiums paid
            
            
            (104
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (104
            )Business
      acquisition and licensing costs
            
            
            
            
            
            
            
            
            
            
            (258
            )
            
            
            (1,000
            )
            
            
            
            
            
            
            (1,258
            )Construction
      project development costs
            
            
            
            
            
            
            (16,697
            )
            
            
            (3,354
            )
            
            
            
            
            
            
            
            
            
            
            (20,051
            )Purchase
      of property and equipment
            
            
            (7
            )
            
            
            (535
            )
            
            
            (2,475
            )
            
            
            (1,067
            )
            
            
            
            
            
            
            (4,084
            )Net
      cash flows from investing activities
            
            
            (111
            )
            
            
            (17,232
            )
            
            
            (6,087
            )
            
            
            (2,067
            )
            
            
            
            
            
            
            (25,497
            )CASH
      FLOWS FROM FINANCING ACTIVITIES:Deferred
      financing costs
            
            
            
            
            
            
            (87
            )
            
            
            (32
            )
            
            
            (40
            )
            
            
            
            
            
            
            (159
            )Principal
      payments on debt
            
            
            
            
            
            
            (7
            )
            
            
            (10
            )
            
            
            (2,866
            )
            
            
            
            
            
            
            (2,883
            )Proceeds
      from senior credit facilities
            
            
            
            
            
            
            3,500
            
            
            
            
            
            
            
            1,000
            
            
            
            
            
            
            
            4,500Payments
      on senior credit facilities
            
            
            
            
            
            
            (3,500
            )
            
            
            
            
            
            
            (1,000
            )
            
            
            
            
            
            
            (4,500
            )Proceeds
      from term loan
            
            
            
            
            
            
            1,023
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,023Member
      contributions (distributions)
            
            
            (9,215
            )
            
            
            17,818
            
            
            
            (9,218
            )
            
            
            (1,518
            )
            
            
            
            
            
            
            (2,133
            )Net
      cash flows from financing activities
            
            
            (9,215
            )
            
            
            18,747
            
            
            
            (9,260
            )
            
            
            (4,424
            )
            
            
            
            
            
            
            (4,152
            )NET
      INCREASE IN CASH AND CASH EQUIVALENTS
            
            
            (11,916
            )
            
            
            3,816
            
            
            
            (3,275
            )
            
            
            1,751
            
            
            
            
            
            
            
            (9,624
            )CASH
      AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
            
            
            11,908
            
            
            
            4,606
            
            
            
            11,834
            
            
            
            13,752
            
            
            
            
            
            
            
            42,100CASH
      AND CASH EQUIVALENTS AT END OF PERIOD
            
            $
            (8
            )
            
            $
            8,422
            
            
            $
            8,559
            
            
            $
            15,503
            
            
            
            
            
            
            $
            32,476


23






Six Months Ended June 30, 2007(in thousands)
            
            Parent
              Co-Issuer -
              PGL
            
            
            Subsidiary
              Co-Issuer -
              DJL
            
            
            Subsidiary
              Guarantor -
              EVD
            
            
            Subsidiary
              Non-
              Guarantor -
              DJW
            
            
            Consolidating
              Adjustments
            
            
            
            ConsolidatedCASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      income (loss)
            
            $
            (507
            )
            
            $
            (3,903
            )
            
            $
            3,202
            
            
            $
            2,527
            
            
            $
            (1,826
            )
            
            
            $
            (507
            )Adjustments
      to reconcile net income (loss) to net cash flows from
      operating activities:Depreciation
      and amortization
            
            
            22
            
            
            
            2,387
            
            
            
            4,641
            
            
            
            3,004
            
            
            
            
            
            
            
            
            10,054Non-cash
      interest
            
            
            
            
            
            
            632
            
            
            
            880
            
            
            
            549
            
            
            
            
            
            
            
            
            2,061Non-cash
      equity based and other compensation
            
            
            7,505
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            7,505Corporate
      expense allocation
            
            
            (6,509
            )
            
            
            2,257
            
            
            
            2,126
            
            
            
            2,126Loss
      on disposal of assets
            
            
            
            
            
            
            76
            
            
            
            21
            
            
            
            
            
            
            
            
            
            
            
            
            97Income
      from equity investment in subsidiaries
            
            
            (1,826
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,826Changes
      in operating assets and liabilities:Restricted
      cash — purse settlements
            
            
            
            
            
            
            
            
            
            
            (1,255
            )
            
            
            
            
            
            
            
            
            
            
            
            (1,255
            )Receivables
            
            
            
            
            
            
            41
            
            
            
            (2,092
            )
            
            
            241
            
            
            
            
            
            
            
            
            (1,810
            )Receivables
      from affiliates
            
            
            
            
            
            
            (590
            )
            
            
            
            
            
            
            
            
            
            
            590Payables
      to affiliates
            
            
            
            
            
            
            
            
            
            
            762
            
            
            
            775
            
            
            
            (590
            )
            
            
            
            947Inventories
            
            
            
            
            
            
            (79
            )
            
            
            (123
            )
            
            
            (154
            )
            
            
            
            
            
            
            
            (356
            )Prepaid
      expenses and other
              assets
            
            
            (38
            )
            
            
            (976
            )
            
            
            17
            
            
            
            (13
            )
            
            
            
            
            
            
            
            (1,010
            )Accounts
      payable
            
            
            8
            
            
            
            (230
            )
            
            
            3,517
            
            
            
            (33
            )
            
            
            
            
            
            
            
            3,262Accrued
      expenses
            
            
            88
            
            
            
            594
            
            
            
            1,350
            
            
            
            874
            
            
            
            
            
            
            
            
            2,906Net
      cash flows from operating activities
            
            
            (1,257
            )
            
            
            209
            
            
            
            13,046
            
            
            
            9,896
            
            
            
            
            
            
            
            
            21,894CASH
      FLOWS FROM INVESTING ACTIVITIES:Increase
      in cash value of life insurance for premiums paid
            
            
            (121
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (121
            )Proceeds
      from restricted cash
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            12,981
            
            
            
            
            
            
            
            
            12,981Business
      acquisition and licensing costs
            
            
            
            
            
            
            
            
            
            
            (254
            )
            
            
            (1,000
            )
            
            
            
            
            
            
            
            (1,254
            )Construction
      project development costs
            
            
            
            
            
            
            (2,623
            )
            
            
            (2,236
            )
            
            
            (18,685
            )
            
            
            
            
            
            
            
            (23,544
            )Purchase
      of property and equipment
            
            
            (4
            )
            
            
            (688
            )
            
            
            (1,544
            )
            
            
            (1,543
            )
            
            
            
            
            
            
            
            (3,779
            )Proceeds
      from sale of property and equipment
            
            
            
            
            
            
            22
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            22Net
      cash flows from investing activities
            
            
            (125
            )
            
            
            (3,289
            )
            
            
            (4,034
            )
            
            
            (8,247
            )
            
            
            
            
            
            
            
            (15,695
            )CASH
      FLOWS FROM FINANCING ACTIVITIES:Deferred
      financing costs
            
            
            
            
            
            
            (145
            )
            
            
            (119
            )
            
            
            (121
            )
            
            
            
            
            
            
            
            (385
            )Principal
      payments on debt
            
            
            
            
            
            
            (672
            )
            
            
            (2,694
            )
            
            
            (1,748
            )
            
            
            
            
            
            
            
            (5,114
            )Member
      contributions (distributions)
            
            
            1,893
            
            
            
            (2,656
            )
            
            
            (2,601
            )
            
            
            (940
            )
            
            
            
            
            
            
            
            (4,304
            )Net
      cash flows from financing activities
            
            
            1,893
            
            
            
            (3,473
            )
            
            
            (5,414
            )
            
            
            (2,809
            )
            
            
            
            
            
            
            
            (9,803
            )NET
      INCREASE IN CASH AND CASH EQUIVALENTS
            
            
            511
            
            
            
            (6,553
            )
            
            
            3,598
            
            
            
            (1,160
            )
            
            
            
            
            
            
            
            (3,604
            )CASH
      AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
            
            
            20,999
            
            
            
            13,069
            
            
            
            8,889
            
            
            
            13,964
            
            
            
            
            
            
            
            
            56,921CASH
      AND CASH EQUIVALENTS AT END OF PERIOD
            
            $
            21,510
            
            
            $
            6,516
            
            
            $
            12,487
            
            
            $
            12,804
            
            
            
            
            
            
            
            $
            53,317  24


ITEM 2.  MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS




The
following discussion and analysis should be read in conjunction with the
condensed consolidated financial statements and the related notes thereto
appearing elsewhere in this report.




Forward Looking
Statements






Some
statements contained in “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” constitute “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include the words “may,” “estimate,” “intend,”
“continue,” “believe,” “expect,” or “anticipate” and other similar words. These
forward-looking statements generally relate to plans and objectives for future
operations and are based upon management’s reasonable estimates of future
results or trends. Although we believe that the plans and objectives reflected
in or suggested by such forward-looking statements are reasonable, such plans or
objectives may not be achieved. Actual results may differ from projected results
due to, but not limited to, unforeseen developments, including developments
relating to the following:




·
            the
      availability and adequacy of our cash flows to satisfy our obligations,
      including payment obligations under the Peninsula Gaming Notes, the DJW
      Notes, the PGL Credit Facility and the DJW Credit Facility and additional
      funds required to support capital improvements and
      development;




·
            economic,
      competitive, demographic, business and other conditions in our local and
      regional markets;




·
            changes
      or developments in the laws, regulations or taxes in the gaming and horse
      racing industry;




·
            actions
      taken or omitted to be taken by third parties, including customers,
      suppliers, competitors, members and shareholders, as well as legislative,
      regulatory, judicial and other governmental
  authorities;




·
            changes
      in business strategy, capital improvements, development plans, including
      those due to environmental remediation concerns, or changes in personnel
      or their compensation, including federal, state and local minimum wage
      requirements;




·
            the
      loss of any license or permit, including the failure to obtain an
      unconditional renewal of a required gaming license on a timely
      basis;




·
            the
      termination of our operating agreement with the Dubuque Racing
      Association, Ltd. and/or the Worth County Development Authority or the
      failure of the Dubuque Racing Association, Ltd. and/or the Worth County
      Development Authority to continue as our “qualified sponsoring
      organization;”




·
            the
      loss of our riverboat casino or land-based facilities due to casualty,
      weather, mechanical failure or any extended or extraordinary maintenance
      or inspection that may be required;




·
            the
      failure to complete our construction projects on time and within
      budget;




·      changes
in federal or state tax obligations;





·
            potential
      exposure to environmental liabilities, changes or developments in the
      laws, regulations or taxes in the gaming or horse racing industry or a
      decline in the public acceptance of gaming or horse racing and other
      unforeseen difficulties associated with a new
  venture;




·
            adverse
      circumstances, changes, developments or events relating to or resulting
      from our ownership and control of DJL, EVD and DJW;
  and




·
            other
      factors discussed in our other filings with the
  SEC.





25








Overview




We own
and operate (i) the Diamond Jo riverboat casino in Dubuque, Iowa with 777
slot machines and 17 table games, (ii) the Evangeline Downs racino in
Opelousas, Louisiana with 1,627 slot machines and a one-mile dirt horse
racetrack and four OTBs located throughout south central Louisiana and (iii) the
Diamond Jo Worth casino in Worth County, Iowa with 910 slot machines, 25 table
games and 7 poker tables which opened to the public in April 2006 and
subsequently expanded in April 2007.




Results
      of Operations




Our
results of operations discussed below include the consolidated results of
operations of the Company, DJL, EVD and DJW for the three and six months ended
June 30, 2008 and 2007.




Statement
of Operations Data




INCOME
      (LOSS) FROM OPERATIONS:
            
            Three Months Ended
              June 30,(in thousands)
            
            2008
            
            
            2007General
      corporate
            
            $
            5,449
            
            
            $
            (6,987
            )Diamond
      Jo
            
            
            3,252
            
            
            
            1,971Evangeline
      Downs
            
            
            8,080
            
            
            
            7,972Diamond
      Jo Worth
            
            
            5,591
            
            
            
            5,504Income
      from operations
            
            $
            22,372
            
            
            $
            8,460







Diamond Jo
              Three Months Ended
              June 30,
            
            
            Evangeline Downs
              Three Months Ended
              June 30,
            
            
            Diamond Jo Worth
              Three Months Ended
              June 30,(in thousands)
            
            2008
            
            
            2007
            
            
            2008
            
            
            2007
            
            
            2008
            
            
            2007REVENUES:Casino
            
            $
            10,687
            
            
            $
            10,283
            
            
            $
            27,496
            
            
            $
            27,586
            
            
            $
            20,480
            
            
            $
            19,451Racing
            
            
            
            
            
            
            
            
            
            
            6,399
            
            
            
            6,658Video
      poker
            
            
            
            
            
            
            
            
            
            
            1,598
            
            
            
            1,057Food
      and beverage
            
            
            635
            
            
            
            629
            
            
            
            2,785
            
            
            
            2,866
            
            
            
            1,012
            
            
            
            758Other
            
            
            567
            
            
            
            587
            
            
            
            390
            
            
            
            350
            
            
            
            2,232
            
            
            
            1,999Less
      promotional allowances
            
            
            (1,423
            )
            
            
            (1,206
            )
            
            
            (2,320
            )
            
            
            (2,543
            )
            
            
            (1,665
            )
            
            
            (1,485
            )Net
      revenues
            
            
            10,466
            
            
            
            10,293
            
            
            
            36,348
            
            
            
            35,974
            
            
            
            22,059
            
            
            
            20,723EXPENSES:Casino
            
            
            4,593
            
            
            
            4,467
            
            
            
            13,177
            
            
            
            12,918
            
            
            
            7,139
            
            
            
            6,923Racing
            
            
            
            
            
            
            
            
            
            
            5,253
            
            
            
            5,356Video
      poker
            
            
            
            
            
            
            
            
            
            
            1,203
            
            
            
            863Food
      and beverage
            
            
            547
            
            
            
            608
            
            
            
            2,071
            
            
            
            2,056
            
            
            
            815
            
            
            
            681Other
            
            
            3
            
            
            
            65
            
            
            
            70
            
            
            
            75
            
            
            
            2,008
            
            
            
            1,837Selling,
      general and administrative
            
            
            1,868
            
            
            
            1,853
            
            
            
            3,950
            
            
            
            3,996
            
            
            
            3,317
            
            
            
            3,132Depreciation
      and amortization
            
            
            765
            
            
            
            1,208
            
            
            
            1,995
            
            
            
            2,170
            
            
            
            2,296
            
            
            
            1,716Pre-opening
      expense
            
            
            32
            
            
            
            23
            
            
            
            (1
            )
            
            
            
            
            
            
            
            
            
            
            137Development
      expense
            
            
            (649
            )
            
            
            83
            
            
            
            1
            
            
            
            56Loss
      on disposal of assets
            
            
            55
            
            
            
            15
            
            
            
            44
            
            
            
            1
            
            
            
            21Affiliate
      management fees
            
            
            
            
            
            
            
            
            
            
            505
            
            
            
            511
            
            
            
            872
            
            
            
            793Total
      expenses
            
            
            7,214
            
            
            
            8,322
            
            
            
            28,268
            
            
            
            28,002
            
            
            
            16,468
            
            
            
            15,219Income
      from operations
            
            $
            3,252
            
            
            $
            1,971
            
            
            $
            8,080
            
            
            $
            7,972
            
            
            $
            5,591
            
            
            $
            5,504







Three
      months ended June 30, 2008 compared to three months ended June 30,
      2007




Net
revenues increased $1.9 million, or 3%, to $68.9 million for the three months
ended June 30, 2008 from $67.0 million for the three months ended June 30, 2007.
This increase was primarily derived from a $1.3 million net revenue increase at
DJW directly related to the impact of DJW’s casino expansion that opened to the
public in late April 2007 as well as an increase in net revenues at EVD and DJL
of $0.4 million and $0.2 million, respectively.





26





DJL’s
casino revenues increased by $0.4 million to $10.7 million for the three months
ended June 30, 2008 from $10.3 million for the three months ended June 30, 2007.
DJL’s slot revenue increased to $10.0 million for the three months ended June
30, 2008 from $9.6 million for the three months ended June 30, 2007 as a result
of an increase in slot hold percentage. DJL’s table game revenue remained
substantially unchanged at $0.7 million for each of the three months ended June
30, 2008 and 2007.




DJW’s
casino revenues increased by $1.0 million, or 5%, to $20.5 million for the three
months ended June 30, 2008 from $19.5 million for the three months ended June
30, 2007 primarily due to the opening of the casino expansion project to the
public in late April 2007.  DJW’s slot revenue increased 5% to $18.8
million for the three months ended June 30, 2008 from $17.9 million for the
three months ended June 30, 2007.  DJW table game revenue increased 7%
to $1.5 million for the three months ended June 30, 2008 from $1.4 million for
the three months ended June 30, 2007.  Poker revenue remained
unchanged at $0.2 million for the three months ended June 30, 2008 and
2007.




Casino
operating expenses increased $0.6 million, or 2%, to $24.9 million for the three
months ended June 30, 2008 from $24.3 million for the three months ended June
30, 2007 due primarily to (i) an increase in payroll and payroll related
expenses at EVD of $0.3 million and (ii) an increase in gaming taxes at DJW of
$0.2 million related to the increase in gaming revenue.




Video
poker revenues at EVD for the three months ended June 30, 2008 increased 45% to
$1.6 million compared to $1.1 million for the three months ended June 30, 2007.
The increase in video poker revenues is primarily attributable to the addition
of video poker at our Henderson OTB in August 2007 as well as substantial
increases in video poker revenue at both our Port Allen and Eunice OTBs of 20%
and 40%, respectively, which is primarily attributable to recent renovations at
the Port Allen facility as well as continuous updating of the video poker
machines at these OTB’s to provide the latest and most popular
games.





Consistent
with the increase in video poker revenues, video poker expenses increased $0.3
million to $1.2 million for the three months ended June 30, 2008 from $0.9
million for the three months ended June 30, 2007.




Food and
beverage revenues and other revenues increased $0.4 million during the three
months ended June 30, 2008 compared to the three months ended June 30, 2007 due
primarily to (i) an increase in food and beverage revenues of $0.2 million at
DJW related to the opening of a new high-end restaurant in January 2008 and the
continued success of DJW’s  buffet restaurant which was added as part
of the casino expansion and opened in June 2007 and (ii) an increase in other
revenue at DJW of $0.2 million related to an increase in convenience store
revenues due to an increase in fuel prices over the second quarter of
2007.  Consistent with these increases in sales, DJW realized relative
increases in food and beverage and other expenses.





Selling,
general and administrative expenses decreased $12.2 million to $3.6 million for
the three months ended June 30, 2008 from $15.8 million for the three months
ended June 30, 2007. This decrease was due primarily to a $12.7 million decrease
in non-cash expenses related to a decrease in the fair value of PGP incentive
units granted to certain executive officers of the Company in
2005.  This decrease was partially offset by (i) an increase of $0.3
million of general corporate operating expenses primarily due to increased
travel costs and (ii) an increase of $0.2 million in expenses associated with
operations at DJW, including increased costs associated with the casino
expansion relative to the corresponding period of the prior year.




Depreciation
and amortization expenses at DJW increased $0.6 million, or 35%, to $2.3 million
for the three months ended June 30, 2008 from $1.7 million for the three months
ended June 30, 2007 due primarily to the impact of the depreciation on the
assets associated with the casino expansion.  In addition, included in
depreciation expense for the three months ended June 30, 2008 is an impairment
charge associated with long-lived assets at DJW’s waste water treatment
facility of approximately $0.2 million.  The increase in deprecation and
amortization expenses at DJW is offset by decreases at DJL and EVD of $0.4
million and $0.2 million, respectively, related to assets that had reached their
useful lives after the second quarter of 2007.





In 2007,
DJL expensed $1.3 million to development expense relating to its unconditional
obligation to contribute the Diamond Jo vessel to the Dubuque County Historical
Society (the “Historical Society”).  In June 2008, DJL and the
Historical Society reached an amended agreement wherein DJL would sell the
vessel with the proceeds to be split evenly between DJL and the Historical
Society.  Based on this agreement, DJL reduced its outstanding
obligation to the Historical Society by 50% of the estimated proceeds expected
to be received upon the sale of the Diamond Jo vessel with a corresponding
credit to development expense on the Company’s statement of
operations.







27





Affiliate
management fees of $1.5 million and $1.4 million for the three months ended June
30, 2008 and 2007, respectively, relate to management fees paid or accrued to
related parties under various management services and consulting agreements at
EVD and DJW and increased primarily due to the increased revenues at
DJW.




Interest
income of approximately $0.6 million for the three months ended June 30, 2008 is
primarily related to interest earned on DJW’s investment in its available for
sale security.  Interest income of approximately $0.6 million for the
three months ended June 30, 2007 is primarily related to interest earned on cash
deposits invested in interest bearing accounts.  Interest expense, net
of amounts capitalized, remained substantially unchanged at $10.1 million and
$10.0 million for the three months ended June 30, 2008 and 2007, respectively.
Interest expense at DJW increased approximately $0.5 million primarily related
to the issuance of $23 million principal amount of DJW Notes in October 2007.
This increase is partially offset by a decrease in interest expense at DJL
primarily related to $0.6 million of capitalized interest in the second quarter
of 2008.  Interest expense of approximately $0.6 million and $0.2
million was capitalized as part of the casino development and other construction
projects during the three months ended June 30, 2008 and 2007,
respectively.




INCOME
      (LOSS) FROM OPERATIONS:
            
            Six Months Ended
              June 30,(in thousands)
            
            2008
            
            
            2007General
      corporate
            
            $
            2,371
            
            
            $
            (9,351
            )Diamond
      Jo
            
            
            5,249
            
            
            
            2,082Evangeline
      Downs
            
            
            16,424
            
            
            
            14,976Diamond
      Jo Worth
            
            
            10,406
            
            
            
            10,098Income
      from operations
            
            $
            34,450
            
            
            $
            17,805







Diamond Jo
              Six Months Ended
              June 30,
            
            
            Evangeline Downs
              Six Months Ended
              June 30,
            
            
            Diamond Jo Worth
              Six Months Ended
              June 30,(in thousands)
            
            2008
            
            
            2007
            
            
            2008
            
            
            2007
            
            
            2008
            
            
            2007REVENUES:Casino
            
            $
            20,148
            
            
            $
            20,265
            
            
            $
            55,562
            
            
            $
            54,901
            
            
            $
            39,373
            
            
            $
            35,018Racing
            
            
            
            
            
            
            
            
            
            
            9,716
            
            
            
            10,120Video
      poker
            
            
            
            
            
            
            
            
            
            
            3,156
            
            
            
            2,194Food
      and beverage
            
            
            1,203
            
            
            
            1,210
            
            
            
            5,017
            
            
            
            5,153
            
            
            
            1,968
            
            
            
            1,309Other
            
            
            1,244
            
            
            
            1,252
            
            
            
            804
            
            
            
            813
            
            
            
            3,833
            
            
            
            3,234Less
      promotional allowances
            
            
            (2,504
            )
            
            
            (2,364
            )
            
            
            (4,614
            )
            
            
            (5,171
            )
            
            
            (2,956
            )
            
            
            (2,605
            )Net
      revenues
            
            
            20,091
            
            
            
            20,363
            
            
            
            69,641
            
            
            
            68,010
            
            
            
            42,218
            
            
            
            36,956EXPENSES:Casino
            
            
            9,032
            
            
            
            8,993
            
            
            
            26,052
            
            
            
            25,387
            
            
            
            14,005
            
            
            
            12,267Racing
            
            
            
            
            
            
            
            
            
            
            8,162
            
            
            
            8,273Video
      poker
            
            
            
            
            
            
            
            
            
            
            2,329
            
            
            
            1,692Food
      and beverage
            
            
            1,099
            
            
            
            1,195
            
            
            
            3,650
            
            
            
            3,728
            
            
            
            1,581
            
            
            
            1,146Other
            
            
            7
            
            
            
            115
            
            
            
            130
            
            
            
            143
            
            
            
            3,366
            
            
            
            2,970Selling,
      general and administrative
            
            
            3,650
            
            
            
            3,776
            
            
            
            7,796
            
            
            
            8,090
            
            
            
            6,702
            
            
            
            5,861Depreciation
      and amortization
            
            
            1,560
            
            
            
            2,387
            
            
            
            3,923
            
            
            
            4,641
            
            
            
            4,424
            
            
            
            3,004Pre-opening
      expense
            
            
            87
            
            
            
            23
            
            
            
            8
            
            
            
            24
            
            
            
            32
            
            
            
            196Development
      expense
            
            
            (641
            )
            
            
            1,716
            
            
            
            32
            
            
            
            68Loss
      on disposal of assets
            
            
            48
            
            
            
            76
            
            
            
            127
            
            
            
            21
            
            
            
            48Affiliate
      management fees
            
            
            
            
            
            
            
            
            
            
            1,008
            
            
            
            967
            
            
            
            1,654
            
            
            
            1,414Total
      expenses
            
            
            14,842
            
            
            
            18,281
            
            
            
            53,217
            
            
            
            53,034
            
            
            
            31,812
            
            
            
            26,858Income
      from operations
            
            $
            5,249
            
            
            $
            2,082
            
            
            $
            16,424
            
            
            $
            14,976
            
            
            $
            10,406
            
            
            $
            10,098







Six
      months ended June 30, 2008 compared to six months ended June 30,
      2007




Net
revenues increased $6.6 million, or 5%, to $131.9 million for the six months
ended June 30, 2008 from $125.3 million for the six months ended June 30, 2007.
This increase was primarily derived from a $5.3 million net revenue increase at
DJW directly related to the impact of DJW’s casino expansion that opened to the
public in April 2007 as well as an increase in net revenues at EVD of $1.6
million. This increase was partially offset by a decrease in net revenues at DJL
of $0.3 million.





28





EVD’s
casino revenues increased 1% to $55.6 million for the six months ended June 30,
2008 from $54.9 million for the six months ended June 30, 2007 primarily related
to an increase in slot hold percentage. Promotional allowances as a percentage
of casino revenues decreased by approximately $0.6 million for the six months
ended June 30, 2008 compared to the six months ended June 30, 2007 due to
improvements to the database marketing programs to target more profitable
customers.





DJL’s
casino revenues decreased to $20.1 million for the six months ended June 30,
2008 from $20.3 million for the six months ended June 30, 2007. DJL’s operations
were negatively impacted by adverse weather conditions during the first quarter
of 2008, which impacted revenue at DJL for 28 days in the first quarter of 2008
compared to only 13 days during the same period in 2007. DJL’s slot revenue
remained substantially unchanged at $18.7 million for the six months ended June
30, 2008 and 2007 and DJL’s table game revenue decreased 7% to $1.4 million for
the six months ended June 30, 2008 compared to $1.5 million for the six months
ended June 30, 2007.




DJW’s
casino revenues increased by $4.4 million, or 13%, to $39.4 million for the six
months ended June 30, 2008 from $35.0 million for the six months ended June 30,
2007. This increase is due primarily the impact of the April 2007 DJW casino
expansion.  DJW’s slot revenue increased to $36.0 million for the six
months ended June 30, 2008 from $32.1 million for the six months ended June 30,
2007.  DJW table game revenue increased to $2.9 million for the six
months ended June 30, 2008 from $2.7 million for the six months ended June 30,
2007.  Poker revenue increased to $0.5 million for the six months
ended June 30, 2008 from $0.2 million for the six months ended June 30,
2007.





Casino
operating expenses increased $2.5 million to $49.1 million for the six months
ended June 30, 2008 from $46.6 million for the six months ended June 30, 2007
due primarily to (i) an increase in casino payroll and other operating
expenses at DJW directly related to the casino expansion and (ii) an increase in
gaming taxes at DJW and EVD related to the increases in gaming revenue at each
property.





Racing
revenues at EVD for the six months ended June 30, 2008 were $9.7 million
compared to $10.1 million for the six months ended June 30, 2007. This decrease
is primarily due to running 48 live race days in 2008 versus 52 days for
2007.




Consistent
with a decrease in racing revenues, racing expenses decreased $0.1 million to
$8.2 million for the six months ended June 30, 2008 from $8.3 million for the
six months ended June 30, 2007.





Video
poker revenues at EVD for the six months ended June 30, 2008 increased 45% to
$3.2 million compared to $2.2 million for the six months ended June 30, 2007.
The increase in video poker revenues is primarily attributable to the addition
of video poker at our Henderson OTB in August 2007 as well as increases in video
poker revenue at both our Port Allen and Eunice OTBs of 17% and 27%,
respectively, which is primarily attributable to recent renovations at the Port
Allen facility as well as continuous updating of the video poker machines at
these OTB’s to provide the latest and most popular games.





Consistent
with an increase in video poker revenues as described above, video poker
expenses increased $0.6 million to $2.3 million for the six months ended June
30, 2008 from $1.7 million for the six months ended June 30, 2007.




Food and
beverage revenues and other revenues increased $1.1 million during the six
months ended June 30, 2008 compared to the six months ended June 30, 2007 due
primarily to (i) an increase in food and beverage revenues of $0.7 million at
DJW related to the opening of a new high-end restaurant in January 2008 and the
continued success of DJW’s  buffet restaurant which was added as part
of the casino expansion and opened in June 2007 and (ii) an increase in other
revenue at DJW of $0.6 million primarily related to an increase in convenience
store revenues due to an increase in fuel prices over 2007. Consistent with
these increases in sales, DJW realized relative increases in food and beverage
and other expenses.





Selling,
general and administrative expenses decreased $11.3 million to $15.6 million for
the six months ended June 30, 2008 from $26.9 million for the six months ended
June 30, 2007. This decrease was due primarily to a $12.2 million decrease in
non-cash expenses related to a decrease in the fair value of PGP incentive units
granted to certain executive officers of the Company in 2005.  This
decrease was partially offset by a $0.8 million increase in expenses associated
with operations at DJW primarily related to additional costs associated with the
casino expansion.




Depreciation
and amortization expenses decreased to $9.9 million for the six months ended
June 30, 2008 from $10.1 million for the six months ended June 30, 2007 due
primarily to decreases at DJL and EVD of $0.8 million and $0.7 million,
respectively, related to assets that had reached their useful lives after the
second quarter of 2007.  These decreases







29


were
partially offset by an increase at DJW of $1.4 million primarily related to the
impact of the depreciation on the assets associated with the DJW casino
expansion. In addition, included in depreciation expense for the six months
ended June 30, 2008 is an impairment charge associated with long-lived assets at
DJW’s waste water treatment facility of approximately $0.2
million.




In 2007,
DJL expensed $1.3 million to development expense relating to its unconditional
obligation to contribute the Diamond Jo vessel to the Historical
Society.  In June 2008, DJL and the Historical Society reached an
amended agreement wherein DJL would sell the vessel with the proceeds to be
split evenly between DJL and the Historical Society.  Based on this
agreement, DJL reduced its outstanding obligation to the Historical Society by
50% of the estimated proceeds expected to be received upon the sale of the
Diamond Jo vessel with a corresponding credit to development expense on the
Company’s statement of operations.  In relation to its new casino
development, during the six months ended June 30, 2007, DJL expensed $1.4
million as development expense relating to certain of its obligations
under an agreement with the Historical Society and approximately $0.3
million of other costs associated with the development
project.




Affiliate
management fees of $2.8 million and $2.6 million for the six months ended June
30, 2008 and 2007, respectively, relate to management fees paid or accrued to
related parties under various management services and consulting agreements at
EVD and DJW and increased primarily due to the increased revenues at
DJW.




Interest
income of approximately $1.4 million for the six months ended June 30, 2008 is
primarily related to interest earned on DJW’s investment in its available for
sale security.  Interest income of approximately $1.3 million for the
six months ended June 30, 2007 is primarily related to interest earned on cash
deposits invested in interest bearing accounts.  Interest expense, net
of amounts capitalized, increased $0.7 million to $20.3 million during the six
months ended June 30, 2008 from $19.6 million for the six months ended June 30,
2007. This increase is primarily due to an increase in interest at DJW of
approximately $1.2 million primarily related to the issuance of $23 million
principal amount of DJW Notes in October 2007, partially offset by a decrease in
interest expense at DJL primarily related to $0.9 million of capitalized
interest.  Interest expense of approximately $0.9 million and $0.6
million was capitalized as part of the casino development and other construction
projects during the six months ended June 30, 2008 and 2007,
respectively.




SEASONALITY
AND INFLATION




Our
operations are subject to seasonal fluctuations. Our Iowa operations are
typically weaker from November through February as a result of adverse
weather conditions, and are typically stronger from March through October.
Our Louisiana horse racing operations are also subject to seasonal fluctuations.
Our horse racing operations are usually stronger during live racing season which
generally runs from April through November. In general, our payroll and
general and administrative expenses are affected by inflation. Although
inflation has not had a material effect on our business to date, we could
experience more significant effects of inflation in future periods.







LIQUIDITY
      AND CAPITAL RESOURCES




Cash
      Flows from Operating, Investing and Financing
  Activities




Our cash
balance decreased $9.6 million to $32.5 million at June 30, 2008 from $42.1
million at December 31, 2007.




Cash
flows from operating activities were $20.0 million during the six months ended
June 30, 2008, a decrease of $1.9 million when compared to $21.9 million
during the six months ended June 30, 2007.




Cash
flows used in investing activities during the six months ended June 30, 2008 was
$25.5 million consisting of (i) payments of $16.7 million for construction
and other development costs associated with the DJL casino development project,
(ii) cash outflows of $3.4 million related to the hotel development project
and the development of the turf track at EVD, (iii) cash outflows of $4.1
million at DJL, EVD and DJW primarily related to the acquisition of slot
machines and slot machine conversions and general maintenance capital
expenditures and (iv) business acquisition and licensing costs of $1.3 million
primarily related to DJW’s license agreement with the State of Iowa requiring a
$1.0 million payment in May 2008.




Cash
flows used in financing activities during the six months ended June 30, 2008 of
$4.2 million reflects payments on debt of $2.9 million, member
distributions of $2.1 million and deferred financing costs of $0.2 million,
partially offset by proceeds from DJL’s term loan in the amount of $1.0
million.







30





As of
June 30, 2008, the Company had no outstanding advances under the revolver
portion of the PGL Credit Facility and outstanding letters of credit of
approximately $0.9 million. In addition, as of June 30, 2008, DJW had no
outstanding balances under the DJW Credit Facility and outstanding letters of
credit of approximately $0.7 million.  As of June 30, 2008, DJL had
approximately $1.0 million outstanding under the Term Loan.




Financing
Activities




Our
financing activities will have several important effects on our future
operations and are described in “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” in the Company’s Annual Report on
Form 10-K for the year ended December 31, 2007.





On June
30, 2008, DJL and EVD (the “Borrowers”) entered into a Fifth Amendment to Loan
and Security Agreement (the “Fifth Amendment”) with Wells Fargo Foothill, Inc.
(“Wells Fargo”), as the arranger and agent for the lenders thereunder, which
amends the PGL Credit Facility.




The Fifth
Amendment provides, among other things, that:




·
            The
      term of the PGL Credit Facility is extended to January 15,
      2012;





·
            Capital
      expenditures will be permitted, in addition to those otherwise previously
      permitted by the terms of the PGL Credit Facility, in an aggregate amount
      not to exceed (i) $25,000,000 by EVD in connection with the project to
      design, develop, construct, equip and operate the new hotel project
      adjacent to EVD’s casino and racetrack in Opelousas, Louisiana, including
      the remodeling of the existing casino exterior, casino floors and
      restaurants, (ii) $8,000,000 by EVD to develop an off-track betting parlor
      in St. Martin Parish, Louisiana, and (iii) $85,000,000 by DJL in
      connection with the project to design, develop, construct, equip and
      operate the Dubuque Casino;





·
            The
      applicable margin for advances made under the PGL Credit Facility with
      respect to base rate loans and LIBOR rate loans was increased to (i) 0.50%
      and 3.00%, respectively, where Combined EBITDA for the applicable 12-month
      period is less than $40,000,000, (ii) 0.25% and 2.50%, respectively, where
      Combined EBITDA for the applicable 12-month period is greater than or
      equal to $40,000,000 but less than $52,000,000, (iii) 0.00% and 2.25%,
      respectively, where Combined EBITDA for the applicable 12-month period is
      greater than or equal to $52,000,000, but less than $62,000,000 and (iv)
      0.00% and 2.00%, respectively, where Combined EBITDA for the applicable
      12-month period is greater than
$62,000,000.





·
            The
      prepayment premium for early termination by the Borrowers has been reduced
      to $1,300,000 for the period starting from the date of the Fifth Amendment
      to the first anniversary of such date, $650,000 for the period starting
      from the first anniversary of the date of the Fifth Amendment to the
      second anniversary, and $0 during the period of time from and including
      the date that is the second anniversary of the date of the Fifth
      Amendment;





·
            The
      resetting of restrictions related to permitted investments, restricted
      payments and indebtedness;





·
            All
      obligations shall have a minimum interest rate of 6.00% per
      annum;





·
            In
      certain instances, the Borrowers will be permitted to make payments in
      accordance with its management agreements, but in no event will the
      payments in any fiscal year exceed than the lesser of (i) 5% of Combined
      EBITDA for the immediately preceding fiscal year and (ii)
      $4,000,000;





·
            An
      increase in the required minimum Combined EBITDA of the Borrowers to
      $40,000,000 for the twelve month period ended on June 30, 2008 and on the
      last day of each fiscal quarter ended thereafter;
  and





·
            Commencing
      March 1, 2009, Borrowers must establish a reserve against available
      borrowings under the PGL Credit Facility at a rate of $575,833.33 times
      the number of months that have elapsed during the period commencing on
      February 1, 2009 and ending on February 28, 2010.  The reserve
      shall be released upon the repayment of EVD’s outstanding 13% senior notes
      due March 1, 2010.




In
connection with execution of the Fifth Amendment, the Borrowers also entered
into a fee letter by which Wells Fargo may syndicate up to $25.0 million of the
advances under the PGL Credit Facility, subject to certain terms and
conditions.





31








On May 1,
2008, PGL, DJL and EVD (collectively, the “FF&E Borrowers”) entered into a
Loan and Security Agreement (“Term Loan”) with American Trust & Savings Bank
(“Bank”).  The Term Loan allows the FF&E Borrowers to request
advances of up to $8.0 million during the period May 1, 2008 through December
31, 2008 (the “Draw Down Period”) to finance the purchase of certain furniture,
fixtures and equipment related to DJL’s new casino development. No principal
payments are due during the Draw Down Period and interest shall accrue on all
advances at a rate equal to the Wall Street Journal Prime Rate per annum and is
payable the first of each month in arrears.  Commencing on January 1,
2009 and continuing through December 1, 2013 (the “Term Period”), the FF&E
Borrowers shall pay principal in equal monthly installments, plus accrued
interest, with the first principal payment due on February 1, 2009. Interest
during the Term Period shall be calculated at a rate of 6.5% per
annum.  As of June 30, 2008, DJL had outstanding advances of
approximately $1.0 million under the Term Loan.





On August
31, 2006, DJW entered into the First Supplemental Indenture to the Indenture,
dated as of July 19, 2005, requiring among other things, DJW to offer to buy
back a portion of DJW’s 11% senior secured notes due 2012 (“DJW Notes”) on a
semi-annual basis at a premium of 7.5%, beginning March 31, 2007, with 50% of
Excess Cash Flow (as defined therein) (“Excess Cash Flow
Amount”).  DJW redeemed $1.4 million principal amount of DJW Notes,
plus applicable premium and accrued interest, in May 2008 based on the Excess
Cash Flow provision.








Development




DJL is
currently constructing a new casino facility in close proximity to its current
riverboat location within the Port of Dubuque in Dubuque, Iowa.  DJL’s
new casino facility will include approximately 924 slot machines, 17 table games
and a five-table poker room.  Additional amenities will include a
bowling center, various restaurants and an entertainment center.  The
new casino project is estimated to cost approximately $84.0 million and is
expected to open in December 2008.





In
addition, EVD is currently developing a 75,000 square foot, 100 room hotel
contiguous to its current casino along with various other property improvements
including the remodel of the existing casino exterior, casino floor and
restaurants, at a total estimated cost of approximately $21.2
million.  Additional amenities for the hotel include a fitness center,
meeting space, a full in-house support laundry and a guest business center.
Adjoining the existing racino structure, the new hotel, which is expected to
open in the summer of 2009, will provide easy access to the casino and all of
EVD’s existing amenities.





General




In
addition to our cash on hand, we currently have the following sources of funds
for our business: (i) cash flows from operations, (ii) available borrowings
under the PGL Credit Facility, (iii) available borrowings under the DJW
Credit Facility and (iv) available borrowings under the Term Loan. The available
borrowing amount at June 30, 2008, after reductions for letters of credit
outstanding under the PGL Credit Facility and the DJW Credit Facility was $64.1
million and $4.3 million, respectively. The available borrowing amount at June
30, 2008 under the Term Loan was $7.0 million.  Contractual
restrictions and other provisions contained in the agreements governing our
consolidated indebtedness, including our senior credit facilities and the
indentures governing the Peninsula Gaming Notes and the DJW Notes, limit or
restrict our ability to use the funds available to us at each of our gaming
properties.





For DJL
and EVD, we expect our capital expenditures for the next twelve months,
excluding any amounts related to the casino development at DJL and the hotel
development at EVD, to be approximately $5.0 million. Capital expenditures for
the next twelve months related to the casino development at DJL are estimated to
be approximately $57.6 million. Capital expenditures and other development costs
for the next twelve months at EVD related to the hotel development and property
remodel and improvements are expected to be approximately $17.1 million. DJL and
EVD’s debt maturities for the next twelve months are estimated to be
approximately $0.7 million. DJL and EVD’s member distributions to PGP for the
next





32


twelve
months are currently estimated to be approximately $2.0 million.  The
Company plans to finance these expected cash requirements with: (i) a portion of
the available cash on hand at the DJL and EVD of $17.0 million at June 30, 2008,
excluding amounts needed for normal operations, (ii) cash generated from
operations, (iii) available borrowings under the PGL Credit Facility, (iv)
available borrowings under the Term Loan and (v) available slot vendor
financing. There can be no assurances that the projects described above will be
completed in the estimated time frames or at the estimated
costs.




For DJW,
we expect our capital expenditures for the next twelve months to be
approximately $3.6 million, including the $1.0 million payment due in May 2009
related to DJW’s gaming license. DJW’s debt maturities for the next twelve
months are estimated to be approximately $1.6 million. DJW’s member
distributions to PGP for the next twelve months are currently estimated to be
approximately $0.9 million.  The Company plans to finance these
expected cash requirements with: (i) a portion of the available cash on hand at
DJW of $15.5 million at June 30, 2008, excluding amounts needed for normal
operations, and (ii) cash generated from operations.





Based on
our cash on hand, expected cash flows from operations and our available sources
of financing, we believe we will have adequate liquidity to satisfy our current
operating needs at each of our gaming properties and to service our outstanding
indebtedness, including any Excess Cash Flow obligations under the DJW Notes,
for the next twelve months.





Our level
of indebtedness will have several important effects on our future operations
including, but not limited to, the following: (i) a significant portion of
our cash flow from operations will be required to pay interest on our
indebtedness and the indebtedness of our subsidiaries; (ii) the financial
covenants contained in the agreements governing such indebtedness will require
us and/or our subsidiaries to meet certain financial tests and may limit our
respective abilities to borrow additional funds or to transfer or dispose of
assets; (iii) our ability to obtain additional financing in the future for
working capital, capital expenditures, acquisitions or general corporate
purposes may be impaired; and (iv) our ability to adapt to changes in the
gaming or horse racing industries which affect the markets in which we operate
could be limited.





CONTRACTUAL
OBLIGATIONS




A table
of our contractual obligations as of December 31, 2007 was included in
Item 7, “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” of our Annual Report on Form 10-K for the fiscal year
ended December 31, 2007. There have been no significant changes to our
contractual obligations during the six months ended June 30, 2008.





OFF-BALANCE
SHEET TRANSACTIONS




Other
than as described in Item 7, “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” of our Annual Report on Form 10-K
for the fiscal year ended December 31, 2007, we do not maintain any
off-balance sheet transactions, arrangements, obligations or other relationships
with unconsolidated entities or others that are reasonably likely to have a
material current or future effect on our financial condition, cash flows,
revenues or expenses, results of operations, liquidity, capital expenditures or
capital resources.







CRITICAL
      ACCOUNTING POLICIES




The
preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods. We periodically evaluate our policies and the
estimates and assumptions related to these policies.





Understanding
our critical accounting policies and related risks is important in evaluating
our financial condition and results of operations. The critical accounting
policies used in preparation of the Company’s financial statements involve a
significant use of management judgment on matters that are inherently uncertain
and are described in “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” in the Company’s Annual Report on
Form 10-K for the year ended December 31, 2007. If actual results
differ significantly from management’s estimates, there could be a material
effect on our financial condition, results of operations and cash flows.
Management regularly discusses the identification and development of these
critical accounting policies with the Audit Committee of the Board of Managers.
There have been no significant changes to our critical accounting policies
during the six months ended June 30, 2008.





33





ITEM 3.  QUANTITATIVE AND
QUALITATIVE DISCLOUSRES ABOUT MARKET RISK




We are
exposed to certain market risks which are inherent in our financial instruments
which arise from transactions entered into in the normal course of business.
Market risk is the risk of loss from adverse changes in market prices and
interest rates. We do not currently utilize derivative financial instruments to
hedge market risk. We also do not hold or issue derivative financial instruments
for trading purposes.




We are
exposed to interest rate risk due to changes in interest rates with respect to
our long-term variable interest rate debt borrowing under the PGL Credit
Facility, the DJW Credit Facility and the Term Loan. As of June 30, 2008, the
Company had no outstanding borrowings under the PGL Credit Facility and DJW
Credit Facility and had approximately $1.0 million in outstanding borrowings
under the Term Loan. We have estimated our market risk exposure using
sensitivity analysis. We have defined our market risk exposure as the potential
loss in future earnings and cash flows with respect to interest rate exposure of
our market risk sensitive instruments assuming a hypothetical increase in market
rates of interest of 100 basis points. Assuming we borrow the maximum amount
allowed under the PGL Credit Facility, DJW Credit Facility and the Term Loan
(currently an aggregate amount of $78.0 million) and if market rates of interest
on our variable rate debt increase by 100 basis points, the estimated additional
annual interest expense would be approximately $0.8 million.




We are
also exposed to fair value risk due to changes in interest rates with respect to
our long-term fixed interest rate available for sale investment and debt
borrowings. Our fixed rate available for sale investment is recorded at fair
value, and therefore, is directly impacted by changes in interest rates and
market risks. Our fixed rate debt instruments are not generally affected by a
change in the market rates of interest, and therefore, such changes generally do
not have an impact on future earnings. However, future earnings and cash flows
may be impacted by changes in interest rates related to indebtedness incurred to
fund repayments as such fixed rate debt matures. The following table contains
information relating to our fixed and variable rate debt borrowings as of June
30, 2008 (dollars in millions):





Description
            
            Maturity
            
            
            Interest
              Rate
            
            
            Carrying
              Value
            
            
            Fair
              ValueAvailable
      for sale investment
            
            
            2011
      – 2037
            
            
            
            71⁄2
            %
            
            $
            11.7
            
            
            $
            11.7
            (1)8
      3⁄4% senior secured notes
            
            April 15,
      2012
            
            
            
            83⁄4
            %
            
            
            253.0
            
            
            
            228.7
            (2)13%
      senior notes with contingent interest of EVD
            
            March 1,
      2010
            
            
            
            13
            %
            
            
            6.9
            
            
            
            6.9
            (2)11%
      senior secured notes
            
            April
      15, 2012
            
            
            
            11
            %
            
            
            115.1
            
            
            
            115.7
            (2)Term
      loan
            
            December
      1, 2013
            
            
            
            5
            %
            
            
            1.0
            
            
            
            1.0
            (2)Notes
      payable, capital lease obligations and other financial
      instruments
            
            
            2008
      - 2017
            
            
            
            7
      1⁄4% - 83⁄4
            %
            
            
            4.1
            
            
            
            4.2
            (2)Derivative
      liability
            
            April
      15, 2012
            
            
            
            N/A
            
            
            
            1.1
            
            
            
            1.1
            (2)Obligation
      under Minimum Assessment Agreement
            
            
            2011
      - 2037
            
            
            
            N/A
            
            
            
            3.9
            
            
            
            3.9
            (2)




(1)           Our
available for sale investment is not traded.  Fair value is based on
considerable judgment using a combination of current market rates and estimates
of market conditions for similar instruments and estimates from two independent
sources of what market participants would use in pricing the
bond.  Due to the illiquid nature of the investment, changes in market
risks could have a significant impact on the fair value.





(2)           Represents
fair value as of June 30, 2008 based on current market interest rates and
estimates of market conditions for instruments with similar terms, maturities,
and degrees of risk.







ITEM 4.  CONTROLS AND PROCEDURES




Disclosure Controls and
Procedures. We maintain disclosure controls and procedures (as defined
in Rule 13a-l 5(e) under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)) that are designed to ensure that information required to be
disclosed in our reports filed or submitted under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the
SEC’s rules and forms, including controls and procedures designed to ensure that
such information is accumulated and communicated to our management, including
our Chief Executive Officer and Chief Financial Officer, as appropriate, to
allow timely decisions regarding required disclosure. Management necessarily
applied its judgment in assessing the costs and benefits of such controls and
procedures, which, by their nature, can provide only reasonable assurance
regarding management’s disclosure control objectives. Under the supervision and
with the participation of our management, we evaluated the effectiveness of our
disclosure controls and procedures as of June 30, 2008. Based on that
evaluation, our Chief Executive Officer and our Chief Financial Officer concluded
that our disclosure controls and procedures were effective as of June 30,
2008.





34







Changes in Internal Control Over
Financial Reporting.  There were no significant changes in our
internal control over financial reporting (as defined in Exchange Act Rule
13a-15(f)) that occurred during our second quarter that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.





PART II.  OTHER
INFORMATION






ITEM 1. LEGAL PROCEEDINGS






In
October 2003, EVD filed a Petition for Declaratory Judgment in St. Landry
Parish, Louisiana, naming as opposing parties the Secretary of the Department of
Revenue and Taxation for the State of Louisiana (the “Department”), the St.
Landry Parish School Board and the City of Opelousas. EVD sought a judgment
declaring that sales taxes were not due to the defendants on purchases made by
EVD and its contractors in connection with the construction and furnishing of
the Evangeline Downs Racetrack and Casino, which was constructed in St. Landry
Parish in 2003-2004. EVD’s action was based on Louisiana statutory law which
provides that racetracks are not required to pay taxes and fees other than those
provided in the racing statutes, and that taxes and fees provided in the racing
statutes are in lieu of, among other things, all state and local sales taxes.
The St. Landry Parish School Board and the City of Opelousas questioned the
application of the racing statutes to the construction and furnishing of the
casino portion of the facility, thereby leading to the filing of this action.
Subsequently, the Department adopted a similar position as the St. Landry Parish
School Board and the City of Opelousas.





On
February 20, 2008, EVD and the Department entered into a Settlement Agreement
(the “Settlement Agreement”) which settled tax disputes between EVD and the
Department arising out of audits conducted by the Department of the taxable
years ended December 31, 2002, 2003 and 2004.  The Department and EVD
also reached an agreement regarding the payment of additional sales tax by EVD
for tax years beginning on or after January 2005 for which EVD paid $0.3 million
to the Department for the tax years 2005 - 2007.  The sales and use
tax dispute with St. Landry Parish and the City of Opelousas remains open. EVD
has accrued management’s best estimate of all sales and use taxes that may be
due to St. Landry Parish or the City of Opelousas as of June 30,
2008.




In
October 2005, EVD filed a request to arbitrate certain claims against the
general contractor of its racino relating to improper construction of the horse
racetrack at the racino. In March 2008, EVD and the general contractor agreed in
principal to a settlement agreement whereby EVD agreed to pay the general
contractor approximately $0.8 million to settle all claims related to the
arbitration.  The formal agreement was executed in the second quarter of
2008.  Accordingly, in the second quarter of 2008 EVD recorded an $0.8
million reduction in the $1.6 million liability for unpaid billings from the
contractor previously recorded on the Company’s consolidated balance sheet with
a corresponding reduction in property and equipment.





Other
than as described above, neither the Company nor its subsidiaries are parties to
any pending legal proceedings other than litigation arising in the normal course
of business. Management does not believe that adverse determinations in any or
all such other litigation would have a material adverse effect on the Company’s
financial condition, results of operations or cash flows.




ITEM 1A. RISK FACTORS






None.




ITEM 2. UNREGISTERED SALES OF
EQUITY SECURITIES AND USEOF PROCEEDS






None.




ITEM 3. DEFAULTS UPON SENIOR SECURITIES






None.




ITEM 4. SUBMISSION OF MATTERS FOR
A VOTE OF SECURITY HOLDERS






None.







35




ITEM 5. OTHER INFORMATION




None.




ITEM 6. EXHIBITS






(a)
            Exhibits




Exhibit
              Number
            
            Description4.1
            
            Loan
      and Security Agreement dated May 1, 2008 by and between Diamond Jo, LLC,
      The Old Evangeline Downs, L.L.C. and American Trust and Savings
      Bank.4.2
            
            Fifth
      Amendment to Loan and Security Agreement, dated June 30, 2008 by and
      between Diamond Jo, LLC, The Old Evangeline Downs, L.L.C. and Wells Fargo
      Foothill, Inc. - incorporated by reference to Exhibit 10.1 of Peninsula
      Gaming, LLC’s Current Report on Form 8-K filed July 7,
    2008.10.1
            
            First
      Change Order dated April 19, 2008, between Diamond Jo, LLC and Conlon
      Construction Company10.2
            
            Second
      Change Order dated June 12, 2008, between Diamond Jo, LLC and Conlon
      Construction Company31.1
            
            Certification
      of M. Brent Stevens, Chief Executive Officer, pursuant to Section 302
      of the Sarbanes-Oxley Act of 2002 and Rule 15d-l4 of the Securities
      Exchange Act, as amended.31.2
            
            Certification
      of Natalie A. Schramm, Chief Financial Officer, pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 15d-14 of
      the Securities Exchange Act, as
amended.





36





SIGNATURES




Pursuant
to the requirements of the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dubuque, State of Iowa on August 14,
2008.




PENINSULA
      GAMING, LLCBy:
            /s/
      M. BRENT STEVENSM.
      Brent StevensChief
      Executive OfficerBy:
            /s/
      JONATHAN SWAINJonathan
      SwainChief
      Operating OfficerBy:
            /s/
      NATALIE A. SCHRAMMNatalie
      A. SchrammChief
      Financial OfficerPENINSULA
      GAMING CORP.By:
            /s/
      M. BRENT STEVENSM.
      Brent StevensChief
      Executive OfficerBy:
            /s/
      NATALIE A. SCHRAMMNatalie
      A. SchrammChief
      Financial OfficerDIAMOND
      JO, LLCBy:
            /s/
      M. BRENT STEVENSM.
      Brent StevensChief
      Executive OfficerBy:
            /s/
      JONATHAN SWAINJonathan
      SwainChief
      Operating OfficerBy:
            /s/
      NATALIE A. SCHRAMMNatalie
      A. SchrammChief
      Financial OfficerTHE
      OLD EVANGELINE DOWNS, L.L.C.By:
            /s/
      M. BRENT STEVENSM.
      Brent StevensChief
      Executive OfficerBy:
            /s/
      JONATHAN SWAINJonathan
      SwainChief
      Operating OfficerBy:
            /s/
      NATALIE A. SCHRAMMNatalie
      A. SchrammChief
      Financial Officer










37