UNITED
          STATES
 SECURITIES
          AND EXCHANGE COMMISSION
 Washington,
          D.C. 20549
 FORM
          10-K
 
 ANNUAL
          REPORT PURSUANT TO SECTION 13 OR 15(d)
 OF
          THE
          SECURITIES EXCHANGE ACT OF 1934
 
 For
          the
          fiscal year ended December 31, 2006
 
 Commission
          file number: 333-06489
 
 Indiana
                THE
                    MAJESTIC STAR CASINO, LLC
                43-1664986Indiana
                THE
                    MAJESTIC STAR CASINO CAPITAL CORP.
                35-2100872Indiana
                MAJESTIC
                    STAR CASINO CAPITAL CORP. II
                20-3879309(State
                    or other jurisdiction of incorporation or organization)
                (Exact
                    name of registrant
                  As
                    specified in its charter)
                (I.R.S.
                    Employer Identification No.)
  301
          Fremont Street
 Las
          Vegas, NV 89101
 (702)
          388-2224
 (Registrant’s
          address and telephone number, including area code)
 
 Securities
          registered pursuant to section 12(b) of the act: None
 Securities
          registered pursuant to section 12(g) of the act: None
 
 Indicate
          by check mark if the registrant is a well-known seasoned issuer, as defined
          in
          Rule 405 of the Securities Act.
 Yes
                    [   ]
                No
                    [X ]
 
 Indicate
          by check mark if the registrant is not required to file reports pursuant
          to
          Section 13 or Section 15(d) of the Act.
 Yes
                    [   ]
                No
                    [X ]
 
 Indicate
          by check mark whether the registrant (1) has filed all reports required
          to be
          filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
          the
          preceding 12 months (or for such shorter period that the registrant was
          required
          to file such reports), and (2) has been subject to filing requirements
          for the
          past 90 days.
 Yes
                    [X]
                No
                    [   ]
 
 Indicate
          by check mark if disclosure of delinquent filers pursuant to Item 405 of
          Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
          be contained, to the best of registrant’s knowledge, in definitive proxy or
          information statements incorporated by reference in Part III of this Form
          10-K
          or any amendment to this Form 10-K.  [X]
 
 Indicate
          by check mark whether the registrant is a large accelerated filer, an
          accelerated filer, or a non-accelerated filer. See definition of “accelerated
          filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check
          one):
 Large
                    accelerated filer [   ]
                Accelerated
                    Filer [   ]
                Non-accelerated
                    filer [X]
 
 Indicate
          by a check mark whether the registrant is a shell company (as defined in
          rule
          12-b2 of the Act.)
 Yes
                    [   ]
                No
                    [X]
 
 The
          aggregate market value of the voting and non-voting stock held by non-affiliates
          of the registrant: Not Applicable. The Company has no publicly traded equity
          securities.
 
 The
          number of shares of common stock issued and outstanding: Not Applicable.
 
 DOCUMENTS
          INCORPORATED BY REFERENCE: NONE
 
 
 THE
        MAJESTIC STAR CASINO, LLC AND
        SUBSIDIARIES
 (A
        Wholly
        Owned Subsidiary of Majestic Holdco, LLC)
 2006
        ANNUAL REPORT ON FORM 10-K
 
 TABLE
        OF
        CONTENTS
 
 
 PART
                  IItem
                  1.
              Business
              1Item
                  1A.
              Risk
                  Factors
              14Item
                  1B.
              Unresolved
                  Staff Comments
              20Item
                  2.
              Properties
              20Item
                  3.
              Legal
                  Proceedings
              20Item
                  4.
              Submission
                  of Matters to a Vote of Security
                  Holders
              24PART
                  IIItem
                  5.
              Market
                  for Registrant’s Common Equity, Related Stockholder
                  Matters and Issuer Purchases of Equity Securities
              25Item
                  6.
              Selected
                  Financial Data
              25Item
                  7.
              Management’s
                  Discussion and Analysis of Financial Condition
                  and Results of Operations
              27Item
                  7A.
              Quantitative
                  and Qualitative Disclosures About Market
                  Risk
              43Item
                  8.
              Financial
                  Statements and Supplementary
                  Data
              44Item
                  9.
              Changes
                  in and Disagreements with Accountants on Accounting
                  and Financial Disclosure
              44Item
                  9A.
              Controls
                  and Procedures
              44Item
                  9B.
              Other
                  Information
              44PART
                  IIIItem
                  10.
              Directors,
                  Executive Officers and Corporate
                  Governance
              45Item
                  11.
              Executive
                  Compensation
              47Item
                  12.
              Security
                  Ownership of Certain Beneficial Owners and
                  Management and Related Stockholder Matters
              52Item
                  13.
              Certain
                  Relationships and Related Transactions, and
                  Director Independence
              53Item
                  14.
              Principal
                  Accounting Fees and Services
              54PART
                  IVItem
                  15.
              Exhibits,
                  Financial Statement Schedules
              56Signatures
              S-1
 
 
  i
 
 Table
            of Contents
   **PART
        I**
 
 **ITEM
        1. BUSINESS**
 
 **GENERAL**
 
 The
        Majestic Star Casino, LLC was formed in December 1993 as an Indiana limited
        liability company. The Majestic Star Casino, LLC conducts its operations
        both
        directly and through its subsidiaries. In this report, unless indicated
        otherwise, “Majestic,” the “Company,” “we,” “us,” and “our” refer to The
        Majestic Star Casino, LLC, The Majestic Star Casino Capital Corp., Majestic
        Star
        Casino Capital Corp. II, and our subsidiaries which guarantee our principal
        debt obligations. The Majestic Star Casino Capital Corp. was formed in May
        1999
        as an Indiana corporation solely to facilitate the offering of certain senior
        secured notes of The Majestic Star Casino, LLC, and has no assets or operations.
        Majestic Star Casino Capital Corp. II was formed in November 2005 as an
        Indiana corporation solely to facilitate the offering of certain senior notes
        of
        The Majestic Star Casino, LLC, and has no assets or operations.
 
 We
        own
        and operate four casino properties, two located in Gary, Indiana, (“Majestic
        Star” and “Majestic Star II”, collectively, the “Majestic Properties”), and
        one each in Tunica County, Mississippi (“Barden Mississippi” or “Fitzgeralds
        Tunica”), and Black Hawk, Colorado (“Barden Colorado” or “Fitzgeralds Black
        Hawk”). As of December 31, 2006, our properties collectively contain
        approximately 4,500 slot machines, 100 table games, 21 poker tables and 806
        hotel rooms. Our properties are well established, each having been in operation
        for at least ten years, and are well situated within significant drive-in
        gaming
        markets. Within each market, we leverage our brand names, experienced
        management, value-oriented amenities and emphasis on slot play to target
        mid-level gaming customers. Our properties are also strengthening our table
        game
        presence in each market by targeting mid-level players.
 
 We
        are
        wholly owned by Majestic Holdco, LLC (“Majestic Holdco”), which is indirectly
        wholly owned and controlled by Don H. Barden, our Chairman, President, Chief
        Executive Officer and the sole shareholder of Barden Development, Inc. (“BDI”),
        the parent to Majestic Holdco.
 
 As
        of
        December 21, 2005, the Company also owned 100% of Buffington Harbor
        Riverboats, L.L.C., (“BHR”) that had previously been a 50% joint venture with
        Trump Indiana, Inc. (“Trump Indiana”). See Note 3 - Trump Indiana Acquisition in
        the Notes to the Consolidated Financial Statements. As part of the Trump
        Indiana
        acquisition, the Company acquired 50% of Buffington Harbor Parking Association
        (“BHPA”) and through an affiliate of the Company, the other 50% interest in BHPA
        was contributed to the Company. In August 2006, BHPA was merged into Majestic
        Star. As of December 31, 2006, BHR was also dissolved.
 
 Our
        executive offices are located at 301 Fremont Street, 12th Floor, Las Vegas,
        Nevada 89101, and our telephone number is (702) 388-2224. Our World Wide
        Web
        site can be accessed through either http://www.majesticstar.com or
        http://www.fitzgeralds.com. The information in our web site is not part of
        this
        report.
 
  1
 Table
            of Contents
  **GAMING
        FACILITIES**
 
 The
        following provides certain information regarding our gaming facilities as
        of
        December 31, 2006:
 
 **Majestic
                  Properties****Majestic
                  Star**
              **Majestic
                  Star II**
              **Buffington
                  Harbor**
                ******Complex**
              **Fitzgeralds**
                **Tunica**
              **Fitzgeralds**
                **Black
                  Hawk**Date
                  Opened
              June
                  1996
              June
                  1996
              June
                  1996
              June
                  1994
              May
                  1995Gaming
                  Square Feet
              40,800
              43,000
              n/a
              38,088
              10,253Slot
                  Machines
              1,290
              1,346
              n/a
              1,287
              594Table
                  Games
              42
              16
              n/a
              36
              6Poker
                  Tables
              —
              21
              n/a
              —
              —Hotel
                  Rooms (1)
              —
              292
                  standard
              n/a
              434
                  standard
              —8
                  suites
              
              72
                  suitesAmenities
              3
                  bars
                VIP
                  lounge
              Steak
                  house
                Deli
                Coffee
                  shop
                Bar
              Buffet
                Food
                  court
                Restaurant
                Gift
                  shop
                Ballroom
                Lounge
              Steak
                  house
                Coffee
                  shop
                Buffet
                2
                  bars
                Ballroom
                Gift
                  shop
              Restaurant
                BarParking
              
              
              2,000
                  covered (includes 300 valet)
                2,600
                  surface
              411
                  covered
                1,264
                  surface
                120
                  valet
              392
                  covered
                Valet
 (1)
              Of
                  the 300 rooms at Majestic Star II, 28 are currently being used as
                  offices.
 
 ·
              Majestic
                  Star is a riverboat casino located at Buffington Harbor in Gary,
                  Indiana,
                  approximately 23 miles southeast of downtown Chicago. The riverboat
                  casino
                  is a four-story, 360-foot long vessel with a contemporary design
                  that
                  accommodates approximately 3,000 passengers plus crew. The casino
                  includes
                  approximately 40,800 square feet of gaming space across three expansive
                  decks. The casino vessel provides live entertainment, a sports
                  bar, a VIP
                  lounge, and a private high-limit table games area. Majestic Star
                  is
                  located adjacent to the Buffington Harbor complex (described
                  below).
 
 ·
              Majestic
                  Star II operates directly adjacent to Majestic Star. The riverboat
                  casino is a four-story, 280-foot long vessel, which accommodates
                  approximately 2,740 passengers plus crew. The casino vessel includes
                  approximately 43,000 square feet of gaming space that provides
                  live
                  entertainment, a high limit gaming area, and a poker room, which
                  is the
                  largest in the Chicagoland market. Majestic Star II owns and operates
                  a 300-room hotel with various restaurants located adjacent to the
                  Buffington Harbor complex.
 
 ·
              The
                  Buffington Harbor complex is a two-level, 85,410 square foot structure
                  containing a buffet, steak house, lounge, coffee outlet and food
                  court.
                  The Buffington Harbor complex also contains a gift shop, banquet
                  and
                  entertainment facilities, two VIP lounges, a 2,000-space covered
                  parking
                  structure and 2,600 surface parking spaces. The complex offers
                  valet
                  parking and convenient bus loading and unloading
                  facilities.
 
 ·
              Fitzgeralds
                  Tunica is located in north Tunica County, Mississippi, approximately
                  30
                  miles from downtown Memphis, Tennessee. Fitzgeralds Tunica includes
                  38,088
                  square feet of gaming space, a 506-room hotel (including 72 suites),
                  an
                  indoor special events center, an indoor swimming pool, two bars,
                  three
                  restaurants and a gift shop.
 
 ·
              Fitzgeralds
                  Black Hawk is located adjacent to the entrance to the downtown
                  gaming area
                  of Black Hawk, Colorado. Fitzgeralds Black Hawk is approximately
                  30 miles
                  from Denver. The 10,253 square foot casino also offers a restaurant
                  and a
                  bar. Fitzgeralds Black Hawk also has a 392-space, all valet parking
                  garage
                  adjacent to the casino.
  2
 Table
            of Contents
  
 **OPERATING
        STRATEGY**
 
 Our
        operating strategy is to attract mid-level gaming customers by providing
        outstanding customer service and a quality gaming and entertainment experience
        at an affordable price. We believe these middle market guests constitute
        the
        largest segment of potential gaming customers whom we can then identify,
        qualify
        and target for direct marketing activities. We intend to accomplish this
        by
        continuing to pursue the following principal elements of our
        strategy:
 
 *Good
        Locations in Strong Drive-in Markets.* Our
        properties are located in significant drive-in gaming markets, which allows
        our
        casino patrons to reach us in short travel times and to make repeated trips
        to
        our gaming facilities.
 
 ·
              *Majestic
                  Star/Majestic Star II.*Majestic Star and Majestic Star II are located 23 miles from downtown
                  Chicago and they primarily draw customers from Northwest Indiana
                  and the
                  Chicagoland area. The Chicagoland market is the third largest gaming
                  market in the United States, with only Las Vegas and Atlantic City
                  being
                  larger. Majestic Star and Majestic Star II also attract drive-in
                  customers
                  from other areas in Illinois, Indiana and Michigan.
 
 ·
              *Fitzgeralds
                  Tunica.*Fitzgeralds Tunica is located 30 miles from downtown Memphis, Tennessee
                  and primarily draws its gaming patrons from the Memphis area and
                  also
                  attracts drive-in customers from northern Mississippi, Little Rock,
                  Arkansas, southern Missouri, and Birmingham and Huntsville, Alabama,
                  as
                  well as regional travelers flying into Memphis.
 
 ·
              *Fitzgeralds
                  Black Hawk.*Fitzgeralds Black Hawk is located in the Black Hawk/Central City,
                  Colorado
                  market, which includes the City of Black Hawk and Central City,
                  approximately 30 miles from Denver and attracts drive-in or “day trip”
                  customers from the population centers of Denver, Boulder, Colorado
                  Springs
                  and Fort Collins, Colorado, as well as Cheyenne, Wyoming.
 
 *Gaming
        Brands.* We
        believe our gaming brands help attract and retain customers.
 
 ·
              *Majestic
                  Star.*We
                  utilize an integrated marketing campaign to brand Majestic Star
                  in the
                  Chicagoland market for slot and table games customers from the
                  mid-level
                  segment. Our messages about Majestic Star have appeared in various
                  media,
                  including television, radio, print and outdoor media, which we
                  believe has
                  improved our market awareness among Chicagoland area gaming facilities.
                  We
                  intend to utilize these and other similar brand marketing techniques
                  to
                  continue attracting mid-level customers, whom we then may identify,
                  qualify and target for direct marketing activities. The Majestic
                  Star
                  branding has also been applied to the Majestic Star II property
                  upon its
                  acquisition on December 21,
                  2005.
 
 ·
              *Fitzgeralds.*The Fitzgeralds® brand has developed into a regionally recognized gaming
                  brand for casino and hotel services, using a consistent Irish theme
                  throughout the casinos, hotels, restaurants and bars at our Fitzgeralds
                  properties. We believe the Fitzgeralds® brand has come to represent an
                  exciting atmosphere coupled with warm, friendly employees. The
                  Fitzgeralds® brand has also promoted itself as the “Fitz®”. The Fitz gives
                  the Fitzgeralds brand a fun, trendy, more youthful feel to help
                  broaden
                  their market base and target a younger gamer in addition to our
                  core
                  market.
 
 *Strong
        Ownership and Experienced Management.* We are
        indirectly wholly owned and controlled by Don H. Barden, our Chairman, President
        and Chief Executive Officer.  Over the last 40 years, Mr. Barden has also
        successfully built, owned, and operated numerous businesses in various
        industries, including cable television, international trade, radio broadcasting
        and real estate development. Our property management teams and corporate
        staff
        collectively have extensive experience in the gaming industry, with in-depth
        knowledge and experience regarding the markets in which they conduct
        business.
  3
 Table
            of Contents
  
 *Emphasize
        Slot Play* .
        We
        emphasize slot machine wagering, which we believe is the fastest growing,
        most
        stable and most profitable segment of the casino entertainment business.
        The
        increasing popularity of slot machines is due, in part, to the continuing
        rapid
        technological innovation that is resulting in the replacement of older devices
        with advanced interactive electronic games and ticket-in ticket-out technology
        (“TITO”). TITO allows us to operate our casino floors more efficiently which
        provides a greater level of guest service. TITO allows our customers to play
        their favorite slot machines longer with fewer interruptions and eliminates
        the
        problems and expense associated with handling coins and tokens. As part of
        integrating the operations of Majestic Star and Majestic Star II, our
        Majestic Properties became 100% TITO during the first quarter of 2006. As
        of
        December 31, 2006, Fitzgeralds Tunica and Fitzgeralds Black Hawk are 88%
        (management’s desired level given the popularity of certain coin-operated slot
        machines) and 100% TITO, respectively. As new technologies continue to be
        introduced in the market, we continue to evaluate and pursue those technologies
        that have the greatest return. We have introduced “Promo Cash” at our
        Fitzgeralds Tunica and Majestic Properties, which give our customers the
        opportunity to download their promotional cash right at the slot
        machines. We continue to enhance and modify our mix of slot machines to meet
        the
        demand of our customers. As a result of our continued focus on slot play,
        slot
        revenues generated approximately 86.5% of our gaming revenues for the year
        ended
        December 31, 2006.
 
 *Focus
        on Quality and Service at an Affordable Price.* Our
        casinos provide a high-quality casino entertainment experience at an affordable
        price to attract middle market guests. Our approach to business at our
        properties focuses on guest service and includes:
 
 ·  friendly
        employees;
 
 ·  trained
        hosts to personally assist guests;
 
 ·  quality
        food and beverages;
 
 ·  live
        casino entertainment with nationally known acts, boxing and other special
        events;
 
 ·  lodging
        (at Fitzgeralds Tunica and the Majestic Properties) at a moderate
        price;
 
 ·  a
        mix of
        gaming machines and new technologies tailored to our customers; and
 
 ·  personal
        attention through direct mail offers, targeted incentives and offerings,
        and the
        use of the Majestic Star and Fitzgeralds reward program as part of our player
        loyalty program.
 
 We
        believe that such an approach to business creates a comfortable, familiar
        and
        friendly environment that promotes customer loyalty and satisfaction, enhances
        playing time, leads to a high rate of repeat business and further supports
        our
        reputation for quality and service at an affordable price.
 
 
 **MARKETING
        AND GROWTH STRATEGIES**
 
 We
        believe that our future growth is going to be based upon our ability to
        successfully grow and market to our database of casino customers, provide
        our
        customers with a superior level of service and value-oriented gaming, generate
        greater levels of hotel occupancy (Fitzgeralds Tunica and the Majestic
        Properties) from qualified, rated customers, and leverage our food, beverage
        and
        entertainment options to satisfy our existing customers and prompt visits
        from
        customers who have not previously patronized our facilities. We will continue
        other forms of broad-based marketing to attract customers to our facilities.
        These other forms include television, radio, newspaper and outdoor media.
        Our
        advertising messages are branding and product oriented. We also emphasize
        entertainment, special events, and internal promotions to attract and retain
        gaming customers to increase our revenues. Our direct mail database programs
        and
        our player development initiatives are our strongest marketing tools to increase
        and retain market share in all of our highly competitive
        markets.
  4
 Table
            of Contents
  
 
 All
        of
        our properties are located in regional markets. Our customers generally live
        within close proximity to our casinos, and are more likely to make frequent
        trips to our facilities. Since we operate regionally, database marketing
        is a
        key element to encouraging casino customers to make frequent visits to our
        properties. But equally as critical is attracting new customers to our casinos
        so that we can grow our database. We do this through a combination of
        promotions, specials events, and product and entertainment marketing, direct
        mail reactivation, direct mail prospecting, and player development recruitment
        strategies. Through our investment in player tracking technology systems,
        the
        use of the Majestic Star and Fitzgeralds player reward cards allows us to
        track
        individual or combined play at slot machines, table games, as well as food
        and
        beverage and hotel expenditures (available at Fitzgeralds Tunica and the
        Majestic Properties). The systems allow us to identify players and their
        gaming
        preferences and practices and to develop a comprehensive customer database
        for
        marketing and guest services purposes. Our player tracking programs allow
        us to
        target our marketing programs to categories of players, including advertising
        programs, promotions, tournaments with substantial cash prizes, special group
        and tour packages, direct mail, and other events and incentives designed
        to
        promote customer loyalty and increase repeat business. Our tracking system
        also
        allows us to better tailor our pricing, promotions, gaming machine selection
        and
        other guest services to customer preferences. The newest player tracking
        customer experience allows the customer to download the equivalent of their
        cash
        coupons at the slot machine by entering their four-digit PIN. The customer
        no
        longer has to wait in line at the rewards booth to redeem their cash
        coupon.
 
 A
        key
        element to enhancing our casino revenues and profitability is our continued
        investment in the newest slot machines and slot technology. Each year we
        purchase the newest slot machines available to continue to provide our casino
        guests with the most entertaining gaming experience possible. We have found
        that
        providing a broad array of slot machines, differentiated by denomination
        and
        game type, is the most successful strategy in maximizing revenue from our
        slot
        machines. We also continue to invest heavily in technology that will allow
        us to
        operate our casino floors more efficiently, provide greater levels of guest
        service and offer promotional programs that are directly linked with slot
        machine play. Our customers will find this advantageous since they will no
        longer have to stand in lines to receive their promotion or cash out their
        winnings.
 
 With
        the
        ownership of both Majestic Star and Majestic Star II, we are now able to
        provide a consistent message with our marketing efforts in the Gary/Chicago
        area
        emphasizing gaming, food and beverage and entertainment options. The marketing
        and player development dollars spent to drive incremental revenue are no
        longer
        shared with another casino company. When a patron comes to our location,
        we now
        receive 100% of the revenue where in the past, the potential existed for
        the
        patron to visit the Trump Indiana facility. With ownership of both facilities,
        we made capital improvements to the Porte Cochere and parking, added signage
        and
        are currently upgrading the various food operations in the Buffington Harbor
        Complex.
 
 We
        own
        approximately 320 acres at the Buffington Harbor complex which are available
        for
        development. Improvements could include a new hotel, convention center,
        condominiums, and other amenities to support our casino operations. If so
        developed, these improvements would be phased in over time and may be funded
        with a combination of public and private investment.
 
 At
        our
        Fitzgeralds Black Hawk property, we own two adjacent partially demolished
        buildings that provide expansion opportunities. One of the properties, the
        Rohling Inn, is being rebuilt and will be used for administration and player
        events. We believe having separate facilities to host events will allow us
        to
        improve the loyalty of our customers.. The second building, the Masonic
        Building, is being rebuilt, and when completed, will have four stories with
        a
        gaming mezzanine, which should allow us to add up to 400 slot machines and
        a
        foot outlet. The total cost of both projects is approximately $30.9 million.
 
 We
        have
        embarked on various projects and initiatives to draw a wider customer base
        at
        Fitzgeralds Tunica. Fitzgeralds Tunica has already invested $3.5 million
        updating 108 hotel rooms as well as remodeling the hotel lobby and room
        corridors, and upgrading the elevator access areas. We started the remodeling
        of
        additional hotel rooms early in 2007 at an anticipated cost of $3.5 million.
        Depending on our cash flows, we will remodel the casino floor and restaurants
        in
        2007. We are improving the quality of both our slot and table games customers
        by
        enhancing our restaurant operations and food product, upgrading hotel rooms
        with
        amenities that appeal to a higher-value customer, and becoming more liberal
        with
        the issuance of credit.
  5
 Table
            of Contents
  **COMPETITION**
 
 We
        face
        intense competition in each of the markets in which our gaming facilities
        are
        located. Many of our competitors have significantly greater name recognition
        and
        financial, marketing and other resources than we do. In addition to regional
        competitors, we compete with gaming facilities nationwide, including land-based
        casinos in Nevada and Atlantic City, not only for customers, but also for
        employees. We also compete, to some extent, with other forms of gaming on
        both a
        local and national level, including state-sponsored lotteries, Internet gaming,
        on- and off-track wagering, slot parlors, race tracks with slot machines,
        and
        card parlors. See Item 1A for further discussion on competition in the markets
        in which we currently operate.
 
 In
        addition, over the years, the Arkansas voters and the Arkansas legislature
        have
        considered various proposals to approve casino gaming in Arkansas or slot
        machines at a dog track in West Memphis and a horse track in Hot Springs.
        In
        voter referenda held in November 2005, the voters of both cities approved
        the
        installation of “electronic games of skill” at these tracks. At this time, we
        have not seen a negative impact on our operations in Tunica from the
        installation of slot machines at these tracks. In November 2006, a ballot
        initiative was approved for an amendment to the Arkansas constitution to
        permit
        casino-style gaming resorts in seven counties throughout the state. The counties
        for which gaming was approved encompass the cities of Little Rock, Hot Springs
        and West Memphis. At this time, we cannot determine what impact, if any,
        this
        would have on our operations.
 
 The
        recent and continued expansion of legalized casino gaming within existing
        jurisdictions and into new jurisdictions throughout the United States has
        increased competition faced by us, and such competition could increase in
        the
        future.
 
 
 **FINANCIAL
        INFORMATION ABOUT SEGMENTS**
 
 For
        financial information regarding the Company’s business segments, see
        Note 16 of the Notes to Consolidated Financial Statements.
 
 
 **SEASONALITY**
 
 The
        gaming operations of the Company’s properties are seasonal and, depending on the
        location and other circumstances, the effects of such seasonality could be
        significant. The properties’ results are affected by inclement weather in
        relevant markets. For example, because of the climate in the Chicago
        metropolitan area, the Majestic Properties’ operating revenues are expected to
        be stronger during the period from May through September. Fitzgeralds Black
        Hawk, located in the Rocky Mountains of Colorado, is subject to snow and
        icy
        road conditions during the winter months. Any such severe weather conditions
        may
        discourage potential customers from visiting the Fitzgeralds Black Hawk
        facility. In December 2006, Fitzgeralds Black Hawk was closed for two days
        due
        to inclement weather. At Fitzgeralds Tunica and Fitzgeralds Black Hawk, business
        levels are typically weaker from Thanksgiving through the end of the winter
        and
        typically stronger from mid-June to mid-November. Accordingly, the Company’s
        results of operations are expected to fluctuate from quarter to quarter and
        the
        results for any fiscal quarter may not be indicative of results for future
        fiscal quarters.
 
 
 **EMPLOYEES**
 
 As
        of
        December 31, 2006, we directly employed approximately 2,900 persons.
        Approximately 11.3% of our workforce is unionized. Our unionized employees
        work
        at our Majestic Properties.
 
 In
        recruiting personnel, Majestic Star is obligated, under the terms of a
        Development Agreement with the City of Gary, to use its best efforts to have
        an
        employee base which is comprised of 70% from racial minority groups, 52%
        females, 67% residents of the City of Gary and 90% residents of Lake County,
        Indiana. We believe that our recruitment and programs strive to meet this
        obligation.
 
 
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  **TRADE
        NAMES, TRADEMARKS AND SERVICE MARKS**
 
 We
        utilize a comprehensive integrated marketing campaign to brand Majestic Star
        as
        THIS IS MY KIND OF PLACE ® for slot
        customers from the middle-income segment. We own certain trademarks that
        are
        integral to the business and operation of Majestic Star’s riverboat gaming
        facility and the Fitzgeralds Casinos. For Majestic Star, each of the trademarks,
        Majestic Star Casino ® (words
        and design), Majestic Star ® ,
        Club
        Majestic ® ,
        Club
        Majestic Premier ® ,
        Change
        Your Luck! ® ,
        We’ve
        Got Your Slots ® ,
        and
        This is My Kind of Place ® is
        currently registered in the United States Patent and Trademark Office (“PTO”).
        Applications for registrations have been filed in the PTO for the marks
“PROMOCASH” (words and design) and “WHOOPLA!”.
 
 The
        Fitzgeralds Casinos have developed a national gaming brand by using a consistent
        Irish theme throughout the casinos, hotel, restaurants and bars at each of
        its
        properties. We own proprietary rights in registered and common law trade
        names,
        trademarks and service marks used in connection with the business and created
        to
        enhance the Irish theme and gaming activities, including the marks
        Fitzgeralds ® (including
        shamrock design and words), Fitz ® ,
        Get
        Reel Lucky ® ,
        and Mr.
        O’Lucky ® .
        Following the Fitzgeralds acquisition, and under a license from us, Fitzgeralds
        Reno, Inc. (“Fitzgeralds Reno”), a subsidiary of Fitzgeralds Gaming Corporation,
        retained the right to use the name Fitzgeralds ® and
        certain other marks in connection with its operation of its existing casino
        property in Reno, Nevada and in connection with any casino properties it
        may
        operate in the future in Northern California, Northern Nevada, Oregon and
        Washington. In addition, Fitzgeralds Reno may assign the license to the first
        purchaser of the casino in Reno; however, any other assignment requires our
        prior written consent. We retained all other rights to the Fitzgeralds name
        and
        all Fitzgeralds trademarks, service marks and trade dress for use in connection
        with Fitzgeralds Tunica and Fitzgeralds Black Hawk. In connection with any
        use
        of the Fitzgeralds name, the terms of the license require Fitzgeralds Gaming
        Corporation to comply with certain requirements, including operating any
        casino
        property using the Fitzgeralds name in accordance with our current operating
        standards. In connection with the spin-off of Barden Nevada in 2003, we entered
        into a license with Barden Nevada to allow Barden Nevada the right to use
        the
        name Fitzgeralds ® and
        other marks in connection with its operation of that property.
 
 
 **GOVERNMENT
        REGULATION AND LICENSING**
 
 ***General***
 
 The
        ownership and operation of our gaming facilities are subject to various state
        and local laws and regulations in the jurisdictions where they are located.
        The
        following is a summary of the provisions of the laws and regulations applicable
        to the Company’s gaming operations and other laws and regulations applicable to
        the Company. The summary does not purport to be a full description thereof
        and
        is qualified in its entirety by reference to such laws and
        regulations.
 
 ***Indiana
        Gaming Regulation***
 
 The
        ownership and operation of the Majestic Properties is subject to regulation
        by
        the State of Indiana through the Indiana
        Gaming Commission (the “IGC”). The IGC is given extensive powers and duties for
        the purposes of administering, regulating and enforcing riverboat gaming
        in
        Indiana. The IGC is authorized to award up to 11 gaming licenses to operate
        riverboat casinos in the State of Indiana, including five to counties contiguous
        to Lake Michigan in northern Indiana, five to counties contiguous to the
        Ohio
        River in southern Indiana and one to a county contiguous to Patoka Lake in
        southern Indiana, which was subsequently relocated to
        French Lick. Referenda required by the Riverboat Gambling Act to authorize
        the
        five licenses to be issued for counties contiguous to Lake Michigan have
        been
        conducted and gaming has been authorized for the cities of Hammond, East
        Chicago, and Gary in Lake County, Indiana, and for Michigan City in LaPorte
        County, Indiana to the east of Lake County.
 
 The
        IGC
        has jurisdiction and supervision over all riverboat gaming operations in
        Indiana
        and all persons on riverboats where gaming operations are conducted. The
        IGC is
        authorized to adopt rules for administering the gaming statute and the
        conditions under which riverboat gaming in Indiana may be conducted. The
        IGC may
        suspend or revoke the license of a licensee or impose civil penalties, in
        some
        cases without notice or hearing, for any act in violation of the Riverboat
        Gambling Act or for any other fraudulent act.
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 The
        Riverboat Gambling Act requires extensive disclosure of records and other
        information concerning an applicant, including disclosure of all directors,
        officers and persons holding a five percent or more direct or indirect
        beneficial interest in an applicant.
 
 A
        Riverboat Owner’s License and Operating Contract entitles the licensee or the
        Operating Agent to operate one riverboat. In May 2003, the Riverboat Gambling
        Act was amended to allow a person to hold up to one hundred percent of up
        to two
        individual Riverboat Owner’s Licenses. An owner’s initial license may be renewed
        for one-year periods by the IGC upon satisfaction of certain statutory and
        regulatory requirements. While the IGC reserves the right to investigate
        Riverboat Licensees (a “Riverboat Licensee”) at any time it deems necessary,
        each Riverboat Licensee must undergo a complete reinvestigation every three
        years. Applications for the required annual license renewals for 2006 were
        submitted and approved, and the Majestic Properties will undergo a complete
        reinvestigation in 2007.
 
 The
        Riverboat Gambling Act places special emphasis on minority and women business
        enterprise participation in the riverboat industry. Riverboat Licensees and
        Operating Agents must establish goals of expending ten percent of the total
        dollars spent on the majority of goods and services with minority business
        enterprises and five percent with women’s business enterprises. Each Riverboat
        Licensee is required to submit annually to the IGC a report that includes
        the
        total dollar value of contracts awarded for goods and services and the
        percentage awarded to minority and women’s business enterprises. The IGC may
        suspend, limit or revoke an owner’s gaming license or impose a fine for failure
        to comply with these statutory requirements. For the calendar year ended December
        31, 2006, the Company has submitted unaudited reports to the IGC that the
        Company believes meet these statutory requirements.
 
 Indiana
        state law stipulates a graduated wagering tax with a starting tax rate of
        15%
        and a top rate of 35% for adjusted gross receipts in excess of $150 million. In
        addition to the wagering tax, an admissions tax of $3 per turnstile count
        is
        assessed.
 
 The
        IGC
        has also promulgated a rule mandating Riverboat Licensees to maintain a cash
        reserve to protect patrons against defaults in gaming debts. The cash reserve
        is
        to be equal to a Riverboat Licensee’s average payout for a three-day period
        based on the riverboat’s performance the prior calendar quarter. The cash
        reserve can consist of cash on hand, cash maintained in Indiana bank accounts
        and cash equivalents not otherwise committed or obligated.
  The
          Company and its affiliates are subject to restrictions on the incurrence
          of
          debt. A Riverboat Licensee and its affiliates may enter into debt transactions
          that total $1.0 million or more only with the prior approval of the IGC.
          Such
          approval is subject to compliance with requisite procedures and a showing
          that
          each person with whom the riverboat licensee and its affiliates enters
          into a
          debt transaction would be suitable for licensure under the Act. Unless
          waived,
          approval of debt transactions requires consideration by the IGC at two
          business
          meetings. The IGC, by resolution, has authorized the Executive Director,
          subject
          to subsequent ratification by the IGC, to approve debt transactions after
          a
          review of the documents and consultation with the Chair and either the
          Certified
          Public Accountant, who is a Member of the IGC or who acts as a consultant
          to the
          IGC.
  ***Mississippi
        Gaming Regulation***
 
 The
        ownership and operation of casino gaming facilities in Mississippi are subject
        to extensive state and local regulations, but primarily the licensing and/or
        regulatory control of the Mississippi Gaming Commission (the “Mississippi
        Commission”).
 
 The
        Mississippi Act (“Mississippi Act”) provides for legalized gaming in each of the
        fourteen Mississippi counties that border the Gulf Coast or the Mississippi
        River, but only if the voters in the county have not voted to prohibit gaming
        in
        that county. Certain anti-gaming groups have previously proposed for adoption
        through the initiative and referendum process certain amendments to the
        Mississippi Constitution which would prohibit gaming in the state. The proposals
        were declared illegal by Mississippi courts on constitutional and procedural
        grounds. If other such proposals were to be offered and if a sufficient number
        of signatures were to be gathered to place a legal initiative on the ballot,
        it
        is possible for the voters of Mississippi to consider such proposals.
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 Currently,
        gaming is permissible in nine of the fourteen eligible counties in the State
        of
        Mississippi and gaming operations have commenced in seven counties.
        Traditionally, Mississippi law required gaming vessels to be located on the
        Mississippi River or on navigable waters in eligible counties along the
        Mississippi River, or in the waters lying south of the counties along the
        Mississippi Gulf Coast. In 2005, however, the Mississippi Legislature amended
        the statutes to permit licensees in the three counties along the Gulf Coast
        to
        establish land-based casino operations under limited circumstances.
 
 The
        Mississippi Act permits unlimited stakes gaming on a 24-hour basis and does
        not
        restrict the percentage of space which may be utilized for gaming. The
        Mississippi Act permits substantially all traditional casino games and gaming
        devices.
 
 We
        and
        any subsidiary of ours that operate a casino in Mississippi (a “Gaming
        Subsidiary”) are subject to the licensing and regulatory control of the
        Mississippi Commission. Each of the Company, Majestic Holdco, and BDI, have
        registered under the Mississippi Act as either a publicly traded corporation
        (a
“Registered Corporation”) or a holding company of Barden Mississippi Gaming,
        LLC, the owner and operator of Fitzgeralds Tunica and a licensee of the
        Mississippi Commission. We, BDI, and Majestic Holdco, as registered holding
        companies or publicly traded corporations within the meaning of the Mississippi
        Act, and Barden Mississippi, as a gaming licensee, are required periodically
        to
        submit detailed financial, operating and other reports to the Mississippi
        Commission and furnish any other information which the Mississippi Commission
        may require. No person may become a stockholder of nor receive any percentage
        of
        profits from a licensed subsidiary of a registered holding company or publicly
        traded corporation without first obtaining licenses and approvals from the
        Mississippi Commission.
 
 Barden
        Mississippi must maintain its gaming license from the Mississippi Commission
        in
        order to continue to operate a casino in Mississippi. Such licenses are issued
        by the Mississippi Commission subject to certain conditions, including continued
        compliance with all applicable state laws and regulations. There are no
        limitations on the number of gaming licenses which may be issued in Mississippi.
        Gaming licenses require the payment of periodic fees and taxes, are not
        transferable, are issued for a three-year period, may be continued for two
        additional three-year periods, and must be renewed periodically thereafter.
        Barden Mississippi’s current gaming license expires in December of 2007.
 
 Certain
        management personnel of ours, our manager, our parent, and certain management
        personnel and key employees of Barden Mississippi must be found suitable
        or be
        approved by the Mississippi Commission. We believe that we have obtained,
        applied for or are in the process of applying for all necessary findings
        of
        suitability with respect to the key employees of Barden Mississippi, although
        the Mississippi Commission, in its discretion, may require additional persons
        to
        file applications for findings of suitability. In addition, any person having
        a
        material relationship or involvement with us may be required to be found
        suitable, in which case those persons must pay the costs and fees associated
        with such investigation.
 
 We
        may be
        required to disclose to the Mississippi Commission, upon request, the identities
        of the holders of any of our debt or other securities. In addition, under
        the
        Mississippi Act, the Mississippi Commission, in its discretion, may require
        the
        holder of any debt security of a Registered Corporation or a registered holding
        company to file an application, be investigated and be found suitable to
        own the
        debt security if the Mississippi Commission has reason to believe that the
        ownership of the debt security by the holder would be inconsistent with the
        declared policies of the State.
 
 Although
        the Mississippi Commission generally does not require the individual holders
        of
        obligations, such as notes, to be investigated and found suitable, the
        Mississippi Commission retains the discretion to do so for any reason, including
        but not limited to, a default, or where the holder of the debt instruments
        exercises a material influence over the gaming operations of the entity in
        question. Any holder of debt securities required to apply for a finding of
        suitability must pay all investigative fees and costs of the Mississippi
        Commission in connection with the investigation.
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 If
        the
        Mississippi Commission determines that a person is unsuitable to own a debt
        security, then the Registered Corporation may be sanctioned, including the
        loss
        of its approvals, if without the prior approval of the Mississippi Commission,
        it:
 
 ·
              pays
                  to the unsuitable person any dividend, interest, or any distribution
                  whatsoever;
 
 ·
              recognizes
                  any voting right by the unsuitable person in connection with those
                  securities;
 
 ·
              pays
                  the unsuitable person remuneration in any form; or
 
 ·
              makes
                  any payment to the unsuitable person by way of principal, redemption,
                  conversion, exchange, liquidation, or similar
                  transaction.
 
 Substantially
        all material loans, leases, sales of securities and similar financing
        transactions by a Registered Corporation or a Gaming Subsidiary must be reported
        to or approved by the Mississippi Commission. A Registered Corporation may
        not
        make a public offering of its securities without the prior approval of the
        Mississippi Commission if any part of the proceeds of the offering is to
        be used
        to finance the construction, acquisition or operation of gaming facilities
        in
        Mississippi or to retire or extend obligations incurred for those purposes.
        Such
        approval, if given, does not constitute a recommendation or approval of the
        investment merits of the securities subject to the offering and remains subject
        to the ability of the Mississippi Commission to issue a stop order with respect
        to any such securities offering if the staff determines it would be necessary
        to
        do so.
 
 Under
        the
        regulations of the Mississippi Commission, Barden Mississippi may not guarantee
        a security issued by us or any other affiliated company pursuant to a public
        offering, or pledge the assets of Barden Mississippi to secure payment or
        performance of the obligations evidenced by the security issued by us or
        the
        affiliated company, without the prior approval of the Mississippi Commission.
        A
        pledge of the equity securities of a gaming licensee and the foreclosure
        of such
        a pledge are ineffective without the prior approval of the Mississippi
        Commission. Moreover, restrictions on the transfer of an equity security
        issued
        by a Mississippi gaming licensee or a registered holding company and agreements
        not to encumber such securities are ineffective without the prior approval
        of
        the Mississippi Commission. We have obtained approvals from the Mississippi
        Commission for such guarantees, pledges and restrictions in connection with
        prior offerings of securities, subject to certain restrictions from the
        Mississippi Commission for pledges and stock restrictions in connection with
        certain financing transactions. Moreover, the regulations of the Mississippi
        Commission require us to file a loan to licensees report with the Mississippi
        Commission within thirty (30) days following certain financing transactions
        and the offering of certain debt securities. If the Mississippi Commission
        were
        to deem it appropriate, the Mississippi Commission could order such transactions
        rescinded.
 
 None
        of
        us, BDI, Majestic Holdco, or Barden Mississippi may engage in gaming activities
        in Mississippi while also conducting gaming operations outside of Mississippi
        without approval of the Mississippi Commission. The Mississippi Commission
        may
        require determinations that, among other things, there are means for the
        Mississippi Commission to have access to information concerning the out-of-state
        gaming operations of us and our affiliates. We previously have obtained a
        waiver
        of foreign gaming approval from the Mississippi Commission for our gaming
        operations in Indiana, Nevada and Colorado. We will be required to obtain
        the
        approval or a waiver of such approval from the Mississippi Commission prior
        to
        engaging in any additional future gaming operations outside of Mississippi.
 
 If
        the
        Mississippi Commission were to determine that we, BDI, Majestic Holdco, or
        Barden Mississippi violated a gaming law or regulation, the Mississippi
        Commission could limit, condition, suspend or revoke the approvals of any
        such
        company and the license of Barden Mississippi, subject to compliance with
        certain statutory and regulatory procedures. In addition, we, BDI, Majestic
        Holdco, Barden Mississippi and the persons involved could be subject to
        substantial fines for each separate violation. Because of such a violation,
        the
        Mississippi Commission could attempt to appoint a supervisor to operate the
        casino facilities. Limitation, conditioning or suspension of any gaming license
        or approval or the appointment of a supervisor could (and revocation of any
        gaming license or approval would) materially adversely affect us and our
        business, financial condition and results of operations.
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 License
        fees and taxes, computed in various ways depending on the type of gaming
        or
        activity involved, are payable to the State of Mississippi and to the counties
        and cities in which a Gaming Subsidiary’s operations are conducted. Depending
        upon the particular fee or tax involved, these fees and taxes are payable
        either
        weekly, monthly, quarterly or annually. Gaming taxes are based upon the
        following:
 
 ·
              a
                  percentage of the gross gaming revenues received by the casino
                  operation;
 
 ·
              the
                  number of gaming devices operated by the casino; or
 
 ·
              the
                  number of table games operated by the casino.
 
 The
        license fee payable to the State of Mississippi is based upon “gaming revenue”
(generally defined as gross receipts less payouts to customers as winnings),
        and
        the current maximum rate imposed is eight percent of all gaming receipts
        in
        excess of $134,000 per month. The foregoing license fees paid by Barden
        Mississippi are allowed as a credit against Barden Mississippi’s state income
        tax liability for the year paid. The gross revenue fee imposed by Tunica
        County
        equals approximately four percent of the gaming receipts.
 
 The
        sale
        of alcoholic beverages, including beer and wine, at Fitzgeralds Tunica is
        subject to licensing, control and regulation by both the local jurisdiction
        and
        the Alcoholic Beverage Control Division (the “ABC”) of the Mississippi State Tax
        Commission. Fitzgeralds Tunica is in an area designated as a special resort
        area, which allows Fitzgeralds Tunica to serve alcoholic beverages on a 24-hour
        basis. All such licenses are revocable and are non-transferable. If the ABC
        laws
        are violated, the ABC has the full power to limit, condition, suspend or
        revoke
        any license for the serving of alcoholic beverages or to place such a licensee
        on probation with or without conditions. Any such disciplinary action could
        (and
        revocation would) have a material adverse effect on us and Barden Mississippi’s
        operations at Fitzgeralds Tunica. Certain of our officers and managers at
        Fitzgeralds Tunica must be investigated by the ABC in connection with our
        liquor
        permits and changes in certain key positions must be approved by the
        ABC.
 
 ***Colorado
        Gaming Regulation***
 
 The
        Colorado Limited Gaming Act of 1991 (the “Colorado Act”) authorizes limited
        gaming only in certain designated commercial districts of Central City, Black
        Hawk and Cripple Creek, Colorado. Limited gaming consists of poker, blackjack
        and slot machines, all with maximum single bets of five dollars. Only persons
        aged 21 or older may participate in limited gaming, and limited gaming is
        prohibited between the hours of 2:00 a.m. and 8:00 a.m. Limited gaming is
        only
        allowed on premises licensed for that purpose, and the gaming-licensed premises
        of any building may not exceed 35% of the square footage of the building
        and no
        more than 50% of any floor of such building. There is no limitation on the
        size
        of any structure or total square footage devoted to limited gaming.
        Additionally, the gaming-licensed premises of any casino must be physically
        located within the designated commercial district of one of the three
        above-referenced cities.
 
 Pursuant
        to the Colorado Act, and the rules and regulations promulgated thereunder
        (collectively, the “Colorado Gaming Regulations”), the ownership and operation
        of limited gaming facilities in Colorado, however acquired, are subject to
        extensive regulation by the Division of Gaming (the “Colorado Division”) and the
        Colorado Limited Gaming Control Commission (the “Colorado Gaming
        Commission”).
 
 The
        Colorado Gaming Commission may issue the following gaming licenses: (1) slot
        machine manufacturer or distributor; (2) operator; (3) retail gaming; (4)
        support; and (5) key employee. The first three licenses require annual renewal
        by the Colorado Gaming Commission. Support and key employee licenses are
        issued
        for two-year periods and are renewable by the Division Director. The retail
        gaming (casino) license renewal process includes a determination by the Colorado
        Gaming Commission that the licensee will operate in compliance with the
        statutes, rules and regulations governing the conduct of casino gaming in
        Colorado and that the licensee continues to be of good moral character and
        fitness. The Colorado Gaming Commission has broad discretion to condition,
        suspend for up to six months, revoke, limit or restrict a license at any
        time
        and also has the authority to impose fines.
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 A
        retail
        gaming license is required for all persons conducting limited stakes gaming
        on
        their premises. In addition, an operator license is required for all persons
        who
        engage in the business of placing and operating slot machines on the premises
        of
        a retailer, or who provide goods or services in return for fees calculated
        upon
        a percentage of limited gaming revenue. However, a retailer is not required
        to
        hold an operator license. No person may have an ownership interest in more
        than
        three retail licenses. In June 2006, Barden Colorado applied with the Colorado
        Gaming Commission for a renewal of its operator’s and retail gaming licenses,
        and those licenses were renewed on September 28, 2006.
 
 The
        Colorado Act requires that every officer, director, and stockholder of private
        corporations or equivalent office or ownership holders for non-corporate
        applicants, and every officer, director or stockholder holding either a 5%
        or
        greater interest or controlling interest of a publicly traded corporation
        or
        owners of an applicant or licensee, shall be a person of good moral character.
        These persons ordinarily must submit to a full background investigation
        conducted by the Colorado Division and the Colorado Gaming Commission. The
        Colorado Gaming Commission may require any person having an interest, however
        limited or indirect, in a license or a licensee to undergo a full background
        investigation and pay the cost of investigation in the same manner as an
        applicant. Limited disclosure forms are customarily required of those persons
        holding any equity interest under 5% in a non-publicly traded
        applicant.
 
 In
        addition, all persons loaning monies, goods, or real or personal property
        directly or indirectly to a licensee or applicant, or having any interest
        in a
        licensee or applicant, or entering into any agreement with a licensee or
        applicant, must provide any information requested by the Colorado Division
        or
        Colorado Gaming Commission, and in the discretion of the Colorado Division
        or
        the Colorado Gaming Commission, these persons must supply all information
        relevant to a determination of any such person’s suitability for licensure, and
        must submit to a full background investigation if ordered by the Colorado
        Gaming
        Commission. Failure to promptly provide all information requested, or to
        submit
        to a suitability or background investigation, may result in a finding of
        unsuitability, the denial of a license application, suspension or revocation
        of
        an existing license, termination of any lease, note arrangement, or agreement
        between the applicant or licensee and the person requested to provide the
        information, and other sanctions. Investigations for suitability, background,
        or
        any other reason may delay a license application or the operation under any
        agreement with a licensee. All agreements, contracts, leases or arrangements
        in
        violation of the Colorado Act or the Colorado Gaming Regulations are void
        and
        unenforceable. Additionally, violations of the Colorado Gaming Regulations
        are
        criminal acts, and violators are subject to arrest, prosecution, and possible
        incarceration, as well as the payment of fines and costs.
 
 Persons
        found unsuitable by the Colorado Gaming Commission may be required immediately
        to terminate any interest in, association or agreement with, or relationship
        to
        a licensee—regardless of any negative financial consequences to such persons. A
        finding of unsuitability with respect to any officer, director, employee,
        associate, lender or beneficial owner of a licensee or applicant may also
        jeopardize the licensee’s license or applicant’s license application. Licenses
        may be conditioned upon termination of any relationship with unsuitable
        persons.
 
 With
        limited exceptions applicable to licensees that are publicly traded entities,
        no
        person, including persons who may acquire an interest in a licensee pursuant
        to
        a foreclosure, may sell, lease, purchase, convey or acquire any interest
        in a
        retail gaming or operator license or business without the prior approval
        of the
        Colorado Gaming Commission.
 
 The
        State
        of Colorado has enacted an annual tax on the adjusted gross proceeds (“AGP”)
        from limited gaming. AGP is generally defined as the amounts wagered minus
        payments to players. For poker, AGP means those sums wagered on a hand retained
        by the licensee as compensation. The gaming tax is paid monthly, with licensees
        required to file returns by the 15th of the following month. Effective July
        1 of
        each year, the Colorado Gaming Commission establishes the gaming tax rates
        for
        the following 12 months. The Colorado Gaming Commission may increase the
        gaming
        tax rate to as much as 40% of AGP. Currently, the gaming tax rates which
        were
        reaffirmed in June 2006 are 0.25% on AGP of up to and including $2 million,
        2%
        over $2 million up to and including $4 million, 4% over $4 million up to
        and
        including $5 million, 11% over $5 million up to and including $10 million,
        16%
        over $10 million up to and including $15 million, and 20% over $15 million.
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 The
        City
        of Black Hawk imposes an annual device fee on each slot machine, black jack
        and
        poker table in the current amount of $750 per device. Black Hawk also imposes
        taxes and fees on other aspects of the businesses of gaming licensees, such
        as
        parking, liquor license and other municipal taxes and fees.
 
 The
        sale
        of alcoholic beverages in gaming establishments is subject to strict licensing,
        control and regulation by state and local authorities. Barden Colorado currently
        holds valid state and local alcoholic beverage licenses for Fitzgeralds Black
        Hawk. Legal hours for service and sale of alcoholic beverages are from
        7:00 a.m. through 2:00 a.m. daily, and no one under age 21 may be
        served alcohol. Alcoholic beverage licenses are renewable annually, revocable
        and non-transferable. State and local licensing authorities have full power
        to
        limit, condition, suspend or revoke any such licenses. Violation of these
        state
        alcoholic beverage laws is a criminal offense, and violators are subject
        to
        criminal prosecution, incarceration and fines.
 
 ***Treasury
        Department Regulations***
 
 The
        Internal Revenue Code and Treasury Regulations require operators of casinos
        located in the United States to file information returns for U.S. citizens,
        including names and addresses of winners, for keno and slot machine winnings
        in
        excess of prescribed amounts and table game winnings in which the payout
        is a
        certain amount greater than the wager. The Internal Revenue Code and Treasury
        Regulations also require operators to withhold taxes on some keno, bingo,
        and
        slot machine winnings of nonresident aliens.
 
 Regulations
        adopted by the Financial Crimes Enforcement Network of the Treasury Department
        and the gaming regulatory authorities in some of the domestic jurisdictions
        in
        which we operate casinos, require the reporting of currency transactions
        in
        excess of $10,000 occurring within a gaming day, including identification
        of the
        patron by name and social security number, which regulations were subsequently
        modified to include a suspicious activity reporting rule. Casinos are required
        to report suspicious monetary transactions when the casino knows, suspects,
        or
        has reason to suspect that the transaction involves funds derived from illegal
        activity or is otherwise intended to facilitate illegal activity.
 
 ***Compliance
        with Other Laws and Regulations***
 
 Currently,
        our Majestic Star and Majestic Star II vessels must comply with U.S. Coast
        Guard
        requirements as to boat design, on-board facilities, equipment, personnel
        and
        safety. The Majestic Star and Majestic Star II vessels must each hold a
        certificate of inspection and must be approved by the American Bureau of
        Shipping for stabilization and flotation, and may also be subject to local
        zoning and building codes. The U.S. Coast Guard requirements establish design
        standards and require individual licensing of all personnel involved with
        the
        operation of the vessels. Loss of a vessel’s certificate of inspection or
        American Bureau of Shipping approval would preclude its use as a
        casino.
 
 U.S.
        Coast Guard regulations require a hull inspection for all riverboats at
        five-year intervals. Under certain circumstances, extensions may be approved.
        The U.S. Coast Guard may require that such hull inspection be conducted at
        a
        U.S. Coast Guard-approved dry-docking facility, and if so required, the travel
        to and from such docking facility, as well as the time required for inspections
        of our Majestic Star and Majestic Star II vessels, could be significant. To
        date, the U.S. Coast Guard has allowed in-place underwater hull inspections
        of
        the Majestic Star and Majestic Star II vessels. The U.S. Coast Guard may
        not allow these types of inspections in the future. The loss of either Majestic
        Star or Majestic Star II from service for any period of time could
        adversely affect our business, financial condition and results of
        operations.
  Pursuant
          to legislation enacted in 2005, the IGC is able to adopt alternative marine
          structural and life safety standards for riverboats ("Alternate Certification").
          The Alternate Certification standards require riverboat gaming vessels
          to be
          capable of getting under way, but shall not carry patrons while under way
          unless
          permitted by the U.S. Coast Guard on a case-by-case basis. The IGC has
          released
          its Alternate Certification standards and anticipates adopting Alternate
          Certification standards in the second quarter of 2007.
 Our
        operations are also subject to extensive state and local regulations in addition
        to the regulations described above, and, on a periodic basis, we must obtain
        various other licenses and permits.
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 **ITEM
        1A. RISK FACTORS**
 
 You
        should be aware that the occurrence of any of the events described in this
        section and elsewhere in this report or in any other of our filings with
        the SEC
        could have a material adverse effect on our business, financial position,
        results of operations and cash flows. In evaluating us, you should consider
        carefully, among other things, the risks described below.
 
 ***Our
        significant indebtedness could adversely affect our financial results and
        prevent us from fulfilling our obligations on our
        indebtedness.***
 
 We
        have a
        significant amount of debt. As a result of our offerings, acquisitions,
        refinancings and assumption of Trump Indiana debt, our consolidated indebtedness
        as of December 31, 2006, is $546.0 million of which the following
        amounts are outstanding: $45.7 million under our Senior Secured Credit
        Facility (“Senior Secured Credit Facility”), $300.0 million of 9 1⁄2%
        senior secured notes (“Senior Secured Notes”), $200.0 million of 9 3⁄4%
        senior unsecured notes (“Senior Notes”) (collectively, “the Notes”), and $0.2
        million is outstanding for capital lease obligations and other indebtedness.
        In
        addition, the indentures governing the Notes permit us to incur additional
        debt
        in certain circumstances, including purchase money debt, and up to an additional
        $34.3 million is available under our Senior Secured Credit
        Facility.
 
 Our
        high
        level of debt could have significant effects on our business. For example,
        it
        could, among other things:
 
 ·
              make
                  it more difficult for us to satisfy our obligations with respect
                  to the
                  Notes and our other outstanding
                  indebtedness;
 
 ·
              require
                  us to direct a substantial portion of our cash flow from operations
                  to
                  payments on our indebtedness, thereby reducing the availability
                  of our
                  cash flow to fund working capital, capital expenditures, development
                  projects, acquisitions and other general corporate
                  purposes;
 
 ·
              increase
                  our vulnerability to adverse economic and industry conditions or
                  a
                  downturn in our business;
 
 ·
              result
                  in an event of default if we fail to comply with the financial
                  and other
                  restrictive covenants contained in the indentures governing the
                  Notes or
                  our Senior Secured Credit Facility, which event of default could
                  result in
                  all of our indebtedness becoming immediately due and payable and
                  would
                  permit some or all of our lenders to foreclose on our assets securing
                  such
                  indebtedness;
 
 ·
              limit
                  our ability to fund or obtain additional financing for future working
                  capital, capital expenditures and other general financial requirements;
                  or
 
 ·
              place
                  us at a competitive disadvantage compared to our competitors that
                  have
                  less debt.
 
 ***We
        may not be able to generate sufficient cash flow to service our
        debt.***
 
 We
        might
        not be able to generate sufficient cash flow to service our debt, to repay
        the
        Notes when due or to meet unanticipated capital needs or shortfalls in our
        projections. We plan to be able to service our debt and repay the Notes when
        due
        with cash from operations and refinancing of debt upon maturity.
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 Our
        ability to generate sufficient cash flow to service our debt and to satisfy
        our
        other liquidity needs will depend on the future performance of our gaming
        operations, which is subject to many economic, political, competitive,
        regulatory and other factors that we are not able to control. However, if
        cash
        flows from operations are not sufficient to service our debt and to satisfy
        our
        other liquidity needs, we may need to seek additional financing in the debt
        or
        equity markets, refinance the Notes, sell selected assets or reduce or delay
        planned activities and capital expenditures. Any such financing, refinancing
        or
        sale of assets might not be available on economically favorable terms, if
        at
        all, and may be difficult because of gaming regulatory restrictions on
        ownership. In the event that we are left without sufficient liquidity to
        meet
        our debt service requirements, an event of default would occur under the
        indentures governing the Notes and our Senior Secured Credit Facility. Such
        an
        event of default could result in all of our indebtedness under the Notes
        and our
        Senior Secured Credit Facility becoming immediately due and payable and could
        permit the trustee under the indenture governing the Senior Secured Notes
        and
        the lenders under our Senior Secured Credit Facility to foreclose on our
        assets
        securing the Senior Secured Notes and our Senior Secured Credit Facility,
        which
        are secured by substantially all of our current and future assets.
 
 ***We
        may need to seek additional amendments to the financial covenants contained
        in
        our debt agreements.***
 
 We
        have
        amended the Senior Secured Credit Facility seven times. Many of these amendments
        were necessary so that the Company would be in compliance with either current
        or
        future financial covenants. Given the Company’s significant debt and competitive
        markets, there is a risk that the Company might not achieve the financial
        covenants as outlined in the most recent amendment to the Senior Secured
        Credit
        Facility. As such, the Company may need to seek further amendments to the
        financial covenants contained in the amended Senior Secured Credit Facility.
        Should the Company fail in receiving such future amendments, then a default
        would exist, which would accelerate the maturity of the debt outstanding
        under
        the Senior Secured Credit Facility with all such debt, with interest, being
        immediately due and payable. This would, in turn, cause a cross-default
        with the Company’s other outstanding indebtedness, which would similarly
        accelerate the maturity of this debt, with all such additional indebtedness,
        with interest, being due and payable.
 
 ***We
        face significant competition in each market where we operate and have limited
        opportunities for new markets to grow our business.***
 
 We
        face
        significant competition in each of the markets in which our gaming facilities
        are located as well as any new potential gaming markets. Many of our competitors
        have significantly greater name recognition, national presence and financial,
        marketing and other resources than we do. Our properties currently compete
        principally with other gaming properties in or near Illinois, Indiana,
        Mississippi and Colorado. Our competitors continue to make significant capital
        expenditures in their properties and are developing new properties. These
        new
        capital expenditures and casino projects will likely increase competition
        significantly and could negatively impact our operations.
 
 On
        April 27, 2006, Harrah’s Entertainment announced plans for a $485.0 million
        renovation and expansion of its Horseshoe Casino in Hammond, Indiana that
        is
        tentatively scheduled to open in mid-2008. The facility is expected to more
        than
        double the size of their existing facility.
 
 In
        addition, the Pokagon Indians have broken ground on a facility near the Indiana
        and Michigan state line that is scheduled to open in the summer of 2007 with
        an
        anticipated 3,000 slot machines, 90 table games and 20 poker tables. This
        casino
        will have the advantage of being a land-based facility.
 
 Boyd
        Gaming has also announced a $130.0 million expansion to their Blue Chip Casino
        facility in Indiana with a 22-story hotel tower adding 300 guest rooms, a
        spa
        and fitness center, additional meeting and event space, new dining facilities
        and other additional amenities. They began construction in the first quarter
        of
        2007 and plan to open in late 2008.
 
 While
        we
        cannot determine what effect the new Pokagon casino facility or the expanded
        Horseshoe and Blue Chip facilities will have on the financial performance
        of our
        Majestic Properties, these projects will have a significant impact on how
        we
        operate our Majestic Properties to remain competitive.
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 Ameristar
        Black Hawk is adding a 536-room, 33-story hotel to its facility in Black
        Hawk,
        which they expect to complete in December 2008. At this time, we cannot
        determine what effect this will have on the Black Hawk market as Black Hawk
        has
        previously been a day-trip market with a limited number of hotel rooms in
        the
        market.
 
 Myriad
        Entertainment & Resorts, Inc. has plans for its $1.6 billion resort in
        Tunica. They have stated that construction on the project is expected to
        begin
        in the summer of 2007 and take 24 to 48 months to complete. If the project
        is
        completed as planned, the addition of 80,000 square feet of casino space
        may
        have a negative impact on our Fitzgeralds Tunica operations.
 
 In
        addition, we compete with gaming facilities nationwide, including casinos
        located on Indian reservations and other land-based casinos in Nevada and
        Atlantic City, and to some extent, with other forms of gaming, including
        state-sponsored lotteries, Internet gaming, on- and off-track wagering, slot
        parlors, race tracks with slot machines, and card parlors. The expansion
        of
        legalized gaming to new jurisdictions throughout the United States also has
        increased competition faced by us and will continue to do so in the future.
 
 New
        casino facilities and the expansion of existing facilities will impact our
        ability to remain competitive in our markets in the event we are unable to
        improve our facilities.
 
 ***We
        may be unable to fund capital improvements.***
 
 Competition
        requires us to make substantial capital expenditures to maintain and enhance
        the
        competitive positions of our properties, including updating slot machines
        to
        reflect changing technology and consumer tastes, refurbishing rooms and public
        service areas periodically, replacing obsolete equipment on an ongoing basis
        and
        making other expenditures to improve the attractiveness and add to the appeal
        of
        our properties. Our 2007 capital budgets anticipate expenditures of $39.8
        million. Because we are highly leveraged, after satisfying our obligations
        under
        our outstanding indebtedness, there can be no assurance that we will have
        sufficient funds to undertake these expenditures or that we will be able
        to
        obtain sufficient financing to fund such expenditures. Furthermore, our Senior
        Secured Credit Facility contains covenants limiting the amounts we can spend
        on
        capital expenditures. If we are unable to make sufficient expenditures, our
        competitive position and our results of operations could be materially adversely
        affected.
 
 Included
        in our 2007 capital expenditure budget is $16.7 million for the expansion
        of
        Fitzgeralds Black Hawk, which incorporates the re-building of a partially
        demolished building known as the Masonic Building. On November 10, 2005,
        Fitzgeralds Black Hawk was served with a complaint filed against it by the
        City
        of Black Hawk. The complaint asserted that Fitzgeralds Black Hawk maintains
        a
        partially demolished historic building (the Masonic Building), which constitutes
        a public nuisance and requested that the court enter a finding that the
        structure violates the Municipal Code, enjoin Fitzgeralds Black Hawk from
        keeping the alleged nuisance, direct Fitzgeralds Black Hawk to rebuild the
        historic structure, and assess Fitzgeralds Black Hawk a penalty in the amount
        of
        $499 for each day of the alleged violation beginning on June 1, 2005. On
        December 30, 2005, the parties filed a stipulation to dismiss the complaint
        without prejudice. An order granting the dismissal was entered on
        January 5, 2006. Pursuant to the terms of the stipulation, the City of
        Black Hawk agreed not to re-file its nuisance complaint based upon the same
        allegations as are in the complaint so long as Fitzgeralds Black Hawk is
        proceeding with work necessary to prepare for reconstruction of the Masonic
        Building as part of the Fitzgeralds Black Hawk casino expansion and so long
        as
        Fitzgeralds Black Hawk is engaged in and continues to make substantial and
        timely progress toward casino expansion to encompass the Masonic Building
        or
        toward rebuilding the Masonic Building itself. If the Company fails to make
        satisfactory progress on the Fitzgeralds Black Hawk expansion and re-building
        the Masonic Building, the City of Black Hawk could file another complaint
        based
        on some or all of the allegations in the original complaint and such new
        complaint, for all purposes, will relate back to the Notice to Abate that
        the
        City of Black Hawk served on Fitzgeralds Black Hawk on July 14, 2005
        related to the condition of the Masonic Building.
  16
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 ***A
        shortfall in the amount of insurance proceeds related to our Black Hawk
        construction projects could limit our ability to implement our other planned
        expenditures at our properties.***
 
 If
        there
        is a shortfall in the insurance proceeds we expect to receive for the rebuilding
        of the Rohling Inn in Black Hawk, we will need to reallocate our capital
        expenditure budget to cover these costs. This will limit our ability to
        implement our other planned capital expenditures at our properties.
 
 ***The
        concentration and evolution of the slot machine manufacturing industry could
        impose additional costs on us.***
 
 A
        majority of our revenues is attributable to slot machines operated by us
        at our
        casinos. It is important, for competitive reasons, that we offer to our
        customers the most popular and up to date slot machine games with the latest
        technology.
 
 In
        recent
        years, the prices of new slot machines have escalated faster than the rate
        of
        inflation. Furthermore, certain slot machine manufacturers have frequently
        refused to sell slot machines featuring the most popular games, instead
        requiring casinos to enter into participating lease arrangements in order
        to
        acquire the machines. Participating slot machine lease arrangements typically
        require the payment of a minimum fixed daily rental and payment of a percentage
        of coin-in or net win amounts. Generally, a participating lease is substantially
        more expensive over the long term than the cost to purchase a new
        machine.
 
 For
        competitive reasons, we may be forced to purchase new slot machines or enter
        into participating lease arrangements that are more expensive than current
        costs
        associated with the continued operation of our existing slot machines. If
        the
        newer slot machines do not provide sufficient incremental revenues to offset
        the
        increased investment and participation or lease costs, it could hurt our
        profitability.
 
 ***Our
        operations are highly taxed and may be subject to higher taxes in the future,
        and we have ongoing tax disputes.***
 
 In
        virtually all gaming jurisdictions, state and local governments raise
        considerable revenues from taxes based on casino revenues and operations.
        We
        also pay property taxes, payroll taxes, franchise taxes and income taxes.
        From
        time to time, state and local governments have increased gaming taxes and
        property taxes (including on a retroactive basis), such as in Indiana with
        our
        Majestic Star, Majestic Star II and Buffington Harbor operations, and such
        increases can significantly impact the profitability of gaming operations.
        Any
        material increase in or the adoption of additional taxes or fees would have
        a
        material adverse effect on our future financial results. In addition, the
        Company and certain of its subsidiaries are a party to certain ongoing tax
        protests and audits which, if adversely determined, could have a material
        adverse affect on our future financial results and cash flows.
 
 ***We
        have assumed the liabilities of Trump Indiana in our stock purchase; further,
        indemnification obligations of the former owner of Trump Indiana may not
        be
        sufficiently secured.***
 
 As
        a
        result of acquiring the stock of Trump Indiana, we are legally responsible
        for
        any liabilities of Trump Indiana, including ordinary course litigation and
        certain contingent liabilities without further recourse to the former owner
        of
        Trump Indiana, Trump Entertainment Resorts Holdings, L.P. (“TERH”). TERH has
        agreed to indemnify us for tax liabilities attributed to the period prior
        to
        closing in addition to indemnification for breach of representations and
        warranties, fines or penalties payable to the IGC, certain identified litigation
        and pre-closing workers’ compensation and patron liability for the period prior
        to the closing date. Trump Indiana is a party to ongoing audits by the Internal
        Revenue Service regarding its federal income tax returns. Although there
        currently is $27.0 million in escrow with respect to TERH’s obligation to
        indemnify us for federal tax liabilities, there is no security for any other
        indemnification obligation. If TERH is unable or unwilling to satisfy in
        full
        any indemnity obligation that may occur, we may be unable to recover the
        full
        amount of the costs we incur, which could have a material negative impact
        on our
        financial condition, results of operations, and cash flow. Further,
        unanticipated contingent liabilities assumed as part of the stock transaction,
        if significant, could have an adverse impact on our financial condition,
        cash
        flows and results of operations.
  17
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 ***Extensive
        government regulation continuously impacts our
        operations.***
 
 The
        ownership, management and operation of gaming facilities are subject to
        extensive laws, regulations and ordinances, which are administered by various
        federal, state and local governmental entities and agencies. To enforce
        applicable gaming regulations, gaming authorities may, among other things,
        limit, suspend or revoke the licenses of any gaming entity or individual,
        and
        may levy fines or forfeiture of assets against us or individuals for violations
        of gaming laws or regulations. Any of these actions could have a material
        adverse effect on us.
 
 ***Legislation
        or local referenda on gaming may restrict or adversely impact our
        operations.***
 
 The
        casino entertainment industry is subject to political and regulatory
        uncertainty. In some of the jurisdictions in which we currently operate or
        from
        which we attract customers, or into which we may expand, gaming is subject
        to
        local referenda. If the results of a referendum held in a jurisdiction in
        which
        we operate were to restrict gaming in whole or in part or if the results
        of a
        referendum in a nearby non-gaming jurisdiction were to permit gaming, our
        results of operations would be negatively impacted.
 
 ***We
        are highly dependent on the services of our principal
        executive.***
 
 Don
        H.
        Barden is Chairman, President and Chief Executive Officer of the Company
        and the
        sole owner of our ultimate member, Barden Development, Inc., with responsibility
        for key policy-making functions at each of our casinos. The loss of the services
        of Mr. Barden or a change in ownership of the Company, for any reason,
        could have a material adverse effect on our business, operating results and
        financial condition.
 
 ***BDI
        is not restricted from pursuing other activities that may compete with
        us.***
 
 BDI,
        an
        entity wholly owned and controlled by Don H. Barden, indirectly beneficially
        owns all of our outstanding equity interests and voting power. In addition,
        we
        have entered into a manager agreement with BDI, which provides for, among
        other
        things, a distribution payable by Majestic to BDI for acting as its manager.
        Neither Mr. Barden nor any of the entities which he controls is restricted
        from
        pursuing other opportunities which may compete for business with our
        operations.
 
 ***We
        may be unable to retain management personnel at our
        properties.***
 
 We
        retain
        management personnel and key executives through a combination of programs
        and
        techniques, including employment agreements, performance-based compensation,
        and
        other types of incentives and benefit packages.
 
 A
        number
        of current members of management and key executives are under employment
        contracts that expire from time to time. While we will make every reasonable
        effort to maintain those management personnel and key executives that are
        viewed
        as valuable to the operations of our casinos, there can be no assurance as
        to
        our success. Though we will attempt to fill vacated management and key executive
        positions determined to be necessary to our operations, there can be no estimate
        as to the time frame in filling these positions. Any delays in filling these
        positions could have a materially negative impact on our operations and
        financial results.
 
 ***Employee
        relations and union related issues could result in work stoppages at our
        casino
        properties, which could seriously impact the profitability of our
        business.***
 
 As
        of
        December 31, 2006, we employed approximately 2,900 persons of whom
        approximately 11% are represented by unions and subject to collective bargaining
        agreements. A strike, work stoppage or other slowdown could significantly
        disrupt our operations, which could have a material adverse effect on our
        operations and financial results.
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 Certain
        of our collective bargaining agreements will expire in the near future and
        we
        are currently in the process of negotiating new collective bargaining agreements
        with respect to certain employees. If we are unable to enter into new,
        satisfactory labor agreements with our unionized employees, we could experience
        a significant disruption to our operations, which could have a material adverse
        effect on our financial results. In addition, our non-unionized workforce
        may
        become subject to union organizing efforts, which could cause us to incur
        additional labor costs and increase the union related risks we now
        face.
 
 ***Loss
        of our casino properties from service would adversely affect our
        operations.***
 
 Our
        gaming facilities might be damaged or interrupted by fire, flood, wind, power
        loss, technology or mechanical failure, extended or extraordinary maintenance,
        earthquakes, terrorist attacks, war or similar events. In addition, the Majestic
        Star and Majestic Star II riverboats and our Tunica vessel and its dockside
        facilities are subject to risks in addition to those associated with land-based
        casinos, including loss of service due to casualty, mechanical failure, extended
        or extraordinary maintenance or inspection (including routine inspections
        required by the U.S. Coast Guard). In addition, the Tunica vessel is subject
        to
        access restrictions which may be imposed by the Mississippi authorities
        controlling the mainline Mississippi River levee in Tunica. Loss of our casino
        properties from service for any period of time would adversely affect our
        business, financial condition and results of operations.
 
 ***Changes
        in economic conditions, including fuel costs, may impact our financial
        performance.***
 
 Our
        business is affected by economic and market conditions in the markets from
        which
        we draw our customers. Majestic Star and Majestic Star II are particularly
        affected by economic conditions in the Midwest. A recession or economic
        slowdown, changes in general customer confidence or spending, increased fuel
        and
        transportation costs or travel concerns could cause a reduction in visitation
        to
        our properties, which could adversely affect our results of
        operations.
 
 ***We
        are subject to potential exposure to environmental liabilities.***
 
 We
        are
        subject to a variety of federal, state and local governmental laws and
        regulations relating to the use, storage, discharge, emission and disposal
        of
        hazardous materials. Failure to comply with such laws could result in the
        imposition of severe penalties or restrictions on operations by governmental
        agencies or courts that could adversely affect operations.
 
 The
        Buffington Harbor complex is located on a site where prior industrial operations
        and activities may have resulted in contamination of the environment. As
        the
        owner and operator of Majestic Star and Majestic Star II, we could be held
        responsible for the costs of addressing any contamination. Our liability
        under
        applicable environmental laws may be imposed without regard to whether we
        knew
        of, or were responsible for, the presence of hazardous substances and, in
        some
        cases, may not be limited to the value of the affected property. There can
        be no
        assurance that further development of the land, **** or
        of a
        new harbor, and the related construction, will not identify environmental
        contamination. If this were to occur, the costs of remediation or the disruption
        to our business could adversely affect our operations and may also adversely
        affect our ability to sell, lease or operate the property or to borrow against
        it. Further, the land has been the site of a spill and historical environmental
        contamination. Two leaking underground storage tank sites located in close
        proximity to the land may also impact the environmental condition of such
        land.
        Until the leaking underground storage tank sites receive final designation
        from
        the Indiana Department of Environmental Management and their impact on the
        land
        analyzed, environmental consultants have indicated that these sites are a
        recognized environmental condition. We are not entitled to indemnification
        from
        any prior owners or operators of the site with respect to environmental matters,
        except the indemnification from the City of Gary for a 170 acre site owned
        by
        Majestic Star.
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 We
        are
        not aware of any environmental contamination at the Fitzgeralds properties
        in
        Tunica, Mississippi and Black Hawk, Colorado. As for the Fitzgeralds Tunica
        property, an environmental investigation may not have been conducted prior
        to
        the purchase of this property, and accordingly, we may not qualify for an
        “innocent owner” or similar defense to any pre-development environmental
        liabilities that might be discovered in the future. The Fitzgeralds Black
        Hawk
        property, however, is located within a 400-square mile area that in 1983
        was
        designated as the Clear Creek/Central City National Priorities List Site
        Study
        Area (“Study Area”) pursuant to the Comprehensive Environmental Response,
        Compensation and Liability Act of 1980, as amended. Although Fitzgeralds
        Black
        Hawk is not within any of the specific areas of the Study Area currently
        identified for investigation or remediation, no assurance can be given that
        environmental problems will not subsequently be discovered, including in
        connection with any future construction on the expansion parcel of the property.
        Furthermore, the EPA or other governmental authorities could broaden their
        investigations and identify areas of concern within the site, and we could
        be
        identified as a “potentially responsible party” and any liability related
        thereto could have a material adverse effect on us. We do not have insurance
        to
        cover environmental liabilities, if any.
 
 
 **ITEM
        1B. UNRESOLVED STAFF COMMENTS**
 
 None.
 
 
 **ITEM
        2. PROPERTIES**
 
 Information
        relating to the location and general characteristics of our properties appears
        under Item 1. “Business ** -
        Gaming
        Facilities” and is incorporated herein by reference.
 
 Majestic
        Star and Majestic Star II are riverboat casinos docked at Buffington Harbor
        in Gary, Indiana. The site has convenient access via either the Chicago Skyway
        or Interstate 80/94.
 
 We
        own
        320 acres of property in and around Buffington Harbor. This land is held
        for
        future development, which could incorporate various new casino amenities,
        and
        may be funded with both public and private investments.
 
 Fitzgeralds
        Tunica is located on a 50-acre site in north Tunica County, Mississippi.
        The
        site is accessible via Interstate 55 and then Highway 61.
 
 Fitzgeralds
        Black Hawk is located adjacent to the entrance to the downtown gaming area
        of
        Black Hawk, Colorado. Fitzgeralds Black Hawk is accessible via Interstate
        70 and
        then Highway 119. On December 30, 2005, the Company acquired 2.75 acres
        directly behind Fitzgeralds Black Hawk. That property is available for future
        development.
 
 Our
        Senior Secured Credit Facility and Senior Secured Notes are secured by a
        lien on
        substantially all of our assets and the assets of our subsidiary guarantors,
        including the real property.
 
 
 **ITEM
        3. LEGAL PROCEEDINGS**
 
 Various
        legal proceedings are pending against the Company. Management considers all
        such
        pending proceedings, comprised primarily of personal injury and equal employment
        opportunity claims, to be routine litigation incidental to the Company’s
        business. Except as described below, management believes that the resolution
        of
        these proceedings will not individually, or in the aggregate, have a material
        effect on the Company’s financial condition, results of operations or cash
        flows.
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 Anti-trust
        litigation. In June
        2003, a complaint was filed in the U.S. District Court for the Northern District
        of Mississippi against Tunica County casino owners and operators, including
        Barden Mississippi, the Tunica Casino Operators Association and the Tunica
        County Tourism Commission alleging violation of federal and state anti-trust
        claims, as well as various other tort and contract claims. The plaintiffs
        claim
        the defendants made a joint decision to refuse to advertise on the plaintiffs’
website. The plaintiffs are seeking treble, compensatory and punitive damages
        totaling approximately $33.0 million, plus interest and attorney’s fees. Each of
        the casino defendants, including Barden Mississippi, filed counterclaims
        against
        the plaintiffs alleging, among other claims, trademark infringement. Since
        filing the complaint, the plaintiffs’ anti-trust and common law tort claims
        against the Tunica County Tourism Commission and the Tunica Casino Operators
        Association have been dismissed. One casino defendant has also entered into
        a
        settlement with the plaintiffs that resulted in its dismissal from the suit.
        The
        remaining casino defendants filed a motion for summary judgment on each of
        the
        claims alleged against them and the plaintiffs filed a motion for summary
        judgment with respect to each of the casino defendants’ counterclaims. On
        December 21, 2005, the Court entered an order (the “Order”) granting the
        casino defendants’ motion for summary judgment and dismissing with prejudice
        plaintiffs’ claims against them. The casino defendants’ counterclaims remain
        pending. On January 19, 2006, plaintiffs filed a Rule 54(b) motion
        requesting that the Court direct the Clerk of Court to enter a judgment based
        on
        the Order or, in the alternative, issue an order certifying the Order for
        interlocutory appeal. The casino defendants filed an opposition to the
        plaintiffs’ motion on February 6, 2006. On February 7, 2006, the Court
        granted the plaintiffs’ motion for partial final judgment and on March 8, 2006,
        the plaintiffs filed a notice of appeal. The trial date for the casino
        defendants’ counterclaims had been continued until such time as the Court of
        Appeals ruled on the plaintiffs’ appeal. On January 30, 2007, the Court of
        Appeals set the date of March 7, 2007 for hearing oral arguments on
        plaintiffs’ appeals. Without any objection by the defendants, Plaintiffs’
counsel requested a continuance to April 16, 2007 to accommodate a
        pre-existing conflict. The Court of Appeals then cancelled oral arguments
        and
        decided to instead rule on the briefs. The Company intends to vigorously
        defend
        the appeal. At this time, it is too early to determine the outcome of this
        litigation and the effect, if any, on the Company’s financial position and
        results of operations.
 
 Trump
        Indiana Litigations. At the
        time of the closing of the Trump Indiana Acquisition, Trump Indiana was a
        party
        to certain pending lawsuits. Pursuant to the terms of the Stock Purchase
        Agreement (“SPA”) dated November 3, 2005 between the Company and TERH, TERH
        agreed to indemnify the Company and its affiliates against any and all losses
        arising out of certain of those lawsuits (the “Trump Litigation Indemnity”);
        however, the Trump Litigation Indemnity is unsecured. Included in the Trump
        Litigation Indemnity is that certain Trump Indiana ERISA lawsuit (described
        below) and an employment practices lawsuit (described below).
 
 The
        Trump
        Indiana ERISA lawsuit is pending in the United States District Court for
        the
        District of New Jersey. Plaintiffs, participants in the Trump Companies’ Capital
        Accumulation Plan, filed a Complaint on February 8, 2005 against certain
        individuals and organizations, including Trump Indiana, Inc. and members
        of the
        Trump Capital Accumulation Plan Administrative Committee. The Complaint alleges,
        among other things, that defendants breached certain fiduciary duties under
        the
        Employee Retirement Income Security Act of 1974, as amended, when Trump Hotel
        and Casino Resorts Common Stock held in employee accounts was sold by the
        Committee. The Complaint seeks, among other things, damages in an amount
        ranging
        from $1.1 million to $2.3 million plus costs and attorneys’ fees. Defendants
        filed an Answer denying any wrongdoing and the case has been certified as
        a
        class action. Discovery has been completed and defendants anticipate filing
        a
        summary judgment motion seeking dismissal of all claims by April 13, 2007.
 
 The
        employment practices lawsuit included in the Trump Indemnity is a lawsuit
        filed
        on October 12, 2001 by a former employee of Trump Indiana in the U.S.
        District Court, that alleges age, sex, race, and color discrimination claims
        as
        well as equal pay and retaliation claims. The litigation was stayed during
        the
        bankruptcy of Trump Indiana. At this time, we cannot predict the outcome
        of
        either the Trump Indiana ERISA lawsuit or the Trump Indiana employment practices
        litigation.
  21
 Table
            of Contents
  
 Majestic
        Star Income Withholding Tax Protest .
        The
        Company has been assessed $2.6 million, plus interest, for the fiscal year
        1996
        and the period January 1, 1998 through June 18, 2001, by the Indiana
        Department of Revenue (“Department”). On September 7, 2004, the Department
        assessed BDI, the Company’s ultimate parent and member, $1.3 million, plus
        penalties and interest for the remainder of 2001 and all of fiscal year 2002.
        The Department held a hearing on the 1996 through 2002 tax years on
        April 7, 2006, and issued rulings on January 17, 2007. In those
        rulings, the Department sustained BDI’s protest of the imposition of a
        negligence penalty, holding that BDI’s failure to pay the assessed tax amount
        was due to reasonable cause and not due to negligence. The Department also
        concurred with the position taken by the Company and BDI that to the extent
        it
        is ultimately determined they had net operating losses for a taxable year,
        those
        net operating losses are to be applied to offset any add back of riverboat
        wagering tax for income tax purposes. The Department denied the Company’s
        protest that non-resident withholding taxes did not apply for the period
        January 1, 1998 through June 18, 2001.
 
 BDI's
        non-resident shareholder has been assessed $0.2 million, plus penalty and
        interest, for 2003. The protest for 2003 is currently pending before the
        Legal
        Division of the Department. The Department held a hearing on the 2003 protest
        on
        December 5, 2006, and has taken the matter under advisement. The Department
        is expected to issue a ruling on the 2003 protest later this year.
 
 The
        assessments relate to deductions for gaming taxes paid by the Company, which
        deductions were taken for Indiana income tax purposes. The Department has
        taken
        the position that the Company had an obligation to add back State gaming
        taxes
        in determining the Company’s taxable income, and to withhold and remit tax for
        the non-resident shareholder of BDI. On April 19, 2004, the Indiana Tax
        Court ruled in a similar case involving another Indiana casino, Aztar Indiana
        Gaming Corporation (“Aztar”), that the gross wagering tax is a tax based on or
        measured by income and that it must be added back to the taxable income base
        for
        the purpose of determining adjusted gross income for Indiana tax purposes.
        On
        September 28, 2004, the Indiana Supreme Court denied Aztar’s request to
        review the Indiana Tax Court’s decision, and thus, the Indiana Tax Court’s
        opinion in the Aztar case is controlling precedent on the wagering tax add-back
        issue. The Company continues to pursue its protest with the Department on
        the
        grounds that the assessments contain calculation errors and that its protest
        sets forth issues not decided in the Aztar case. No liability has been accrued
        by the Company relating to this matter.
 
 The
        Company’s indentures governing the Senior Secured Notes and the Senior Notes and
        the loan agreement related to the Senior Secured Credit Facility allow the
        Company to make distributions to BDI for tax purposes. Accordingly, should
        the
        Company’s member ultimately be found liable for additional state income taxes to
        the State of Indiana, the Company would make distributions sufficient to
        pay the
        additional tax. Any payments would be recorded as distributions in Member’s
        Deficit. The Company does not intend to make any distributions for the years
        in
        which an assessment was received until it has fully evaluated its options
        with
        BDI. For the years subsequent to 2003, BDI's non-resident shareholder has
        paid
        Indiana state income tax taking into account the add-back of gross wagering
        tax.
 
 Majestic
        Star Sales and Use Tax Assessments .
        In
        October 2005, the Department assessed Majestic Star for unpaid sales and
        use
        taxes, with penalties and interest, for the period 2001 through 2004. The
        sales
        and use tax assessments, with penalties and interest, total $0.3 million.
        The
        use tax portions of the assessments relate to capital and operating supply
        purchases, and food, merchandise and other products provided to the guests
        of
        Majestic Star at no charge. On November 15, 2005, Majestic Star paid $0.2
        million under the State of Indiana amnesty program to eliminate all use tax
        and
        a portion of the sales tax assessment for the 2001 through 2004 tax years.
        All
        penalties and interest associated with such payments are waived in their
        entirety pursuant to Indiana law. The remaining $0.1 million of the assessment
        relates to the difference between sales tax on the full retail price of
        merchandise and other products provided to Majestic Star’s customers at no
        charge less sales tax on the cost of this merchandise and other products,
        and
        sales tax on the retail value of complimentary food provided to Majestic
        Star’s
        customers. Both items relate to the period August 2003 through 2004. On
        November 15, 2005, Majestic Star filed a protest of the proposed
        assessments protesting the sales tax assessments related to this
        period.
  22
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 In
        addition, Majestic Star has a receivable on its balance sheet in the amount
        of
        $0.1 million related to the two items noted immediately above for the period
        2001 through July 2003. During this period of time, Majestic Star was remitting
        full sales tax on the retail value of complimentary food, merchandise and
        other
        products to the Department. In or around July 2003, the Department notified
        Majestic Star’s management that no sales tax should be paid on items provided on
        a complimentary basis to its customers. At the time Majestic Star established
        the receivable for sales taxes paid during the period 2001 through July 2003.
        In
        or around July 2003, Majestic Star also filed claims for refund with the
        Department in the total amount of $0.1 million for tax years 2001 and 2002
        and
        for the period January through July 2003, on food and other items provided
        to
        its customers on a complimentary basis. In December 2005, those refund claims
        were denied by the Department, and on March 27, 2006, Majestic Star
        appealed those denials to the Indiana Tax Court. Majestic Star believes that
        it
        has no sales or use tax liability for food for human consumption purchased
        by it
        and prepared for serving to its customers on a complimentary basis based
        on the
        Hyatt decision (see below for a discussion of the Hyatt decision).
 
 Should
        the Department make similar assessments for 2005 and 2006, the Company estimates
        its tax exposure would be approximately $0.1 million and $0.2 million,
        respectively.
 
 BHR
        Sales and Use Tax Assessments
  1998-2001
        Tax Years. During
        the years at issue, the two 50% members of BHR were Majestic Star and Trump
        Indiana. In October 2002, the Department assessed BHR for unpaid use tax
        for
        1998 and unpaid sales and use taxes for 1999 through 2001 in the total amount
        of
        $0.4 million, excluding interest. The assessments related to purchases of
        capital assets and supplies, vehicle leases and rental of other items of
        personal property, for which no sales tax was paid and no use tax was
        self-assessed. In addition, included in the assessment for the years 1999
        through 2001, the Department assessed tax on BHR’s provision of food, provided
        on a complimentary basis, to the patrons and employees of BHR’s members,
        Majestic Star and Trump Indiana. Sales tax was assessed on BHR’s cost of the
        food, as measured by the members’ periodic reimbursements to BHR. BHR paid the
        use tax portion of the assessment and filed a protest of the proposed
        assessments of sales tax in December 2002. BHR is disputing the assessment
        of
        sales tax on food provided at no charge, to the employees and patrons of
        Majestic Star and Trump Indiana, pursuant to the decision in Hyatt Corp v.
        Indiana Department of State Revenue (“Hyatt”). In Hyatt, the Department assessed
        Hyatt for complimentary continental breakfasts and amenity meals provided
        to its
        customers, plus the free meals provided to Hyatt’s full time employees. Under
        Indiana Code, sales of food intended for human consumption are exempt from
        sales
        tax. Food includes many food products (cereal, milk, eggs, meat, fish,
        vegetables, fruit, spices, etc.) that are prepared for human consumption.
        In
        Hyatt, the petitioner, a hotel operator, sought a refund for use tax paid
        on
        food purchased for complimentary meals that were provided to both guests
        and
        employees. Hyatt prevailed. BHR is arguing that since its inception, it has
        acted as the agent of Majestic Star and Trump Indiana with authority to
        purchase, prepare and provide food to their employees and patrons. This
        arrangement was memorialized in a written Limited Agency Agreement dated
        effective January 1, 2001. BHR’s position has been that all acts performed
        by it in its agency capacity (including the purchase, preparation and delivery
        of food) should be treated as though the acts had been performed by BHR’s
        joint venture partners, Majestic Star and Trump Indiana.
 
 The
        Department conducted a hearing on the protest in August 2005 and in October
        2005, issued a ruling waiving penalties but upholding the proposed $0.4 million
        assessment. BHR filed a petition with the Indiana Tax Court in March 2006,
        protesting the Department’s ruling with regard to the 1999-2001 tax
        years.
  23
 Table
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 2002-2004
        Tax Years. In
        October 2005, the Department assessed BHR $0.3 million in sales and use taxes
        for the 2002 tax year, inclusive of interest and penalties, for many of the
        same
        sales tax and use tax items as were assessed for the earlier years. However,
        for
        2002, unlike prior years, the Department assessed sales tax on complimentary
        food provided to the patrons of Majestic Star and Trump Indiana based on
        the *retail* value of
        the items provided rather than on the *cost* of
        those
        items to BHR. BHR, prior to being dissolved, or Majestic Star, has not reserved
        for the assessment related to the prepared meals provided to the employees
        and
        patrons of Majestic Star and Trump Indiana. On November 15, 2005, BHR paid
        the use tax portion of the assessment for the 2002 tax year under Indiana’s tax
        amnesty program, thereby eliminating interest and penalties on the amount
        paid.
        The remaining amount outstanding of $0.2 million relates to the same issues
        as
        are faced by Majestic Star in its sales and use tax audits (see above). BHR
        has
        protested the remainder of the assessments for 2002 awaiting the Department’s
        ruling on its protest for the 2002 calendar year. In June 2006, the Department
        assessed BHR for unpaid sales and use taxes, with interest, for the 2003
        and
        2004 calendar years. The sales and use tax assessments total $0.3 million.
        The
        sales tax portion of the assessment involves the same issues as identified
        in
        the 2002 and prior years’ assessments. The use tax portion of the assessment
        relates to BHR’s provision of food, provided without charge, to its employees
        and employees and patrons of its owners through a third-party vendor. BHR
        protested these assessments in August 2006 and Majestic Star is awaiting
        a
        hearing on such protests before the Department. Should the Department maintain
        its position that sales taxes are due on the retail value of complimentary
        meals
        BHR provided to employees of Majestic Star and Trump Indiana, BHR’s estimated
        2005 sales tax exposure for the complimentary meals will be $0.1 million.
        Pursuant to the terms of the SPA, TERH is obligated to indemnify the Company
        for
        50% of BHR’s pre-closing tax liability.
 
 
 **ITEM
        4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
        HOLDERS**
 
 Not
        applicable.
  24
 Table
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  **PART
        II**
 
 **ITEM
        5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
        MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES**
 
 The
        Company is a limited liability company and Mr. Barden indirectly holds 100%
        of
        our membership interests. There is no established public trading market for
        the
        membership interests.
 
 We
        did
        not pay any cash dividends during the past three years, and have no current
        plan
        to pay any cash dividends in the near term. We are restricted in our ability
        to
        pay dividends under various covenants of our debt agreements.
 
 
 **ITEM
        6. SELECTED FINANCIAL DATA**
 
 FIVE
        YEAR
        SUMMARY OF SELECTED FINANCIAL DATA
 
 The
        accompanying financial data for 2006 includes all operating results for the
        Majestic Properties, Fitzgeralds Tunica and Fitzgeralds Black Hawk for the
        full
        year. The 2005 financial data includes 11 days of operating results related
        to
        the acquisition of Trump Indiana and BHR, (including 100% of BHR’s operations
        rather than 50%, as BHR had formerly been a 50% joint venture of the Company
        and
        accounted for under the equity method of accounting). The 2005 financial
        data
        also includes 11 days of operations for BHPA, which also became a wholly
        owned
        subsidiary as a result of the Trump Indiana acquisition and a contribution
        of
        our affiliate’s 50% interest in BHPA to the Company. Pursuant to SEC Staff
        Accounting Bulletin 73 Topic 5(J) related to “pushdown” basis of accounting, the
        Company’s financial statements include Majestic Holdco’s debt, and related
        financing costs, including amortization and interest on such debt. Neither
        the
        Company nor any of its direct or indirect subsidiaries is a guarantor of
        Majestic Holdco’s debt. Neither the equity nor assets of the Company or any of
        its direct or indirect subsidiaries secure the debt of Majestic Holdco, and
        the
        Company is restricted in the amount of cash that can be distributed to Majestic
        Holdco. The 2004 financial data includes Fitzgeralds Black Hawk as a continuing
        operation as a result of the mutual termination in April 2005 of the agreement
        to sell Fitzgeralds Black Hawk.
 
 For
                  The Years Ended December 31,2006
              
              2005
                  (1)
              
              2004
              
              2003
              
              2002(in
                  thousands)STATEMENT
                  OF OPERATIONS DATA:Net
                  revenues
              
              $
              354,830
              
              $
              261,972
              
              $
              260,511
              
              $
              244,955
              
              $
              246,328Cost
                  and expenses
              
              
              309,170
              
              
              233,240
              
              
              226,761
              
              
              213,510
              
              
              210,678Operating
                  income
              
              
              45,660
              
              
              28,732
              
              
              33,750
              
              
              31,445
              
              
              35,650Interest
                  expense, net (2)
              
              
              (59,852
              )
              
              (30,219
              )
              
              (28,530
              )
              
              (31,179
              )
              
              (32,225
              )(Loss)
                  gain on extinguishment of debt
              
              
              -
              
              
              (3,688
              )
              
              -
              
              
              (31,960
              )
              
              69(Loss)
                  income from continuing operations
              
              
              (14,307
              )
              
              (5,302
              )
              
              5,019
              
              
              (31,879
              )
              
              3,311Loss
                  from discontinued operation (3)
              
              
              -
              
              
              -
              
              
              -
              
              
              (11,973
              )
              
              (1,995
              )Net
                  (loss) income
              
              
              (14,307
              )
              
              (5,302
              )
              
              5,019
              
              
              (43,852
              )
              
              1,316
  25
 Table
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 As
                  of December 31,2006
              
              2005
              
              2004
              
              2003
              
              2002
                  (4)(in
                  thousands)BALANCE
                  SHEET DATA:Cash
                  and cash equivalents
              
              $
              25,532
              
              $
              32,368
              
              $
              16,722
              
              $
              22,058
              
              $
              24,548Restricted
                  cash
              
              
              3,327
              
              
              3,190
              
              
              2,540
              
              
              1,400
              
              
              1,250Investment
                  in BHR, net
              
              
              -
              
              
              -
              
              
              27,432
              
              
              29,734
              
              
              31,833Total
                  assets (2)
              
              
              506,360
              
              
              517,959
              
              
              246,376
              
              
              233,215
              
              
              275,810Current
                  liabilities
              
              
              49,023
              
              
              46,074
              
              
              31,918
              
              
              33,666
              
              
              25,458Long-term
                  debt (2)
              
              
              596,928
              
              
              592,699
              
              
              316,858
              
              
              301,715
              
              
              274,529Total
                  liabilities
              
              
              645,951
              
              
              638,773
              
              
              348,776
              
              
              335,382
              
              
              299,985Member’s
                  deficit
              
              
              (139,591
              )
              
              (120,814
              )
              
              (102,400
              )
              
              (102,167
              )
              
              (24,175
              )
 
 NOTES:
 (1)  On
        December 21, 2005, the Company acquired Trump Indiana (subsequently renamed
        Majestic Star II), along with its joint venture interests in BHR and BHPA,
        and commenced operations of Majestic Star II on December 21, 2005.
        Accordingly, the consolidated results of operations for the year ended
        December 31, 2005 reflect only 11 days of operating results for Majestic
        Star II and 100% of BHR and BHPA.
 
 (2)
        Includes the push down of debt, financing costs, including amortization,
        and
        interest on debt issued at Majestic Holdco on December 21, 2005. Neither
        the Company nor any of its direct or indirect subsidiaries is a guarantor
        of
        Majestic Holdco’s debt. Also, neither the equity nor assets of the Company or
        any of its direct or indirect subsidiaries secure the debt of Majestic Holdco,
        and the Company is restricted in the amount of cash that can be distributed
        to
        Majestic Holdco. Majestic Holdco’s debt, net of original issue discount, in the
        amount of $45.3 million was pushed down to the Company at December 31, 2005.
        In
        addition, financing costs of $2.8 million and associated amortization of
        $20,000
        were pushed down. Lastly, interest in the amount of $0.2 million was pushed
        down. As of December 31, 2006, Majestic Holdco’s debt of $51.1 million, net
        of original issue discount, was pushed down to the Company. In addition,
        financing costs related to the debt as of December 31, 2006 of $2.4 million
        are being pushed down. The 2006 income statement includes $6.3 million of
        interest expense related to the amortization of the original issue discount
        and
        amortization of deferred financing costs.
 
 (3)  Loss
        from
        discontinued operations for the years ended December 31, 2003 and 2002
        represents the operating results of Barden Nevada, which was spun off to
        BDI on
        December 31, 2003. The loss from discontinued operations for the year ended
        December 31, 2003 includes a $10.0 million charge resulting from the
        write-down of the value of Barden Nevada’s assets to fair market value
        concurrent with the spin-off.
 
 (4)  Barden
        Nevada was spun out to BDI effective December 31, 2003. The selected
        balance sheet data as of December 31, 2002 reflects the assets and
        liabilities of Barden Nevada as held for use.
  26
 Table
            of Contents
  
 **ITEM
        7. MANAGEMENT’S DISCUSSION AND ANALYSIS**
 
 STATEMENT
        ON FORWARD-LOOKING INFORMATION
 
 Throughout
        this report we make forward-looking statements. Forward-looking statements
        include the words “may,” “will,” “would,” “could,” “likely,” “estimate,”
“intend,” “plan,” “continue,” “believe,” “expect” or “anticipate” and other
        similar words and include all discussions about our acquisition and development
        plans. We do not guarantee that the transactions and events described in
        this
        report will happen as described or that any positive trends noted in this
        report
        will continue. The forward-looking statements contained in this report are
        generally located in the material set forth under the headings “Business,” and
“Management’s Discussion and Analysis of Financial Condition and Results of
        Operations,” but may be found in other locations as well. These forward-looking
        statements generally relate to our plans, objectives and expectations for
        future
        operations and are based upon management’s reasonable estimates of future
        results or trends. Although we believe that our plans and objectives reflected
        in or suggested by such forward-looking statements are reasonable, we may
        not
        achieve such plans or objectives. You should read this report completely
        and
        with the understanding that actual future results may be materially different
        from what we expect. We will not update forward-looking statements even though
        our situation may change in the future.
 
 In
        addition to the specific factors identified in Item 1A. Risk Factors and
        included herein by reference and elsewhere in this report, other factors
        that
        might cause actual results to differ from our expectations, or may cause
        us to
        modify our plans and objectives, include but are not limited to:
 
 ·
              adverse
                  determinations of issues related to disputed taxes, particularly
                  in
                  Indiana, as evidenced by the charge in 2004 of retroactive property
                  taxes
                  and the requirement that deductions previously taken for taxes
                  paid on
                  gross gaming receipts are disallowed on our member’s Indiana state income
                  tax return;
 
 ·
              other
                  adverse conditions, such as changes in general customer confidence
                  or
                  spending, increased fuel and transportation costs, or travel concerns
                  that
                  may adversely affect the economy in general and/or the casino and
                  gaming
                  industry in particular;
 
 ·
              seasonal
                  influences that cause our casino operations to
                  fluctuate;
 
 ·
              other
                  factors discussed elsewhere in this report or that may be disclosed
                  from
                  time to time in filings we make with the SEC or
                  otherwise.
 
 
 All
        future written and verbal forward-looking statements attributable to us or
        any
        person acting on our behalf are expressly qualified in their entirety by
        the
        cautionary statements contained or referred to in this report. In light of
        these
        risks, uncertainties and assumptions, the forward-looking events discussed
        in
        this report might not occur.
 
 The
        following discussion should be read in conjunction with, and is qualified
        in its
        entirety by, our financial statements, including the notes thereto listed
        in
        Item 15(a).
  27
 Table
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 **EXECUTIVE
        OVERVIEW**
 
 ***The
        Company***
 
 The
        Majestic Star Casino, LLC and its subsidiaries (collectively, the “Company”),
        operate two riverboat gaming facilities and a dockside pavilion known as
        the
        Buffington Harbor complex located in Gary, Indiana (separately “Majestic Star,”
“Majestic Star II,” and “BHR” and collectively as the “Majestic
        Properties”) and two Fitzgeralds brand casino-hotels located in Tunica County,
        Mississippi (“Barden Mississippi” or “Fitzgeralds Tunica”) and Black Hawk,
        Colorado (casino only) (“Barden Colorado” or “Fitzgeralds Black Hawk”). The
        Company has entered into an expense-sharing arrangement with Barden Nevada
        Gaming, LLC (“Barden Nevada” or “Fitzgeralds Las Vegas”) for support services.
        See Note 15 of the Notes to the Consolidated Financial Statements.
 
 ***Key
        Performance Indicators***
  At
        our
        casino properties, casino revenues, which contribute 91.6% of our consolidated
        gross revenues, are the combination of our win at slots and table games and
        are
        typically called slot revenues (for slot machine win) and table games revenues
        (for table games win). Slot revenues and table games revenues are normally
        described with two principal components: (1) slot machine handle or coin-in,
        which comprises the total dollar volume wagered at the slot machines, and
        slot
        machine win percentage, which is the amount the casino won from customers
        divided by the amounts wagered by customers at slot machines (handle or
        coin-in), and (2) table games drop, which represents the sum of markers issued
        (credit instruments) less markers paid at the tables, plus cash, foreign
        chips
        and other cash equivalents, and free bet coupons deposited in the table drop
        box, and table games hold percentage, which is the amount of drop, plus the
        closing table games inventory (i.e. the amount of chips, tokens and coin
        used to
        operate the table games) and transfer of chips, tokens and coins to the casino
        cashier area (credits), less the beginning table games inventory and transfers
        of chips, tokens and coins to the table games (fills), divided by table games
        drop. Slot machine win and table games hold percentages are not fully
        controllable by us.
 
 ***Trump
        Indiana Acquisition***
 
 On
        December 21, 2005, the Company purchased Trump Indiana, Inc. (“Trump
        Indiana”) from Trump Entertainment Resorts Holdings L.P. (“TERH”). Trump
        Indiana, Inc has been subsequently re-branded as Majestic Star II. As part
        of that purchase, the Company also acquired Trump Indiana’s 50% joint venture
        interest in BHR and in Buffington Harbor Parking Associates, L.L.C. (“BHPA”),
        and an affiliate of the Company contributed to the Company its 50% interest
        in
        BHPA (collectively, the “Trump Indiana Acquisition”). As a result of these
        transactions, Majestic Star II, BHR and BHPA became wholly owned
        subsidiaries of the Company. On August 4, 2006, BHPA was merged into Majestic
        Star. As of December 31, 2006, BHR was dissolved.
 
 Since
        the
        acquisition, we have spent a significant amount of time and effort to integrate
        Majestic Star II into our other Gary, Indiana operations. Difficulties in
        integrating Majestic Star II, intense competition in the Northwest Indiana
        market, and road construction on main highways that lead to our facilities
        have
        resulted in revenues and cash flows at the Majestic Properties below our
        expectations. Margins at the Majestic Properties declined in the latter part
        of
        2006 as we increased costs in marketing, promotions, and food and beverage
        in
        order to remain competitive and try to build back our customer base. Management
        has added staff in order to provide better service on the casino floor and
        added
        leased and participation slot machines in order to provide our casino guests
        with the latest and most entertaining games available.
 
 As
        reported by the IGC, the casino revenues at our Majestic Properties declined
        by
        14.0% for the year ended December 31, 2006 compared to 2005, when the operating
        entities were Majestic Star and Trump Indiana (Majestic Star II for the
        last eleven days of 2005). For all of the Northwest Indiana gaming market,
        casino revenues increased 5.4% in 2006 compared to 2005. Through the first
        two
        months of 2007, casino revenues at our Majestic Properties were down 11.3%.
        The
        Northwest Indiana gaming market as a whole was down 5.0% for the same two-month
        period in 2007. The market continues to be extremely competitive and our
        ability
        to grow our casino revenues will continue to be pressured by the actions
        of the
        other Northwest Indiana casinos.
  28
 Table
            of Contents
  
 In
        an
        effort to improve our market position in 2007, we will:
 
 ·
              Continue
                  refining our direct mail program to achieve a better return from
                  the
                  customers we are targeting in our mailing campaigns;
 
 ·
              Take
                  over the operation of the food and beverage outlets in the BHR
                  pavilion in
                  order to improve the food offerings to our customers, level of
                  service,
                  the physical appearance of the outlets and make these restaurants
                  true
                  amenities for the casino;
 
 ·
              Enhance
                  the slot product on our casino floor by continuing to add new and
                  entertaining machines, through a combination of slot machine purchase
                  and
                  lease agreements;
 
 ·
              Continue
                  to improve the quality of out staff on the casino floor, particularly
                  in
                  table games, to increase guest service and increase casino revenues;
 
 ·
              Enhance
                  our hosting and guest development programs to re-build our base
                  of gaming
                  customers that are loyal to our
                  facilities;
 
 ·
              Change
                  Don and Mike’s Sports Bar into a baccarat room in order to better cater to
                  the desires of our Asian baccarat
                  players;
 
 ·
              Continue
                  development plans, which would include a hotel and other amenities
                  that
                  would support the Company’s casino operations, and evaluate funding
                  sources, including potential investors and the availability of
                  development
                  fund monies and tax credits;
 
 ·
              Continue
                  to evaluate our plans for a single-level vessel, which would help
                  our
                  ability to remain competitive in the market;
                  and
 
 ·
              Pursue
                  the ability to relocate a gaming license to an area within the
                  state of
                  Indiana that is underserved by a casino operation; however, legislation
                  has been introduced that would freeze the location of Indiana’s existing
                  licenses. If such legislation were to become law in its current
                  form it
                  would preclude our ability to move a license outside
                  Gary.
 
 
 ***Overall
        Operating Results - 2006 compared to 2005***
 
 The
        discussion of our consolidated financial results for the year ended
        December 31, 2006 compared to 2005 is inclusive of the operating results of
        Majestic Star II, along with the additional 50% interest of BHR and BHPA,
        for a full year in 2006 compared to only 11 days in 2005. In addition, our
        financial results are inclusive of interest expense and amortization of
        financing costs related to the pushdown of Majestic Holdco’s Discount
        Notes.
 
 For
        the
        year ended December 31, 2006, consolidated gross operating revenues were
        $409.3 million compared to $307.6 million for 2005, an increase of $101.7
        million, or 33.0%. The Majestic Properties contributed $102.8 million of
        the
        increase, with all of the increase resulting from the Trump Indiana Acquisition.
        Fitzgeralds Tunica added $1.1 million to gross revenues, which was offset
        by a
        decrease of $2.2 million at Fitzgeralds Black Hawk.
  29
 Table
            of Contents
  
 In
        the
        year ended December 31, 2006, as compared to the same prior year period,
        consolidated casino revenues, which comprised 91.6% of consolidated gross
        revenues during the period, increased $94.2 million, or 33.5%, to $375.1
        million, due to increases at the Majestic Properties of $95.5 million, which
        resulted from the Trump Indiana Acquisition. Adding to the increase in
        consolidated casino revenue was an $0.8 million increase at Fitzgeralds Tunica,
        offset by declines in casino revenue of $2.1 million at Fitzgeralds Black
        Hawk.
        Casino revenues at Fitzgeralds Tunica were negatively impacted for the year
        ended December 31, 2006, by $4.5 million, due to the implementation of
        downloadable promotional credits. At
        Fitzgeralds Tunica customers directly download promotional credits to the
        slot
        machine thus eliminating the substantial amount of coupons mailed to and
        redeemed by our casino customers, with that cash being inserted into a slot
        machine and played off by the customer. The downloadable promotional credits,
        when played by the customer, are not being recognized as slot revenue; however,
        any jackpots won would be recognized as a reduction in slot revenues. When
        our
        marketing and promotional efforts were comprised principally of mailing coupons
        to our customers, those coupons, when redeemed, were being reflected in
        promotional allowances. The currency inserted and played off at the slot
        machine
        was recognized as revenue and any jackpots associated with this play would
        be a
        reduction of slot revenue .
 
 Promotional
        allowances for the year ended December 31, 2006 were $54.5 million compared
        to $45.7 million for the year ended December 31, 2005. Promotions have
        increased as a result of the Trump Indiana Acquisition and efforts to reposition
        the Fitzgeralds Tunica property toward attracting and retaining a higher
        level
        casino customer.
 
 In
        the
        year ended December 31, 2006, as compared to last year, operating expenses
        increased $75.9 million, with $77.9 million of this increase attributable
        to the
        Majestic Properties and specifically the Trump Indiana Acquisition. Offsetting
        the increased operating expenses from the Majestic Properties were lower
        expenses at Fitzgeralds Black Hawk and within our corporate group, as one
        time
        charges occurred in 2005. These charges resulted from the mutual termination
        of
        the Fitzgeralds Black Hawk sale which resulted in catch-up depreciation in
        the
        second quarter of 2005 of $1.5 million at Fitzgeralds Black Hawk and a $2.3
        million termination fee incurred at corporate.
 
 Operating
        income for the year ended December 31, 2006 was $45.7 million, an increase
        of $16.9 million, or 59.0%, compared to operating income of $28.7 million
        for
        the year ended December 31, 2005. Consolidated net loss was $14.3 million
        in the year ended December 31, 2006, an increase of $9.0 million when
        compared to a net loss of $5.3 million for the same period in 2005. Interest
        expense increased $29.8 million due to the Trump Indiana
        Acquisition.
 
 Developments,
        in addition to those described under “Trump Indiana Acquisition,” that affected
        our results during the year ended December 31, 2006, or that may affect
        future results are listed below:
 
 ·
              Competition
                  in our markets remains intense and continued aggressive marketing
                  by our
                  competitors in all our markets will require us to maintain a high
                  level of
                  marketing and promotional expenses.
  ·
              New
                  casinos and amenities in Northwest Indiana and Black Hawk, Colorado
                  have
                  impacted the results at the Majestic Properties and Fitzgeralds
                  Black Hawk
                  in 2006. Enhancements to existing casino facilities of our competitors
                  and
                  new casino facilities, that should open in the second half of 2007
                  and in
                  2008 will enhance the level of competition our Majestic Properties
                  experience in Northwest Indiana. In the Tunica market, a new casino
                  project has been announced that is expected to begin construction
                  in the
                  summer of 2007 and open 24 to 48 months later.
 
 ·
              The
                  $30.9 million expansion plans for Fitzgeralds Black Hawk are progressing.
                  This expansion will not only add more amenities for our guests,
                  but will
                  also increase the number of slot machines from approximately 600
                  to
                  approximately 1,000, which will all be ticket-in ticket-out (“TITO”). The
                  Company anticipates completing this project in the third quarter
                  of 2008.
  30
 Table
            of Contents
  
 ·
              In
                  an effort to improve market share and attract a higher-valued gaming
                  customer by enhancing the property, Fitzgeralds Tunica completed
                  a $3.5
                  million hotel renovation project in the last half of 2006, updating
                  108
                  hotel rooms as well as remodeling the hotel lobby and room corridors,
                  and
                  upgrading the elevator access areas. The remaining hotel rooms
                  are being
                  renovated in 2007. In conjunction with attracting a higher-valued
                  gaming
                  customer, and depending on cash flow, the property is looking to
                  open a
                  high-limit pit in 2007, remodel the casino floor and open a small
                  poker
                  room.
 
 ·
              The
                  management team at Fitzgeralds Tunica has implemented and is refining
                  changes to the property’s operating strategy to make the property more
                  competitive in the Tunica market and attract a higher value casino
                  customer. Along with a new advertising program, management has
                  also
                  enhanced the property’s direct mail, guest development and hosting
                  programs. Management has also focused on upgrading the property’s food and
                  beverage operations.
 
 ·
              As
                  mentioned previously, our Fitzgeralds Tunica property has implemented
                  downloadable promotional credits to our gaming devices, thus allowing
                  us
                  to greatly reduce coupons mailed to our casino customers. Downloadable
                  promotional credits will eliminate the loss from customers who
                  redeem
                  their coupons and leave the casino without putting any of the money
                  received in action. Downloadable promotional credits will also
                  allow us to
                  reduce our currency handling in our promotions booths, thus making
                  the
                  operations of these booths more efficient. We plan to implement
                  downloadable promotional credits at our other properties once we
                  assess
                  customer acceptance.
 
 ·
              In
                  2006, we spent approximately $25.4 million for the purchase of
                  slot
                  machines and TITO implementation, re-branding Trump Indiana to
                  Majestic
                  Star II, integration of our computer system with Trump Indiana,
                  remodeling the porte cochere at the Majestic Properties, upgrading
                  the
                  Fitzgeralds Tunica hotel and preparing for the Fitzgeralds Black
                  Hawk
                  expansion. As of December 31, 2006, we had 88% of our slot machines
                  at Fitzgeralds Tunica equipped with TITO and 100% of our slot machines
                  at
                  Fitzgeralds Black Hawk, Majestic Star and Majestic Star II are TITO
                  equipped. TITO allows our customers to play their favorite slot
                  machines
                  without interruption from machine paid jackpots and eliminates
                  much of the
                  coin handling that previously existed in our operations, allowing
                  us to
                  operate our casino much more
                  efficiently.
 
 The
        following tables set forth information derived from the Company's statements
        of
        operations, balance sheets and statements of cash flows.
  31
 Table
            of Contents
  
 For
                  The Year EndedDecember
                  31,2006
              
              2005
              
              2004(amounts
                  in thousands)Gross
                  revenues:Majestic
                  Properties (1)
              
              $
              263,264
              
              $
              160,457
              
              $
              154,273Fitzgeralds
                  Tunica
              
              
              107,481
              
              
              106,426
              
              
              104,892Fitzgeralds
                  Black Hawk
              
              
              38,549
              
              
              40,758
              
              
              41,318Total
              
              $
              409,294
              
              $
              307,641
              
              $
              300,483Net
                  revenues:Majestic
                  Properties (1)
              
              $
              237,422
              
              $
              143,624
              
              $
              141,058Fitzgeralds
                  Tunica
              
              
              83,979
              
              
              82,939
              
              
              83,218Fitzgeralds
                  Black Hawk
              
              
              33,429
              
              
              35,409
              
              
              36,235Total
              
              $
              354,830
              
              $
              261,972
              
              $
              260,511Casino
                  revenues:Majestic
                  Properties (1)
              
              $
              250,707
              
              $
              155,217
              
              $
              149,562Fitzgeralds
                  Tunica
              
              
              88,349
              
              
              87,575
              
              
              86,532Fitzgeralds
                  Black Hawk
              
              
              36,058
              
              
              38,127
              
              
              38,675Total
              
              $
              375,114
              
              $
              280,919
              
              $
              274,769Operating
                  income (loss):Majestic
                  Properties (1)
              
              $
              35,183
              
              $
              19,271
              
              $
              16,465Fitzgeralds
                  Tunica
              
              
              8,836
              
              
              10,253
              
              
              11,471Fitzgeralds
                  Black Hawk (2)
              
              
              8,060
              
              
              7,393
              
              
              9,973Corporate
                  (3)
              
              
              (6,419
              )
              
              (7,896
              )
              
              (3,470
              )Majestic
                  Investor Holdings (4)
              
              
              -
              
              
              (289
              )
              
              (689
              )Total
              
              $
              45,660
              
              $
              28,732
              
              $
              33,750Operating
                  margin (5)Majestic
                  Properties (1)
              
              
              14.8
              %
              
              13.4
              %
              
              11.7
              %Fitzgeralds
                  Tunica
              
              
              10.5
              %
              
              12.4
              %
              
              13.8
              %Fitzgeralds
                  Black Hawk
              
              
              24.1
              %
              
              20.9
              %
              
              27.5
              %Total
              
              
              12.9
              %
              
              11.0
              %
              
              13.0
              %Segment
                  depreciation and amortization:Majestic
                  Properties (1)
              
              $
              20,291
              
              $
              8,976
              
              $
              7,785Fitzgeralds
                  Tunica
              
              
              9,157
              
              
              10,062
              
              
              8,858Fitzgeralds
                  Black Hawk (2)
              
              
              2,163
              
              
              3,125
              
              
              994Corporate
              
              
              112
              
              
              180
              
              
              71Majestic
                  Investor Holdings (4)
              
              
              -
              
              
              269
              
              
              278Total
              
              $
              31,723
              
              $
              22,612
              
              $
              17,986Expenditure
                  for additions to long-lived assets:Majestic
                  Properties (1)
              
              $
              9,130
              
              $
              4,152
              
              $
              28,692Fitzgeralds
                  Tunica
              
              
              10,577
              
              
              4,860
              
              
              5,800Fitzgeralds
                  Black Hawk
              
              
              5,541
              
              
              2,655
              
              
              1,520Corporate
              
              
              161
              
              
              116
              
              
              -Total
              
              $
              25,409
              
              $
              11,783
              
              $
              36,012
  32
 Table
            of Contents
  
 December
                  31,
              
              December
                  31,2006
              
              2005(amounts
                  in thousands)Segment
                  assets:Majestic
                  Properties (1)
              
              $
              478,896
              
              $
              519,215Fitzgeralds
                  Tunica
              
              
              79,664
              
              
              75,419Fitzgeralds
                  Black Hawk
              
              
              43,804
              
              
              36,746Corporate
              
              
              524,981
              
              
              289,353Majestic
                  Investor Holdings (4)
              
              
              -
              
              
              20,550Total
              
              
              1,127,345
              
              
              941,283Less:
                  Intercompany
              
              
              (620,985
              )
              
              (423,324
              )Total
              
              $
              506,360
              
              $
              517,959GoodwillMajestic
                  Properties (1)
              
              $
              41,509
              
              $
              41,329Fitzgeralds
                  Tunica
              
              
              3,998
              
              
              3,998Fitzgeralds
                  Black Hawk
              
              
              1,924
              
              
              1,924Total
              
              $
              47,431
              
              $
              47,251
 
 Notes:
 (1)
              The
                  Majestic Properties for 2006 include Majestic Star and Majestic
                  Star II. BHPA was merged into Majestic Star as of August 4, 2006
                  and BHR was dissolved on December 31, 2006. The merger of BHPA and
                  the dissolution of BHR are shown as if these transactions had been
                  completed as of January 1, 2006. The 2005 information is for Majestic
                  Star and 11 days of operations for Majestic Star II, BHR and BHPA.
                  2004 information is for Majestic Star
                  only.
 (2)
              Fitzgeralds
                  Black Hawk’s 2005 depreciation includes the $1.5 million catch up
                  depreciation and amortization expense for the period of time from
                  July
                  2004 to April 2005 when the property’s assets were held for sale and no
                  depreciation or amortization expense was
                  recorded.
 (3)
              Corporate
                  expenses reflect professional fees, payroll, benefits, travel and
                  other
                  costs associated with our corporate staff and are not allocated
                  to the
                  properties. Included in 2005 is the $2.3 million charge related
                  to the
                  termination of the Fitzgeralds Black Hawk
                  sale.
 (4)
              Majestic
                  Investor Holdings was merged into the Company on March 22,
                  2006.
 (5)
              Operating
                  margin is calculated by dividing operating income (loss) by net
                  revenues.
 
 2006
        compared to 2005
 
 **Majestic
        Properties**
 
 Gross
        revenues for the year ended December 31, 2006 were $263.3 million compared
        to $160.5 million in the same period in 2005, an increase of $102.8 million,
        or
        64.1%. The Trump Indiana Acquisition contributed all of the increase. Casino
        revenues, which make up 95.2% of the gross revenues, were $250.7 million,
        an
        increase of $95.5 million, compared to $155.2 million in the prior year.
        Similar
        to gross revenues, the Trump Indiana Acquisition contributed all of the increase
        in casino revenues.
 
 For
        the
        year ended December 31, 2006, operating income for the Majestic Properties
        was $35.2 million compared to $19.3 million for the Majestic Properties in
        the
        prior year. The increase in operating income is the result of the Trump Indiana
        Acquisition and the reduction of costs related to changes in operating strategy
        of running Majestic Star, Majestic Star II and BHR under a common ownership
        structure. Also, there was a reduction in property taxes at Majestic Star
        of
        $1.0 million. 2005 property tax bills, received in August 2006, were less
        than
        anticipated as Lake County applied a one-time credit resulting from a settlement
        with a large Lake County taxpayer.
 
  33
 Table
            of Contents
  **Fitzgeralds
        Tunica**
 
 Gross
        revenues for the year ended December 31, 2006 was $107.5 million at
        Fitzgeralds Tunica compared to $106.4 million in the same period in 2005,
        an
        increase of $1.1 million, or 1.0%. Casino revenues increased 0.9% or $0.8
        million to $88.3 million in 2006 compared to $87.6 million in 2005. The increase
        is comprised of a $1.2 million decrease in slot revenue and a $2.0 million
        increase in table games revenue. Table games revenue increased as a result
        of a
        37.3% increase in drop offset by a 9.1% reduction in the hold percentage.
        2006
        casino revenues were 82.2% of gross revenues compared to 82.3% in 2005.
        Fitzgeralds Tunica’s slot revenues were negatively impacted by $4.5 million, due
        to the implementation of technology that allows customers to play downloadable
        promotional credits directly at the slot machines. The playing of these credits
        is not recorded as revenue, but any jackpots won by our customers will be
        recognized as a direct reduction of slot revenue. As a result of the
        downloadable promotional credits to the slot machine, Fitzgeralds Tunica
        will be
        able to significantly reduce the amount of promotional cash coupons mailed
        and
        redeemed by its customers. We anticipate the reduction in slot revenues will
        be
        offset by reduced cash coupons mailed and redeemed. During the fourth quarter
        of
        2006, property management fully implemented the downloadable promotional
        credits
        program. Management believes it may have been too liberal with the program
        and
        customers received too much in downloadable promotional credits. As a result,
        customers put less of their own money into our slot machines, thus further
        negatively impacting slot revenues. Management is determining the “right” amount
        of downloadable promotional credits to offer customers in order to obtain
        their
        patronage, but at the same time ensure that the customer is wagering a
        satisfactory amount of their money.
 
 Operating
        income decreased to $8.8 million for 2006 compared to $10.3 million in 2005,
        a
        decrease of $1.4 million, or 13.8%. Operating expenses increased $2.5 million,
        mostly in casino expense, gaming taxes and advertising and promotions in
        relation to the higher casino volumes and the repositioning of the property
        to
        attract a higher-valued gaming customer. General and administrative expenses
        were also higher on a year-to-date basis, primarily due to greater labor
        and
        energy costs, that was partially offset by a decrease in depreciation expense
        as
        assets are becoming fully depreciated.
 
 **Fitzgeralds
        Black Hawk**
 
 Gross
        revenues for the year ended December 31, 2006 were $38.5 million compared
        to $40.8 million in 2005, a decrease of $2.2 million, or 5.4%. A decrease
        in
        casino revenue of $2.1 million is primarily responsible for this decrease
        as
        casino revenue decreased to $36.1 million for 2006 compared to $38.1 million
        in
        the same period in 2005. This decline is a result of lower slot coin-in of
        9.9%
        which is due to new amenities and greater levels of marketing from our
        competitors. Weather was also a factor in the fourth quarter with the casinos
        in
        Black Hawk being closed for two days and operating reduced hours on two days
        due
        to the snow storms that hit the Denver area. Year-to-date results in 2005
        were
        impacted by one of the two routes into Black Hawk being closed for most of
        the
        third quarter, but we benefited from new customers visiting our facility
        while
        construction was ongoing at competitors. In 2006, we are feeling the effects
        of
        increased competition and marketing from remodeled properties.
 
 For
        the
        year ended December 31, 2006, Fitzgeralds Black Hawk had operating income
        of $8.1 million compared to $7.4 million in 2005, an increase of $0.7 million
        or
        9.0%. Comparing expenses in 2006 to 2005 shows a decrease in promotions and
        advertising of $0.2 million, a decrease in depreciation expense of $1.0 million
        and a reduction of $0.5 million in gaming taxes and $0.7 million decrease
        in
        general and administrative costs. The decline in depreciation expense from
        2005
        is related to the catch up of depreciation expense in the second quarter
        of 2005
        for the period from July 2004 to April 2005 when the property was being held
        for
        sale prior to the mutual termination of the purchase agreement. General and
        administrative costs decreased due to a reduction in medical insurance premiums
        and a reduction in accounting fees allocated to the property. Gaming taxes
        were
        less due to the reduction in gaming revenue.
  34
 Table
            of Contents
  
 **Corporate**
 
 Corporate
        operating expense for the year ended December 31, 2006 was $6.4 million
        compared to $7.9 million in 2005. The largest component of corporate expense
        is
        payroll, which has increased in 2006 compared to 2005 and will continue to
        increase as we build our corporate management team. The year-to-date expenses
        in
        2005 also include the $2.3 million termination fee related to the cancelled
        sale
        of Fitzgeralds Black Hawk in April 2005.
 
 **Other
        income (expense)**
 
 Other
        income (expense) has increased to $60.0 million in net expenses for the year
        ended December 31, 2006 compared to $34.0 million of expense in 2005. The
        majority of this increase is interest expense associated with $200.0 million
        of
        Senior Notes, $40.0 million of additional Senior Secured Notes and $63.5
        million
        aggregate principal amount at maturity of Discount Notes that were all issued
        in
        December 2005 in conjunction with the Trump Indiana Acquisition. Other expense
        in 2005 also includes a $3.7 million charge for premiums incurred in the
        early
        repayment of debt.
 
 
 2005
        compared to 2004
 
 Consolidated
        gross operating revenues for the year ended December 31, 2005 increased
        $7.1 million, or 2.4%, from consolidated gross operating revenues recorded
        in
        the year ended December 31, 2004. Excluding the Trump Indiana Acquisition,
        which contributed $4.9 million in gross operating revenues for the last 11
        days
        of 2005, the increase in gross revenues during 2005 was $2.2 million. Majestic
        Star’s and Fitzgeralds Tunica’s gross operating revenues increased $1.2 million
        and $1.5 million, respectively, while Fitzgeralds Black Hawk’s gross operating
        revenues declined by $0.5 million. The increase in consolidated gross operating
        revenues resulted from an increase in consolidated casino revenues, which
        comprise 91.3% of consolidated gross revenues. Consolidated casino revenues
        increased $6.1 million, or 2.2%, to $280.9 million during the year ended
        December 31, 2005 as compared to the same period in 2004. The Trump Indiana
        Acquisition contributed casino revenues for the last 11 days of the year
        of $4.6
        million. The other properties had a combined increase in casino revenue of
        $1.4
        million, which resulted from a combined properties’ increase in slot win
        percentage of 2.7% and an increase in table game win percentage of 4.3% offset
        by a decline in table game drop of 9.3% and slot coin-in of 1.3%. At Fitzgeralds
        Tunica, higher food and beverage revenues of $0.5 million also contributed
        to
        its higher gross operating revenues.
 
 **Majestic
        Properties**
 
 The
        2005
        operating results for the Majestic Properties include the Trump Indiana
        Acquisition for the 11 day period December 21, 2005 to December 31,
        2005. Prior to December 20, 2005 and in 2004, the Company accounted for BHR
        as a
        50% joint venture with Trump Indiana and made lease payments to BHPA for
        the
        right to use BHPA’s parking garage
 
 Gross
        revenues for the year ended December 31, 2005 was $160.5 million compared
        to $154.3 million in the same period in 2004, an increase of $6.2 million
        or
        4.0%. The Trump Indiana Acquisition contributed $4.9 million of the increase
        and
        Majestic Star added $1.2 million. Casino revenues, which make up 96.7% of
        the
        gross revenue, were $155.2 million, an increase of $5.7 million compared
        to
        $149.6 million of the prior year. The Trump Indiana Acquisition contributed
        casino revenues of $4.7 million, which was the majority of the increase.
        The
        increase at Majestic Star of $1.0 million was due to a $2.3 million decrease
        in
        table games revenue, resulting from a 11.2% decrease in drop but offset by
        a
        3.2% increase in the hold percentage, and a $3.3 million increase in slot
        win
        due to a reduction of 2.3% in coin-in compared to the prior year but an increase
        in the win percentage of 5.1%. In 2005, Northwest Indiana gaming revenues
        only
        increased at a nominal 1.3%. Majestic Star was able to increase its casino
        revenues only by also increasing its promotional allowances.
  35
 Table
            of Contents
  
 For
        the
        year ended December 31, 2005, operating income for the Majestic Properties
        was $19.3 million compared to $16.5 million for only Majestic Star. Excluding
        the Trump Indiana Acquisition, casino expenses were down $1.2 million primarily
        from savings related to the TITO conversion, advertising and promotions were
        down $1.5 million as less advertising was run in 2005 compared to 2004, general
        and administrative expenses decreased $2.1 million mostly related to the
        higher
        property taxes in 2004 compared to 2005, and gaming taxes were up $0.4 million
        related to the higher casino revenue.
 
 **Fitzgeralds
        Tunica**
 
 Gross
        revenues for the year ended December 31, 2005 was $106.4 million at
        Fitzgeralds Tunica compared to $104.9 million in the same period in 2004,
        an
        increase of $1.5 million or 1.5%. Casino revenues increased 1.2% or $1.0
        million
        to $87.6 million in 2005 compared to $86.5 million in 2004. The increase
        is
        comprised of a $0.7 million increase in slot revenue resulting from increases
        in
        slot coin-in and slot win percentages of 0.1% and 0.8%, respectively, and
        a $0.3
        million increase in table games revenue from a 2.7% decrease in drop offset
        by a
        6.8% increase in the hold percentage. 2005 casino revenues were 82.3% of
        gross
        revenues compared to 82.5% in 2004. The property was able to generate the
        increase in casino revenue by continuing to emphasize its direct mail and
        promotional programs.
 
 Operating
        income decreased to $10.3 million for 2005 compared to $11.5 million in 2004,
        a
        decrease of $1.2 million or 10.6%. Operating expenses increased $0.9 million,
        mostly in general and administrative due to higher professional fees,
        advertising and promotions related to increased promotional activities, and
        gaming taxes related to higher gaming revenue, offset by decreases in casino
        and
        food and beverage costs. Depreciation expense was also $1.2 million higher
        in
        2005 compared to 2004 as a result on additional gaming equipment that was
        placed
        in service.
 
 **Fitzgeralds
        Black Hawk**
 
 Gross
        revenues for the year ended December 31, 2005 were $40.8 million compared
        to $41.3 million in 2004, a decrease of $0.6 million or 1.4%. A decline in
        casino revenue of $0.5 million is primarily responsible for the decline in
        gross
        revenues as casino revenue decreased to $38.1 million for 2005 compared to
        $38.7
        million in the same period in 2004. This decline is a result of lower slot
        coin-in of 1.2% which is due to new amenities and greater levels of marketing
        from our competitors. Casino revenue in 2005 declined due to the completion
        of
        construction projects during the first quarter of 2005 at competitor properties
        and the closure of the main highway into Black Hawk from June 21, 2005 to
        September 12, 2005. During 2004, Fitzgeralds Black Hawk had record breaking
        casino revenues, resulting in part, from the disruption of business of our
        significant competitors. When construction of two of the more significant
        projects was completed, we began to experience a decline in revenue as a
        result
        of the new amenities offered at our competitor’s facilities.
 
 For
        the
        year ended December 31, 2005, Fitzgeralds Black Hawk had operating income
        of $7.4 million compared to $10.0 million in 2004, a decrease of $2.6 million
        or
        25.9%. Comparing expenses in 2005 to 2004 shows a decrease in gaming taxes
        and
        casino expenses offset primarily by an increase in depreciation expense of
        $2.1
        million. The increase in depreciation expense in 2005 is related to the catch
        up
        of depreciation expense in the second quarter of 2005 for the period from
        July
        2004 to April 2005 when the property was being held for sale prior to the
        mutual
        termination of the purchase agreement.
 
 **Corporate**
 
 Corporate
        operating expense for the year ended December 31, 2005 was $7.9 million
        compared to $3.5 million in 2004. The largest component of corporate expense
        is
        payroll, which increased in 2005 compared to 2004 and will continue to increase
        as we build our corporate management team. The year-to-date expenses in 2005
        also include the $2.3 million termination fee related to the cancelled sale
        of
        Fitzgeralds Black Hawk in April 2005.
  36
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            of Contents
  
 **Other
        income (expense)**
 
 Other
        income (expense) increased to $34.0 million in net expenses for the year
        ended
        December 31, 2005 compared to $28.7 million of net expense in 2004. The
        majority of this increase is interest expense associated with $200.0 million
        of
        Senior Notes, $40.0 million of additional Senior Secured Notes and $63.5
        million
        aggregate principal amount at maturity of Discount Notes that were all issued
        in
        December 2005 in conjunction with the Trump Indiana Acquisition. The other
        expense in 2005 also includes a $3.7 million charge for premiums paid on
        the
        early redemption of debt.
 
 
 **LIQUIDITY
        AND CAPITAL RESOURCES**
 
 To
        date,
        we have financed our operations with internal cash flows from our operations
        and
        borrowings under our $80.0 million credit facility (the “Senior Secured Credit
        Facility”). We generate substantial cash flows from operating activities. For
        the years ended December 31, 2006 and 2005, we reported cash flows from
        operating activities of $27.7 million and $27.8 million, respectively. We
        use
        our cash flows to meet our financial obligations, which consist principally
        of
        financing the daily operations of our casinos, servicing our debt, funding
        capital improvements and projects, and making distributions under the manager
        agreement and for tax distributions to BDI.
 
 The
        Company has significant debt outstanding, including $45.7 million drawn on
        its
        Senior Secured Credit Facility ($34.3 million available to draw), $300.0
        million
        of Senior Secured Notes, $200.0 million of Senior Notes and $0.2 million
        of
        capital leases and other debt. Including the $63.5 million of Discount Notes,
        net of original issue discount, the Company and its parent, Majestic Holdco,
        issued $303.5 million of notes in conjunction with the Trump Indiana
        Acquisition. The annual cash interest expense on the debt used to acquire
        Trump
        Indiana is $23.3 million. In 2006, cash flow from operating activities fell
        short of our expectations, primarily due to weak financial performance at
        our
        Majestic Properties. As a result of our higher interest and weak financial
        performance, the Company has needed to amend the financial covenants of the
        Senior Secured Credit Facility in order to avoid a default under the Senior
        Secured Credit Facility (see discussion below).
 
 In
        2007,
        in addition to servicing the Company’s significant debt obligations, the Company
        is budgeting to spend $39.8 million on property improvements, including
        completing the remodel of the remaining Fitzgeralds Tunica hotel rooms and
        remodeling the Fitzgeralds Tunica casino floor, adding a high limit pit and
        poker room, and purchasing equipment, which primarily consists of slot machines.
        The Company is also engaged in the Fitzgeralds Black Hawk expansion and
        re-building the Rohling Inn, which is anticipated to cost $16.7 million in
        2007
        and $30.9 million in total (see discussion below). The Company will also
        be
        required to make tax distributions to its member based upon the state and
        federal taxable income generated by the Company. Also, the Company’s manager has
        deferred previously allowable distributions. If the Company’s manager were to
        elect to take these distributions, the Company would be required to pay $4.5
        million, in addition to what would be allowable for distribution in 2007
        under
        the Manager Agreement.
 
 The
        Company faces significant competition in each of its markets. In addition,
        in
        the market in which our Majestic Properties compete, new and improved facilities
        are planned to be opened later in 2007 and 2008. These new and improved
        facilities could have a negative impact on the operating cash flows generated
        by
        our Majestic Properties and the Company. If operating cash flows are not
        at a
        level to support the Company’s debt service obligations, planned capital
        expenditures, including the Fitzgeralds Black Hawk expansion, and tax and
        manager distributions, the Company will need to draw on its Senior Secured
        Credit Facility or seek other forms of financing. There is no guarantee that
        such financing would be available to the Company on reasonable terms, if
        at all,
        and the Company’s ability to incur additional debt is restricted by the terms of
        the Senior Secured Credit Facility and the indentures governing our outstanding
        Senior Secured Notes and Senior Notes. The Company may, therefore, be required
        to modify the scope or timing of its planned capital
        expenditures.
  37
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 The
        Company will be required to pay any amounts outstanding on the Senior Secured
        Credit Facility, plus accrued interest thereon, in 2010. In addition, beginning
        April 15, 2009, our parent will likely look to us to distribute cash to pay
        interest on the Discount Notes. Our ability to distribute cash to Majestic
        Holdco is limited unless certain financial tests are met. The Senior Secured
        Notes mature in October 2010 and the Senior Notes mature in January 2011.
        No
        assurance can be given that our operating cash flows or proceeds from additional
        financings, if available, will be sufficient for such purposes.
 
 The
        Company had unrestricted cash and cash equivalents of $25.5 million at
        December 31, 2006. The Company does not hold excess cash in its bank
        accounts. Any excess cash is used to pay down the Senior Secured Credit
        Facility. In 2006, we spent approximately $25.4 million for the purchase
        of slot
        machines and TITO implementation, re-branding Trump Indiana to Majestic
        Star II, integration of our computer system with Trump Indiana, remodeling
        the porte cochere at the Majestic Properties, upgrading the Fitzgeralds Tunica
        hotel and preparing for the Fitzgeralds Black Hawk expansion .
        In
        2005, the Company spent $11.8 million for the purchase of new slot machines,
        the
        integration of slot machines with TITO at all of our properties, various
        remodeling projects, principally at Majestic Star, and a new slot player
        tracking and marketing system and costs associated with burying a storm sewer
        pipe below grade, both at Fitzgeralds Black Hawk.
 
 Fitzgeralds
        Black Hawk is expanding its facility by rebuilding the Masonic Building and
        Rohling Inn properties, as a part of a major casino expansion. Management
        expects the casino expansion to cost approximately $30.9 million, including
        the
        re-construction of the Masonic Building and Rohling Inn and the purchase
        of
        associated gaming equipment and other furniture and fixtures. The rebuilt
        Masonic Building will be four stories with a gaming mezzanine, which should
        allow us to add up to 400 slot machines and a food outlet. The Rohling Inn
        will
        be used for administration and contain space for hosting player events. The
        construction on the Rohling Inn is anticipated to be completed in the third
        quarter of 2008 and the Masonic Building by June 2008. A portion of the costs
        to
        re-build the Rohling Inn will be covered by insurance. At this time, the
        insurance company has yet to determine how much of the reconstruction is
        covered
        under the Company’s policy, but has paid the Company $1.4 million against the
        claim. The Company is allowed, pursuant to the terms of the Senior Secured
        Credit Facility, to spend $25.0 million on the Fitzgeralds Black Hawk expansion.
        Any amounts spent in excess of $25.0 million would come out of the allowable
        annual capital expenditures, as specified in the Senior Secured Credit Facility,
        at $25.0 million in 2007 and $30.0 million in 2008. The Fitzgeralds Black
        Hawk
        expansion will be funded by cash flow from operations and advances from the
        Senior Secured Credit Facility.
 
 The
        Company continues to evaluate plans to construct condominiums, a hotel and
        other
        improvements that would support our casino operations at Buffington Harbor.
        The
        Company is precluded, by the Senior Secured Credit Facility, from making
        capital
        expenditures in excess of $25.0 million in 2007 and $30.0 million in each
        year
        thereafter (excluding up to $25.0 million to expand Fitzgeralds Black Hawk)
        until the Senior Secured Credit Facility matures. As a result of the Company’s
        capital expenditure limitation, current level of indebtedness and operating
        cash
        flows, the Company may need to seek partners to provide financing for these
        projects, receive a contribution from its member and seek to amend the capital
        expenditure covenant contained within the Senior Secured Credit Facility.
        In
        addition, the Company acquired on December 31, 2005, 2.45 acres of land at
        its Fitzgeralds Black Hawk property. This land is available for development;
        however, obtaining capital to commence development is limited as previously
        explained.
 
 The
        Company is also exploring the opportunity to replace its two existing gaming
        vessels in Gary, Indiana with a single-level gaming vessel. Management believes,
        with the new and improved casinos planned to open in its Indiana market,
        such a
        vessel will be necessary to remain competitive. The two existing gaming vessels
        are multi-level, which makes it more difficult for guests to move about the
        casinos and less efficient for the Company in operating these casinos, as
        opposed to a single-level casino. While no specific cost has been established
        on
        developing a single-level gaming vessel, whatever financing that would be
        necessary would be outside of the allowable covenants contained within the
        Company’s Senior Secured Credit Facility and the indentures governing the Senior
        Secured Notes and Senior Notes. Thus, to build the single-level gaming vessel
        would require a significant equity infusion from our member or a partner,
        or a
        broader recapitalization of the Company.
  38
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 The
        Company is also pursuing opportunities to move one of its two Gary, Indiana
        licenses to another location within Indiana. If the Company was able to relocate
        a license, and contingent on the location and other requirements placed on
        the
        ability to move a license, such relocated license and casino development
        could
        generate increased cash flows for the Company. However, legislative action
        is
        required to move a license as Indiana law dictates two licenses for Gary.
        There
        is no guarantee that legislation will be passed allowing a license to be
        moved
        or if legislation is passed, that it will contain provisions that are acceptable
        to the Company.
 
 The
        Company made distributions to BDI of $0.9 million in 2006 for 2005 state
        income
        tax liabilities and 2006 estimated state tax liabilities. In 2005, the Company
        made distributions to BDI of $2.3 million (of which $0.7 million was reimbursed
        in 2005 upon final determination of BDI’s tax liability) for 2004 state income
        tax liabilities and 2005 estimated state tax liabilities. The Company
        anticipates that it will make future distributions to fund its member’s tax
        liabilities. Future distributions by the Company to its member could be a
        significant use of the Company’s cash.
 
 The
        indentures governing the Senior Secured Notes and the Senior Notes and the
        loan
        and security agreement for the Senior Secured Credit Facility allow for
        distributions to our member to pay income taxes. The ultimate resolution
        of the
        assessments by the Indiana Department of Revenue against the Company and
        BDI, in
        the amount of $4.1 million, plus penalties and interest (as more fully described
        in Item 3. Legal Proceedings) could have a material impact on the Company’s
        liquidity in the period that the taxes are paid, if any, and to the extent
        that
        the Company uses such liquidity to make distributions to its member for tax
        purposes.
 
 The
        purchase of certain gaming facilities by larger more recognized brand names
        or
        the expansion of gaming in jurisdictions in which gambling is already legal
        or
        currently illegal could significantly increase competition for the Company
        and
        thereby require additional investment by the Company in its facilities, gaming
        devices and marketing efforts. If necessary and to the extent permitted under
        the indentures governing the Senior Secured Notes and Senior Notes, the Company
        would seek additional financing through borrowings of debt or equity financing,
        subject to any governmental approvals. There can be no assurance that additional
        financing, if needed, will be available to the Company or that, if available,
        the financing will be on terms favorable to the Company.
 
 **Credit
        Facility Amendments**
 
 On
        April 13, 2006, the Company entered into Amendment Number Five to the Loan
        and Security Agreement, as amended (“Amendment Five”). Amendment Five modified
        the interest coverage ratio financial covenant for the 12-month period ended
        March 31, 2006. The interest coverage ratio was amended to 1.8:1.0. In
        addition, the definition of Consolidated Interest Expense was amended to
        exclude
        interest expense related to the pushdown of Majestic Holdco’s Discount Notes.
        The interest expense on Majestic Holdco’s Discount Notes is being pushed down to
        the Company pursuant to SEC Staff Accounting Bulletin 73, Topic 5(J). Majestic
        Holdco’s Discount Notes are not guaranteed by the Company or any of its direct
        or indirect subsidiaries and none of the Company’s or its direct or indirect
        subsidiaries equity or assets secure the Discount Notes of Majestic Holdco.
 
 On
        July 31, 2006, the Company entered into Amendment Number Six (“Amendment
        Six”) to the Senior Secured Credit Facility. Amendment Six modified the last
        12-month minimum EBITDA covenant and the last 12-month interest coverage
        ratio
        covenant for the applicable calendar quarterly periods. The amended covenants
        required the Company to have a minimum EBITDA of $65.0 million for the 12
        months
        ended June 30, 2006, which periodically increased in $5.0 million
        increments to a maximum of $90.0 million for the 12 months ending March 31,
        2010 and periods thereafter. The interest coverage ratio was reduced to 1.50:1.0
        for the 12 months ended June 30, 2006, continuing through December 31,
        2007. The ratio increased to 1.60:1.0 in 2008, 1.70:1.0 in 2009 and to 1.80:1.0
        in 2010 and each period thereafter. In addition, the capital expenditure
        limitations were increased to $25.0 million for each of the fiscal years
        2006
        and 2007 and to $30.0 million for each of the fiscal years 2008, 2009 and
        2010.
  39
 Table
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 On
        March 15, 2007, the Company entered into Amendment Number Seven (“Amendment
        Seven”) to the Senior Secured Credit Facility. Amendment Seven modifies the
        Company’s minimum EBITDA requirement for the twelve-month periods ended
        March 31, 2007, June 30, 2007 and September 30, 2007, to $65.0
        million, respectively, modifies the minimum EBITDA requirement for the 12-month
        periods ended December 31, 2007, March 31, 2008 and June 30,
        2008, to $70.0 million, respectively, and modifies the minimum EBITDA
        requirement to $72.0 million and $74.0 million for the 12-month periods ended
        September 30, 2008 and December 31, 2008, respectively. Amendment
        Seven also modifies the Company’s interest coverage ratio requirement for the
        12-month periods ended March 31, 2007, June 30, 2007,
        September 30, 2007, December 31, 2007, March 31, 2008 and
        June 30, 2008, to 1.20:1.0, respectively, and modifies the interest
        coverage ratio requirement to 1.25:1.0 for the 12-month periods ended
        September 30, 2008 and December 31, 2008, respectively.
 
 The
        Company was in compliance with the financial covenants contained in the Senior
        Secured Credit Facility at December 31, 2006.
 
 
 **NEW
        ACCOUNTING PRINCIPLES**
 
 The
        Company has adopted or will be required to adopt the following accounting
        policies resulting from the following newly issued standards.
 
 ·
              In
                  September 2006, the FASB issued FASB No. 157 “Fair Value
                  Measurements,” (“FASB 157”) to establish a framework for measuring
                  fair value and expanding disclosures related to fair value measurements.
                  FASB 157 is effective for financial statements for fiscal years
                  beginning after November 15, 2007. The Company is evaluating what
                  impact, if any, FASB 157 will have on future
                  reporting.
 
 ·
              In
                  September 2006, the SEC issued Staff Accounting Bulletin (“SAB”)
                  No. 108, “Considering the Effects of Prior Year Misstatements when
                  Quantifying Misstatements in Current Year Financial Statements”. SAB
                  No. 108 requires companies to evaluate the materiality of identified
                  unadjusted errors on each financial statement and related financial
                  statement disclosure using both the rollover approach and the iron
                  curtain
                  approach. The rollover approach quantifies misstatements based
                  on the
                  amount of the error in the current year financial statement whereas
                  the
                  iron curtain approach quantifies misstatements based on the effects
                  of
                  correcting the misstatement existing in the balance sheet at the
                  end of
                  the current year, irrespective of the misstatement’s year(s) of origin.
                  Financial statements would require adjustment when either approach
                  results
                  in quantifying a misstatement that is material. Correcting prior
                  year
                  financial statements for immaterial errors would not require previously
                  filed reports to be amended. SAB No. 108 is effective for interim
                  periods of the first fiscal year ending after November 15, 2006. The
                  Company has determined that SAB No. 108 will not have a
                  significant impact on its consolidated financial statements when it
                  is adopted on January 1, 2007.
 
 **CRITICAL
        ACCOUNTING POLICIES**
 
 Our
        consolidated financial statements are prepared in accordance with accounting
        principles generally accepted in the United States of America, which require
        our
        management to make estimates and assumptions about the effects of matters
        that
        are inherently uncertain. We have summarized our significant accounting policies
        in Note 2 to our consolidated financial statements. Of our accounting
        policies, we believe the following may involve a higher degree of judgment
        and
        complexity.
 
 *Revenue
        Recognition* —
Casino
        revenue is the net win from gaming activities, which is the difference between
        the amount wagered by our gaming patrons and the amount paid out to our patrons
        as a result of those wagers. Hotel, food and beverage and other revenue are
        recognized at the time the related service is performed. We deduct from our
        gross revenues the retail value of hotel rooms, food, beverage and merchandise
        provided to our casino customers on a complimentary basis. We also deduct
        from
        our gross revenues the value of certain cash-based promotional activities,
        including cash earned by customers as part of our slot club programs and
        cash
        coupons redeemed by our casino customers.
  40
 Table
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 *Downloadable
        Promotional Credits* —
At
        Fitzgeralds Tunica, we have implemented promotions that allow customers to
        download promotional credits directly to the slot machine. While the Company
        does not recognize the playing of these credits as revenue and the customer
        cannot redeem the credits for cash, any jackpots won by the customer are
        a
        direct reduction of slot revenue.
 
 *Goodwill
        and Other Intangible Assets* —
We
        have
        approximately $47.4 million of goodwill and $125.4 million of other intangibles
        assets recorded on our balance sheet at December 31, 2006, related to the
        acquisitions of Majestic Star II, Fitzgeralds Tunica and Fitzgeralds Black
        Hawk.
        We regularly evaluate our acquired businesses for potential impairment
        indicators. Additionally, we adopted the provisions of SFAS 142, “Goodwill
        and Other Intangible Assets,” in January 2002, which require us to perform
        impairment testing at least annually. Our judgments regarding the existence
        of
        impairment indicators are based on, among other things, the regulatory, market
        status and operational performance of our acquired business. Future events
        could
        significantly impact our judgments and any resulting impairment loss could
        have
        a material adverse impact on our financial condition and results of
        operations.
 
 *Property
        and Equipment* —
At
        December 31, 2006, we have approximately $275.7 million of net property and
        equipment recorded on our balance sheet. We depreciate our assets on a
        straight-line basis over their estimated useful lives. The estimate of the
        useful lives is based on the nature of the asset as well as our current
        operating strategy. Future events, such as property expansions, new competition
        and new regulations, could result in a change in the manner in which we are
        using certain assets requiring a change in the estimated useful lives of
        such
        assets. In assessing the recoverability of the carrying value of property
        and
        equipment, we must make assumptions regarding estimated future cash flows
        and
        other factors. If these estimates or the related assumptions change in the
        future, we may be required to record impairment charges for these
        assets.
 
 *Casino
        Club Liability* —
All
        of
        our casinos offer programs whereby participants can accumulate points for
        casino
        wagering that can currently be redeemed for cash, lodging, food and beverages
        and merchandise. A liability is recorded for the estimate of unredeemed points
        based upon each property’s redemption history. Changes in the program, increases
        in membership and changes in the redemption patterns of the participants
        can
        impact this liability.
 
 *Self-Insurance* —
The
        Company maintains accruals for self-insured health and worker’s compensation
        programs, which are classified in payroll and related liabilities in the
        consolidated balance sheets. Management and consultants determine the estimates
        of these accruals by periodically evaluating the historical expenses and
        projected trends related to these accruals. Actual results may differ from
        those
        estimates.
 
 *Litigation,
        Claims and Assessments* —
We
        also
        utilize estimates for litigation, claims and assessments. These estimates
        are
        based upon our knowledge and experience about past and current events and
        also
        upon reasonable future events. Actual results may differ from those
        estimates.
  41
 Table
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 **CONTRACTUAL
        COMMITMENTS**
 
 The
        following table summarizes our obligations and commitments at December 31,
        2006
        to make future payments under certain contracts, including long-term debt
        obligations, which include our Senior Secured Credit Facility.
 
 Payments
                  Due By Year Ended (4)Contractual
                  Obligations
              
              2007
              
              2008
              
              2009
              
              2010
              
              2011
              
              Thereafter
              
              Total(amounts
                  in thousands)Long-Term
                  Debt
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              300,000
              
              $
              200,000
              
              $
              -
              
              $
              500,000Credit
                  Facility
              
              
              -
              
              
              -
              
              
              -
              
              
              45,737
              
              
              -
              
              
              -
              
              
              45,737Capital
                  leases
              
              
              165
              
              
              64
              
              
              3
              
              
              -
              
              
              -
              
              
              -
              
              
              232Development
                  agreement (1)
              
              
              6,000
              
              
              6,000
              
              
              6,000
              
              
              6,000
              
              
              6,000
              
              
              -
              
              
              30,000Operating
                  Leases (2)
              
              
              528
              
              
              205
              
              
              95
              
              
              69
              
              
              16
              
              
              -
              
              
              913Interest
                  onLong-Term
                  Debt
              
              
              48,005
              
              
              48,001
              
              
              48,000
              
              
              42,063
              
              
              813
              
              
              -
              
              
              186,882Credit
                  Facility (3)
              
              
              3,858
              
              
              3,858
              
              
              3,858
              
              
              1,110
              
              
              -
              
              
              -
              
              
              12,684Total
              
              $
              58,556
              
              $
              58,128
              
              $
              57,956
              
              $
              394,979
              
              $
              206,829
              
              $
              -
              
              $
              776,448
 
 (1)
              On
                  December 21, 2005, Majestic Star and Trump Indiana entered into an
                  amended development agreement (“Amended Majestic Development Agreement”)
                  with the City of Gary (“City”), which, among other things, requires the
                  Company to pay to the City an economic incentive payment equal
                  to 3% of
                  the adjusted gross receipts of Majestic Star and Majestic Star
                  II, but in
                  no event less than $6.0 million per year, with any amount in excess
                  of
                  $6.0 million being placed in a non-reverting improvement fund,
                  of which
                  50% of the fund’s assets are to be used solely to pay for or reimburse
                  certain development and environmental remediation obligations of
                  the City,
                  and 50% of the fund’s assets are to be used by the Company for
                  improvements on or for the benefit of the Buffington Harbor area,
                  including our casino operations. The Amended Majestic Development
                  Agreement also requires the Company or its affiliates to (i) increase
                  its
                  minimum investment commitment from $50.0 million to $70.0 million
                  (the
                  Company has made in excess of $50.0 million of investments towards
                  this
                  commitment), and (ii) to establish a private charitable education
                  foundation (“Barden Foundation”) and to fund the Barden Foundation with an
                  annual contribution of $0.1 million. However, if, within three
                  years of
                  the date of the Amended Majestic Development Agreement, the City
                  has not
                  satisfied its obligations with respect to environmental remediation,
                  the
                  completion of the access road and freeway interchange, and certain
                  subdivision obligations, the Company’s minimum investment commitment
                  terminates. The Company is obligated to complete such minimum investment
                  within 5 years after the date the City has completed the City’s
                  obligations under the Amended Majestic Development Agreement. Because
                  this
                  is a continuing obligation for the Company, we cannot estimate
                  an amount
                  to include in the Thereafter and Total columns.
                
                On
                  or about August 31, 2006, the City called into
                  question the validity of the Amended Majestic Development
                  Agreement. The Company's position is that the Amended Majestic
                  Development Agreement is valid and binding. The City has discussed
                  with
                  the Company its need to receive more economic incentive payments
                  from the
                  Majestic Properties. The Company is continuing its discussions with
                  the City.
 
 (2)
              Years
                  2007 through 2011 include $15,936 each year relating to a perpetual
                  lease.
                  Because this is a continuing obligation for the Company, we cannot
                  estimate an amount to include in the Thereafter and Total
                  columns.
 
 (3)
              Variable
                  rate of 8.436% calculated as a weighted average of rates on the
                  Senior
                  Secured Credit Facility indebtedness using LIBOR in effect plus
                  3.0% as of
                  December 31, 2006.
 
 (4)
              Excludes
                  any amounts related to the debt of Majestic Holdco. Such debt of
                  our
                  parent company has been pushed down to us. See Note 11 to our
                  consolidated financial
                  statements.
  42
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            of Contents
  
 **ITEM
        7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**
 
 Market
        risk is the risk of loss arising from adverse changes in market rates and
        prices, such as interest rates, foreign currency exchange rates and commodity
        prices. Our primary exposure to market risk is interest rate risk associated
        with our long-term debt. The Company does not have any financial instruments
        held for trading or other speculative purposes, does not invest in derivative
        financial instruments, interest rate swaps or other investments that alter
        interest rate exposure.
 
 The
        table
        below provides information about our financial instruments that are sensitive
        to
        changes in interest rates. For debt obligations, the table presents notional
        amounts and weighted average interest rates by contractual maturity dates
        for
        the years ended December 31:
 
 2007
              
              2008
              
              2009
              
              2010
              
              2011
              
              Thereafter
              
              Total
              
              Fair
                  Value (1)(amounts
                  in thousands)Long-Term
                  DebtFixed
                  Rate (2) (3)
              
              $
              165
              
              $
              64
              
              $
              3
              
              $
              300,000
              
              $
              263,500
              
              $
              -
              
              $
              563,733
              
              $
              555,469Average
                  interest rate
              
              
              9.88
              %
              
              9.91
              %
              
              9.93
              %
              
              9.98
              %
              
              12.25
              %
              
              n/a
              
              
              9.98
              %Variable
                  Rate (2)
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              45,737
              
              $
              -
              
              $
              -
              
              $
              45,737
              
              $
              45,737Average
                  interest rate
              
              
              8.44
              %
              
              8.44
              %
              
              8.44
              %
              
              8.44
              %
              
              n/a
              
              
              n/a
              
              
              8.44
              %
              
              8.44
              %
 
 (1)  The
        fair
        values for debt with no public market are based on the borrowing rates currently
        available for debt instruments with similar terms and maturities, and for
        publicly traded debts, the fair values are based on market quotes.
 
 (2)  Based
        on
        contractual interest rates for fixed-rate indebtedness or current LIBOR rates
        for variable rate indebtedness.
 
 (3)  Our
        fixed-rate debt maturities include the Discount Notes issued by Majestic
        Holdco.
        The Discount Notes are solely the obligation of Majestic Holdco and are
        unsecured.
 
 
 We
        attempt to limit our exposure to interest rate risk by managing the mix of
        our
        long-term fixed-rate borrowings and short-term borrowings under the Senior
        Secured Credit Facility. Borrowings under the Senior Secured Credit Facility
        bear interest at a margin above the LIBOR or the Base Rate (each, as defined
        in
        the loan and security agreement governing the Senior Secured Credit Facility)
        as
        selected by us. However, the amount of outstanding borrowings is expected
        to
        fluctuate and may be reduced from time to time. The Senior Secured Credit
        Facility matures in April 2010.
 
 The
        Senior Secured Credit Facility and cash flow from operations are used to
        maintain liquidity and fund business operations. The nature and amount of
        the
        Company’s debt may vary as a result of future business requirements, market
        conditions and other factors.
 
 The
        Senior Secured Credit Facility has a maximum credit line of $80.0 million.
        Assuming we have borrowed against the maximum available under the Senior
        Secured
        Credit Facility, a one-half percentage point change in the underlying variable
        rate would result in a change in related interest expense of $0.4 million
        on an
        annual basis. Additionally, should we assume variable-rate debt in the future,
        we will be subject to market risk, which is the risk of loss from changes
        in
        market prices and interest rates.
 
 At
        December 31, 2006, we had outstanding borrowings of $45.7 million under our
        Senior Secured Credit Facility.
  43
 Table
            of Contents
  
 We
        have
        $300.0 million principal amount of Senior Secured Notes outstanding and $200.0
        million principal amount of Senior Notes outstanding. Interest expense on
        our
        fixed-rate debt instruments is not affected by a change in the market rates
        of
        interest, and therefore, such changes generally do not have an impact on
        future
        earnings. In addition, Majestic Holdco, our parent, issued $63.5 million
        aggregate principal at maturity of 12 1⁄2% Discount Notes due October 15,
        2011. The Discount Notes were issued at a discount. The Discount Notes will
        accrete in value until October 15, 2008. On April 15, 2009, and semi-annually
        thereafter until maturity, the Discount Notes will cash pay interest. The
        Discount Notes are fixed-rate debt instruments and not affected by a change
        in
        the market rates of interest. Neither the Company nor any of its subsidiaries
        guarantees the Discount Notes nor are the equity or assets of the Company
        or its
        subsidiaries security for the Discount Notes.
 
 
 **ITEM
        8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA**
  See
        Item
        15(a) of this Annual Report on Form 10-K.
 
 
 **ITEM
        9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
        AND FINANCIAL DISCLOSURE**
 
 Not
        Applicable
 
 
 **ITEM
        9A. CONTROLS AND PROCEDURES**
 
 As
        of the
        end of the period covered by this report, the Company carried out an evaluation,
        under the supervision and with the participation of the Company’s management,
        including its Chief Executive Officer and Chief Financial Officer, of the
        effectiveness of the design and operation of the Company’s disclosure controls
        and procedures pursuant to Rule 15d-15 of the Securities Exchange Act of
        1934.
        Based upon that evaluation, the Company’s Chief Executive Officer and Chief
        Financial Officer concluded that the Company’s disclosure controls and
        procedures are effective to cause the information required to be disclosed
        by
        the Company in the reports that it files or submits under the Securities
        Exchange Act of 1934 to be recorded, processed, summarized and reported within
        the time periods specified in the SEC’s rules and forms.
 
 We
        maintain disclosure controls and procedures that are designed to ensure that
        information required to be disclosed in our Exchange Act reports is recorded,
        processed, summarized and reported within the time periods specified in the
        SEC’s rules and forms, and 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. In designing and evaluating the disclosure controls and procedures,
        management recognized that any controls and procedures, no matter how well
        designed and operated, can provide only reasonable assurance of achieving
        the
        desired control objectives.
 
 There
        have been no changes in the Company’s internal controls over financial reporting
        during the year ended December 31, 2006 that have materially affected, or
        are
        reasonably likely to materially affect, the Company’s internal controls over
        financial reporting.
 
 
 **ITEM
        9B. OTHER INFORMATION**
 
 Not
        applicable.
  44
 Table
            of Contents
  **PART
        III**
 
 **ITEM
        10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE**
 
 The
        following table sets forth certain information with respect to the directors
        and
        executive officers of the Company as of December 31, 2006. Each director is
        elected at the annual member meeting and serves for a term expiring at the
        following annual member meeting or until their successor(s) are duly elected
        and
        qualified.
 
 **NAME**
              **AGE**
              **POSITION(S)**Don
                  H. Barden
              63
              Chairman,
                  President and Chief Executive OfficerKirk
                  Saylor
              49
              Director,
                  Executive Vice President, and Chief Operating OfficerJon
                  S. Bennett
              46
              Vice
                  President and Chief Financial OfficerSteven
                  J. Lemberg
              52
              Director,
                  Executive Vice President of Strategic InitiativesPatrick
                  R. Cruzen
              59
              DirectorAndrew
                  J. Warhola
              81
              DirectorMichelle
                  R. Sherman
              41
              DirectorCara
                  Brown
              44
              Director
 
 Don
        H.
        Barden is Chairman, President and Chief Executive Officer of the Company
        and,
        since November 1993, Chairman and President of BDI, the manager of the Company,
        with responsibility for key policy-making functions. Since their formations,
        Mr.
        Barden is also President and Chief Executive Officer of Barden Colorado and
        Barden Mississippi; and Chairman, President and Chief Executive Officer of
        The
        Majestic Star Casino Capital Corp., and Majestic Star Casino Capital
        Corp. II. Additionally, he is the President and Chief Executive Officer of
        a group of other companies he owns and/or operates. Over the last 40 years,
        Mr.
        Barden also successfully built, owned and operated numerous business enterprises
        in various industries including cable television, international trade, radio
        broadcasting and real estate development.
 
 Kirk
        Saylor became the Chief Operating Officer of the Company and its subsidiaries
        effective as of May 15, 2006, with responsibility for all aspects of the
        Company’s operating activities. Mr. Saylor is also a member of the Company’s
        Gaming Compliance Committee. Prior to joining the Company, Mr. Saylor was
        the
        Chief Financial Officer of Olympia Gaming, the gaming arm of Olympia Land
        Corporation where he served since April 2005. Prior to that, and since November
        1995, Mr. Saylor served as Senior Vice President and Chief Financial Officer
        of
        Horseshoe Gaming Holding Corp.
 
 Jon
        S.
        Bennett has been the Vice President and Chief Financial Officer of the Company
        since October 2002 with overall responsibility for all aspects of the Company’s
        financial management, accounting and reporting processes. Mr. Bennett is
        also
        the Vice President and Chief Financial Officer for The Majestic Star Casino
        Capital Corp., Majestic Star Casino Capital Corp. II, Barden Mississippi
        and Barden Colorado. Prior to Mr. Bennett’s appointment as Vice President and
        Chief Financial Officer, Mr. Bennett was Vice President of Finance and
        Administration for Barden Mississippi from its acquisition in December 2001
        to
        his promotion in October 2002.
 
 Steven
        J.
        Lemberg has been a Director of the Company since July 9, 2004. Mr. Lemberg
        also serves as Executive Vice President of Strategic Initiatives for the
        Company, a position he has held since January 3, 2005 and is a member of
        the Company’s Gaming Compliance Committee. Prior to employment with the Company,
        Mr. Lemberg was the Chief Executive Officer of Evigna Brand Insight, a national
        advertising specialty company. Mr. Lemberg held various positions with that
        company and its predecessor entities from January 1996 to December 2004,
        including Chief Operating Officer, Chief Financial Officer, and Executive
        Vice
        President of a division of HALO Industries, Inc., a NYSE-listed company.
 
 Patrick
        R. Cruzen joined the Company’s board of directors on June 14, 2005. He is
        the Chairman of the board’s Audit Committee and a member of the Compensation
        Committee. Mr. Cruzen is the Chief Executive Officer and a principal of Cruzen
        & Associates, an executive search and consulting firm specializing in the
        gaming, gaming supply, hospitality and lottery industries which was formed
        in
        1997. Mr. Cruzen also serves as a Director for Canterbury Park Holding Corp.
        and
        Cash Systems, Inc.
  45
 Table
            of Contents
  
 Andrew
        J.
        Warhola has been a Director of the Company since July 9, 2004. He is also a
        member of the board’s Audit Committee and Chairman of the board’s Compensation
        Committee. Mr. Warhola received a degree in economics and a law degree, both
        from the University of Michigan. Mr. Warhola went on to develop a law firm
        in
        Lorain, Ohio, which specialized in real estate, small business, banking and
        health care. Mr. Warhola has retired from the firm. During Mr. Warhola’s career
        he served as a board member and trustee to various organizations, was active
        in
        many community and civic groups and co-founded a radio station.
 
 Michelle
        R. Sherman has been a Director of the Company since July 9, 2004 and is a
        member of the board’s Compensation Committee. Ms. Sherman also serves as Vice
        President, Chief Financial Officer and Treasurer of Barden Companies, Inc.
        (“Barden”). Ms. Sherman has been with Barden for over 13 years, serving Barden
        in various capacities including accounting, finance, administration, and
        business development. Ms. Sherman is an officer of many Barden Companies’
affiliate entities including BDI for which she serves as Vice President,
        Treasurer and Secretary.
 
 Cara
        Brown has been a Director of the Company since November 2006. Ms. Brown joined
        the Company in December 2001 as its Vice President and General Counsel and
        served in that capacity until her resignation effective May 31, 2006. After
        her resignation, Ms. Brown and the Company entered into a consulting agreement
        with a six-month term commencing June 1, 2006 and ending November 30,
        2006.
 
 
 BOARD
        OF
        DIRECTORS MEETINGS
 
 During
        2006, the Board of Directors held a total of ten meetings of which all of
        the
        members, except Ms. Brown, who joined the Board of Directors in November
        2006,
        had at least 75% attendance.
 
 
 COMMITTEES
 
 The
        Company has two committees comprised of outside board members - an Audit
        Committee and a Compensation Committee. The Company does not have a nominating
        committee at this time.
 
 The
        Audit
        Committee operates under a written charter as approved by the Board of
        Directors. The Audit Committee is comprised of Mr. Cruzen and Mr. Warhola.
        Mr.
        Cruzen is the chairman of the Audit Committee and meets the requirements
        of a
        financial expert under the SEC rules. Both board members attended at least
        75%
        of the nine Audit Committee meetings that were held during 2006.
 
 The
        Compensation Committee operates under a written charter as approved by the
        Board
        of Directors. The Compensation Committee is comprised of Mr. Cruzen, Ms.
        Sherman, and Mr. Warhola. Mr. Warhola is the chairman of the Compensation
        Committee. Ms. Sherman and Mr. Warhola attended at least 75% of the two
        Compensation Committee meetings that were held during 2006.
 
 
 CODE
        OF
        ETHICS
 
 We
        have
        adopted a Code of Ethics that applies to our Directors, Chief Executive Officer,
        Chief Operating Officer, Chief Financial Officer and any other person performing
        similar functions. The failure of any of these persons to comply with the
        Code
        of Ethics may result in disciplinary action, up to and including termination
        of
        employment. The Code of Ethics has been posted to our website at
        www.majesticstar.com and www.fitzgeralds.com.
 
 
  46
 Table
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  AUDIT
        COMMITTEE REPORT
 
 In
        conjunction with its activities during the Company’s year ended
        December 31, 2006, the Audit Committee has reviewed and discussed the
        Company’s audited financial statements with management of the Company. The
        members of the Audit Committee have also discussed with the Company’s
        independent auditors the matters required to be discussed by SAS 61
        (Codifications of Statements on Auditing Standards, AU Section 380). The
        Audit Committee has received from the Company’s independent auditors the written
        disclosures and the letter required by Independent Standards Board Standard
        No. 1, and has discussed with the independent auditors their independence.
        Based on the foregoing review and discussions, the Audit Committee recommended
        to the Board of Directors of the Company that the audited financial statements
        be included in the Company’s Annual Report on Form 10-K for the Company’s year
        ended December 31, 2006.
 
 AUDIT COMMITTEE:
                PATRICK R. CRUZENANDREW J.
                  WARHOLA
   **ITEM
        11. EXECUTIVE COMPENSATION**
 
 
 **Compensation
        Discussion and Analysis**
 
 The
        Company does not have publicly-traded equity securities. Stock, stock options,
        restricted stock and other forms of equity compensation have not been offered
        to
        any officer or director of the Company as part of compensation. The Company
        does
        not currently offer long-term or non-cash compensation. The Grants of Plan-Based
        Awards Table, the Outstanding Equity Awards at Fiscal Year-End Table, the
        Option
        Exercises and Stock Vested Table, Pension Benefits Table and the Nonqualified
        Deferred Compensation Table are not applicable. Mr. Don Barden, the Company’s
        Chairman and Chief Executive Officer (“CEO”), and the sole shareholder of BDI,
        along with the Compensation Committee of the Board of Directors, have absolute
        discretion in establishing and reviewing the compensation of the Company’s named
        executive officers (“NEOs”) that are identified in the summary compensation
        table.
 
 **Objectives
        of Compensation Program**
 
 The
        objectives of the Company’s compensation programs are to effectively attract and
        retain executives and key management and to align the employee’s goals with
        those of the Company through financial incentives in a fair and equitable
        manner
        based on the experience and responsibilities assigned to each
        executive.
 
 **What
        Our Compensation Program is Designed to Reward**
 
 Because
        Mr. Barden, as the Company’s CEO, Chairman of the Board and sole shareholder
        of  BDI, receives much of his compensation through enhancing the value of
        the Company and through distributions to BDI for its manager services, Mr.
        Barden receives only a base salary of $600,000 per year, along with an auto
        allowance and payment of group-term life insurance. As CEO and Chairman of
        the
        Company, Mr. Barden creates the long-term vision for the Company and continues
        to successfully implement strategies that contribute to the growth of the
        Company. The compensation for our other officers and directors is established
        by
        Mr. Barden based upon the talents and experience of these individuals, short-
        and long-term strategies for the Company, the contribution of each officer
        and
        director toward achieving overall Company objectives, all at Mr. Barden’s
        absolute discretion. In February 2007, the Board of Directors approved a
        Management Incentive Plan (“MIP”) that will reward the Company’s officers,
        excluding Mr. Barden, based on the overall financial performance of the Company
        and the attainment of individual goals for each officer. The level of incentive
        pay for each officer is described in the MIP as filed by the Company on Form
        8-K
        on February 7, 2007. Incentive pay, if any, under the MIP will be paid at
        the end of calendar year 2007 or in the first quarter of 2008. The MIP’s
        objective is to provide specific financial and individual goals that are
        pre-defined, achievable with effort and measurable (see “Bonus” discussion
        below).
 
  47
 Table
            of Contents
  **Elements
        of the Company’s Compensation Plan and Why We Chose Each**
 
 Base
        salary, bonuses and other fringe benefits are the primary elements of the
        Company’s executive compensation program. The base salary for Mr. Barden is
        established by the Compensation Committee, based upon what is believed to
        be
        fair and reasonable and knowing that Mr. Barden receives compensation through
        the enhanced value of the Company. Mr. Barden establishes the compensation
        for
        the other officers and directors as described under “What Our Compensation
        Program is Designed to Reward.” Ranges for compensation of the executive
        officers, including the CEO, and key management are generally set at levels
        that are believed to be competitive with other gaming companies. For
        the purpose of comparing the compensation programs of other gaming companies,
        various relevant factors, including size and structure, the composition of
        the
        company’s properties, the market in which they operate, the structure of their
        compensation programs and the availability of public compensation are
        reviewed.
 
 ***Base
        Salary***
 
 The
        salary for the CEO was reviewed by the Compensation Committee in 2004 and
        set at
        $600,000 beginning in January 2005. This amount was determined based on an
        informal review of compensation packages for CEOs of other mid-level gaming
        companies at that time. Mr. Barden requested that the Compensation Committee
        not
        increase his salary for 2006 or 2007.
 
 The
        Compensation Committee has served only in an advisory role to Mr. Barden
        during
        his negotiations with the Company’s officers. The salaries for the Company’s
        officers are stated in their respective employment contracts and are based
        on
        what was considered a fair and competitive wage in the gaming industry for
        the
        position and responsibilities assumed by each officer.
 
 ***Bonus***
 
 Mr.
        Barden does not participate in the bonus plan. For 2006, the Company’s other
        officers are eligible to participate in the Company’s bonus plan as determined
        by Mr. Barden at his sole discretion. The program is primarily based on
        achievement of the Company’s EBITDA goals and each officer’s performance.
        Pursuant to the employment contracts with the Chief Operating Officer (“COO”)
        and Chief Financial Officer (“CFO”), target bonuses of 50% and 30% of base
        salary, respectively, were established. The Executive Vice President of
        Strategic Initiatives does not have a specified target in his
        contract.
 
 For
        2006,
        the bonuses for the COO and CFO were $50,000. For the Executive Vice
        President of Strategic Initiatives, the 2006 bonus was $45,000. These amounts
        were determined by Mr. Barden based on the performance of the Company and
        the
        contribution of each individual to the Company’s overall financial
        goals.
 
 With
        the
        adoption of the MIP, the 2007 officer bonuses will be determined based on
        a
        target rate as a percentage of salary. That target will be broken into two
        components - financial objectives, measured as a percentage of actual combined
        properties’ EBITDA, to budgeted combined properties’ EBITDA, and individual
        goals in order to give incentive to the officers to meet both Company and
        personal objectives. If the combined properties’ actual EBITDA does not reach
        85% of budgeted EBITDA, the officers are not eligible for any portion of
        the
        bonus based on financial performance but could receive a bonus for reaching
        individual goals. EBITDA is defined as earnings before interest, taxes,
        depreciation and amortization. Target rates by position are as
        follows:
 
 ·
              COO
                  bonus will be a target of 50% of base salary actually earned during
                  the
                  year with 70% being dependent on the combined properties reaching
                  their
                  financial goals and 30% based on meeting individual
                  goals.
 ·
              CFO
                  bonus will be a target of 30% of base salary actually earned during
                  the
                  year with 60% being dependent on the combined properties reaching
                  their
                  financial goals and 40% based on meeting individual
                  goals.
 ·
              Executive
                  Vice President of Strategic Initiatives bonus will be a target
                  of 30% of
                  base salary actually earned during the year with 50% being dependent
                  on
                  the combined properties reaching their financial goals and 50%
                  being based
                  on meeting individual goals.
  48
 Table
            of Contents
  
 ***Other
        fringe benefits***
 
 Each
        of
        the Company’s officers is entitled to participate in all of the Company’s
        executive benefit plans as are generally made available from time to time
        to
        senior executives, subject to the terms and conditions of the plans, and
        subject
        to the Company’s right to amend, terminate or take other similar actions with
        respect to such plans. These fringe benefits include participation in the
        Company’s 401(k), group-term life insurance, auto allowance, group health and
        executive medical expense reimbursement plans.
 
 ***Change
        of control clauses***
 
 Each
        of
        the Company’s officers with the exception of the Chief Executive Officer has a
        change of control clause in his employment agreement. Upon a change in control,
        Mr. Saylor, the Company’s COO, is entitled to receive his remaining unpaid base
        salary under his employment agreement, which shall not be greater than 12
        months, but in no event less than six months, plus a pro-rated earned but
        unpaid
        bonus, other fringe benefits, earned and unused vacation pay and company-paid
        COBRA coverage for six months. Both Mr. Bennett, the Company’s CFO, and Mr.
        Lemberg, the Company’s Executive Vice President of Strategic Initiatives, have a
        similar clause in their contracts with the unpaid base salary being the maximum
        of six months or the remainder of their employment agreements.
 
 **How
        the Company Determines Each Element of Compensation**
 
 The
        Company has followed a traditional compensation structure for its type of
        organization. The Company is a limited liability company with no stock. Mr.
        Barden, the sole shareholder of BDI, has elected to retain 100% ownership
        of the
        Company. As such, Mr. Barden and the Compensation Committee have looked at
        other
        methods of compensating its officers. These other methods include base salary,
        bonus and other fringe benefits, as previously discussed. Other than Mr.
        Barden’s base salary, which is set by the Compensation Committee, all other
        officer compensation is set by Mr. Barden at his discretion. Mr. Barden
        negotiates officer compensation packages based on the talents and experience
        of
        these individuals, and the short- and long-term strategies for the Company.
        For
        the year 2006, bonuses were determined based upon each officer’s contribution to
        the financial performance and overall goals of the Company, but each bonus
        payment is determined by Mr. Barden at his discretion.
 
 **How
        Each Element of Compensation Fits with the Company’s Overall Compensation
        Objectives**
 
 The
        Company has decided on base salary, bonus and fringe benefits as the forms
        of
        compensation that will allow it to meet the objective of attracting and
        retaining key executives within the current ownership structure of the Company.
        These forms of compensation are based on what the Company considers to be
        the
        acceptable forms and levels of compensation to be competitive with other
        gaming
        companies of similar size and structure, and the Company’s goals and strategies.
        Mr. Barden has determined that base salary be fair and competitive, but that
        it
        also reflects an officer’s talents and experience. Base salary is often
        finalized through negotiation with the officer and ultimately is Mr. Barden’s
        sole decision. Bonus payouts for the year 2006 were based upon Mr. Barden’s
        evaluation of the Company’s financial performance and the relative contribution
        of each officer to such financial performance and other Company goals and
        objectives. Typically, the level of base salaries has little impact on the
        size
        of bonus awards and such bonus awards can vary significantly given the financial
        performance of the Company. Other fringe benefits are fairly nominal when
        compared to base salary and bonuses, and generally follow the fringe benefits
        offered to all the Company’s employees, including 401(k) plan match, group term
        life insurance, and group medical coverage. Our officers, excluding Mr. Barden,
        also receive reimbursement up to $5,000 for certain unpaid medical expenses
        under an executive medical reimbursement plan. The COO and CFO also receive
        a
        $500 monthly car allowance.
 
 **Summary
        Compensation Table**
 
 The
        following table sets forth all compensation earned for services performed
        for
        The Majestic Star Casino, LLC and its subsidiaries during the years shown
        below
        by our Chief Executive Officer and our other current executive officers during
        2006. All compensation is paid by The Majestic Star Casino,
        LLC.
  49
 Table
            of Contents
  
 All
                  OtherName
                  and
              
              
              
              Salary
              
              Bonus
              
              Compen-
              
              TotalPrincipal
                  Position
              
              Year
              
              ($)
              
              ($)
              
              sation
                  ($)
              
              ($)**Don
                  H. Barden (1)**
              
              
              2006
              
              $
              600,228
              
              
              -
              
              $
              57,069
              
              $
              657,297Chairman,President,
                  andChief
                  Executive Officer**Kirk
                  C. Saylor (2)**
              
              
              2006
              
              $
              246,178
              
              $
              50,000
              
              $
              6,375
              
              $
              302,553Executive
                  Vice Presidentand
                  Chief OperatingOfficer**Jon
                  S. Bennett (3)**
              
              
              2006
              
              $
              287,307
              
              $
              50,000
              
              $
              22,215
              
              $
              359,522Vice
                  President andChief
                  Financial Officer**Steven
                  Lemberg (4)**
              
              
              2006
              
              $
              300,047
              
              $
              45,000
              
              $
              10,281
              
              $
              355,328Executive
                  Vice PresidentOf
                  Strategic Initiatives
 
 (1)  The
        amount shown in "All Other Compensation" represents an auto allowance of
        $41,625
        and group term life insurance of $15,444.
 
 (2)  The
        amount shown in “All Other Compensation” includes an auto allowance of $3,959,
        reimbursement for un-reimbursed medical plan expenditures of $788 and group
        term
        life insurance of $1,628. The bonus reflected is for the year earned, not
        paid.
 
 (3)  The
        amount shown in “All Other Compensation” includes a 401(k) match of $4,500 for
        which Mr. Bennett is fully vested, an auto allowance of $3,322, reimbursement
        for un-reimbursed medical plan expenditures of $1,254, a vacation trip valued
        at
        $11,159 and group term life insurance of $1,980. The bonus reflected is for
        the
        year earned, not paid.
 
 (4)  The
        amount shown in “All Other Compensation” reflects a 401(k) match of $4,500 for
        which Mr. Lemberg is 10% vested, reimbursement for un-reimbursed medical
        plan
        expenditures of $2,607 and group term life insurance of $3,174. The bonus
        reflected is for the year earned, not paid.
 
 EMPLOYMENT
        AGREEMENTS
 
 Mr.
        Barden serves as our Chairman, President and Chief Executive Officer and
        currently receives annual compensation of $600,000 as an employee, pursuant
        to a
        letter agreement with the Company dated January 1, 2005. The Company
        provides Mr. Barden with an auto allowance. Mr. Barden is entitled to
        participate in the Company’s employee benefit plans as are generally made
        available to the Company’s senior executives and other customary employee
        benefits, including participation in the Company’s 401(k) plan.
  50
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 Mr.
        Saylor serves as our Executive Vice President and Chief Operating Officer,
        pursuant to an employment agreement with the Company dated April 6, 2006
        and effective as of May 15, 2006. Unless sooner terminated as provided
        therein, the agreement continues in effect for two years. Thereafter, the
        term
        automatically extends for successive one year periods unless either party
        provides notice of its intention not to renew the agreement. The agreement
        provides for a base salary of $400,000 during the first year and $500,000
        during
        the second year and participation in the Company’s discretionary bonus program
        (2006) and MIP (2007). Mr. Saylor is also entitled to participate in the
        Company’s employee benefits plans as are generally made available to the
        Company’s senior executives and other customary employee benefits, including
        participation in the Company’s 401(k) plan. Mr. Saylor also participates in an
        executive medical reimbursement plan with a maximum annual payout of $5,000
        and
        receives a $500 per month car allowance. In the event that the employment
        agreement is terminated prior to its maturity, under certain circumstances,
        Mr.
        Saylor is entitled to severance payments for a maximum of 12 months or the
        remaining term of the agreement (but no less than six months), bonus
        compensation for the employment term and COBRA benefits for a period of six
        months, as well as any earned and unused vacation.
 
 Mr.
        Bennett serves as our Vice President and Chief Financial Officer pursuant
        to an
        employment agreement with the Company dated August 14, 2006. Unless sooner
        terminated as provided therein, the agreement continues in effect for two
        years.
        The agreement provides for a base compensation of $300,000 effective
        July 3, 2006, subject to annual reviews. Mr. Bennett also participates in
        the Company’s discretionary bonus program (2006) and MIP (2007). In addition to
        such compensation, Mr. Bennett is entitled to participate in the Company’s
        employee benefit plans as are generally made available to the Company’s senior
        executives and other customary employee benefits, including participation
        in the
        Company’s 401(k) plan. Mr. Bennett also participates in an executive medical
        reimbursement plan with a maximum annual payout of $5,000 and receives a
        $500
        per month car allowance. In the event that the employment agreement is
        terminated prior to its maturity, under certain circumstances, Mr. Bennett
        is
        entitled to severance payments for a maximum of six months or the remaining
        term
        of the agreement, bonus compensation for the employment term and COBRA benefits
        for a period of six months, as well as any earned and unused
        vacation.
 
 Mr.
        Lemberg serves as a board member and, effective January 3, 2005, joined the
        Company as Executive Vice President of Strategic Initiatives pursuant to
        an
        employment agreement dated December 17, 2004. The agreement provided for a
        two year term which automatically extends for successive one year periods
        unless
        either party provides notice of its intention not to renew the agreement.
        The
        agreement provides for a base salary of $300,000 and participation in the
        Company’s discretionary bonus program (2006) and MIP (2007). Mr. Lemberg is also
        entitled to participate in the Company’s employee benefits plans as are
        generally made available to the Company’s senior executives and other customary
        employee benefits, including participation in the Company’s 401(k) plan. Mr.
        Lemberg also participates in an executive medical reimbursement plan with
        a
        maximum annual payout of $5,000. In the event that the employment agreement
        is
        terminated prior to its maturity, under certain circumstances, Mr. Lemberg
        is
        entitled to severance payments for a maximum of six months or the remaining
        term
        of the agreement, bonus compensation for the employment term and COBRA benefits
        for a period of six months.
 
 
 COMPENSATION
        OF DIRECTORS
 
 Fees
                  Earnedor
                  Paid
              
              All
                  otherin
                  Cash
              
              Compensation
              
              TotalName
              
              ($)
              
              ($)
              
              ($)Patrick
                  R. Cruzen
              
              $
              60,506
              
              $
              -
              
              $
              60,506Andrew
                  J. Warhola
              
              $
              53,000
              
              $
              -
              
              $
              53,000Michelle
                  R. Sherman (1)
              
              $
              -
              
              $
              -
              
              $
              -Cara
                  L. Brown (2)
              
              $
              3,500
              
              $
              162,141
              
              $
              165,641
 
 (1)
        Ms.
        Sherman serves on the Board of Directors and receives no compensation. However,
        Ms. Sherman is reimbursed for her expenses, such as travel and
        meals.
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 (2)
        Ms.
        Brown was an employee of the company until May 31, 2006. She continued a
        relationship with the Company under a six-month consulting agreement. When
        that
        agreement expired, she was appointed to the Board of Directors by a unanimous
        vote of the current board members and the Company’s sole member. Ms. Brown’s
        wages during her employment were $98,786 and she received group term life
        insurance of $355. Under Ms. Brown’s consulting agreement she received total
        payments of $63,000.
 
 Directors
        who are not employees of the Company earn a monthly fee of $3,500, plus $1,000
        for each board meeting they attend. Directors are reimbursed for expenses
        reasonably incurred in connection with their service on the board. The chairman
        of the audit committee earns a monthly fee of $3,917, plus $1,000 for each
        board
        meeting attended.
 
 COMPENSATION
        COMMITTEE REPORT
 
 The
        Compensation Committee has reviewed and discussed the Compensation Discussion
        and Analysis with management and based on that discussion and review has
        recommended to the Board of Directors that the Compensation Discussion and
        Analysis be included as part of this annual report of Form 10-K for the year
        ended December 31, 2006.
  
 COMPENSATION COMMITTEE:
                ANDREW
                    J. WARHOLAMICHELLE R. SHERMANPATRICK R.
                  CRUZEN
   COMPENSATION
        COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
 
 During
        2006, the Compensation Committee consisted of Andrew J. Warhola (Chairman),
        Patrick Cruzen and Michelle R. Sherman. Mr. Warhola and Mr. Cruzen are
        independent directors and not employees of the Company or its subsidiaries.
        Ms.
        Sherman is an officer of BDI, the ultimate parent of the Company.
 
 
 **ITEM
        12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
        MANAGEMENT AND RELATED STOCKHOLDER MATTERS**
 
 As
        of
        December 31, 2006, we are indirectly wholly owned by Don H. Barden, our
        Chairman, President and Chief Executive Officer. Mr. Barden is the sole
        shareholder of BDI, which, in turn, owns 100% of the membership interest
        of
        Majestic Holdco, LLC, the direct parent of The Majestic Star Casino, LLC.
        The
        Majestic Star Casino, LLC, in turn, directly or indirectly owns 100% of the
        equity interest of the following entities: The Majestic Star Casino Capital
        Corp., The Majestic Star Casino II, Inc., Majestic Star Casino Capital Corp.
        II,
        Barden Mississippi Gaming LLC, and Barden Colorado Gaming LLC. The address
        for
        Mr. Barden and Barden Development, Inc. is 163 Madison Avenue, Suite 2000,
        Detroit, MI 48226.
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 **ITEM
        13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
        DIRECTOR INDEPENDENCE**
 
 TRANSACTIONS
        BY OR WITH AFFILIATES
 
 *Pushdown
        of Majestic Holdco Discount Notes.* The
        Company’s financial statements for 2006 and 2005 include the $63.5 million of
        Discount Notes, net of discount of $12.4 million and $18.2 million,
        respectively, issued by Majestic Holdco in connection with the acquisition
        of
        Trump Indiana and other refinancing transactions. The Discount Notes are
        solely
        the obligation of Majestic Holdco and are unsecured. Neither the Company
        nor any
        of its direct or indirect subsidiaries guarantees the Discount Notes nor
        are the
        equity or assets of the Company or its direct or indirect subsidiaries security
        for the Discount Notes. Further, the Indentures governing the Senior Notes
        and
        the Senior Secured Notes and the loan and security agreement which governs
        our
        Senior Secured Credit Facility preclude distributions by the Company to Majestic
        Holdco unless certain financial tests are met. A likely scenario for the
        repayment of these Discount Notes is from cash flows of the Company or a
        refinancing of the Company’s indebtedness, including Majestic Holdco. The
        Discount Notes have been “pushed-down” to the Company pursuant to the guidelines
        of SEC Staff Accounting Bulletin 73 Topic 5(J).
 
 *Manager
        Agreement.* Distributions to BDI under the Manager Agreement, dated October 7, 2003,
        are governed and limited by the terms of the indentures governing the Notes
        and
        by the terms of the Senior Secured Credit Facility. The distributions for
        each
        fiscal quarter may not exceed 1% of the Company’s consolidated net operating
        revenue and 5% of the Company’s consolidated cash flow (as defined in the
        indenture governing the Senior Secured Notes and the Senior Secured Credit
        Facility) for the immediately preceding fiscal quarter.
 
 During
        the year ended December 31, 2006, the Company made distributions of $3.6
        million to BDI pursuant to the Manager Agreement. The $3.6 million of
        distributions paid to BDI in 2006 pertain to the net revenues and consolidated
        cash flows of the Company during the three-month periods ended December 31,
        2005 and March 31, 2006. Though allowable, BDI chose to defer its
        distribution for the second and third quarters of 2006. The net revenue
        component of the distribution for the fourth quarter of 2006 was also deferred.
        The consolidated cash flow component of the distribution for the fourth quarter
        2006 was allowable at the Company level, but was not permissible at Majestic
        Holdco, since the required 1.5:1.0 interest coverage ratio was not achieved.
        Due
        to the inability to achieve a 1.5:1.0 interest coverage ratio, the distribution
        cannot be made to BDI. If allowable distributions were made for all three
        quarters, then the Company would be required to pay $4.5 million. During
        the
        years ended December 31, 2005 and 2004, the Company made
        distributions totaling $5.2 million and $5.3 million, respectively, to BDI
        pursuant to the Manager Agreement.
 
 *Tax
        Distributions* .
        Pursuant to the terms of the indentures governing the Notes and the Senior
        Secured Credit Facility, the Company is permitted to make distributions for
        its
        member’s state and federal income tax liabilities. In the second quarter of
        2006, the Company made a tax distribution of $0.9 million to BDI for 2005
        state
        tax liabilities and estimated 2006 taxes. In the second quarter of 2005,
        the
        Company made a tax distribution of $2.3 million to BDI for 2004 state tax
        liabilities and estimated 2005 taxes of which $0.7 million was reimbursed
        to the
        Company upon final determination of BDI’s tax liabilities in October
        2005.
 
 *BHPA
        Rent Expense.* During
        the period from January 1, 2005 to December 20, 2005 and the year
        ended December 31, 2004, we incurred rent expense payable to BHPA totaling
        $2.0 million, and $2.2 million, respectively. As a result of our acquisition
        of
        Trump Indiana and the contribution of AMB Parking’s equity interest in BHPA to
        the Company, on December 21, 2005, BHPA became an indirect wholly owned
        subsidiary of the Company and the parking leases between BHPA and the Company
        and BHPA and Trump Indiana were terminated.
 
 *Barden
        Nevada Expense Sharing Agreement* .
        The
        Company has entered into an expense sharing agreement dated October 7, 2003
        with Barden Nevada. The expense sharing agreement provides for a fee from
        Barden
        Nevada to the Company in the amount of the greater of (i) $0.5 million per
        year
        or (ii) the actual amount of certain specified expenses incurred by the Company
        in connection with providing services to Barden Nevada. For each of the years
        ended December 31, 2006, 2005 and 2004, the Company charged Barden Nevada
        $1.4 million, $1.4 million and $1.1 million, respectively, pursuant to the
        expense sharing agreement.
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 *Barden
        Nevada Revolving Promissory Note.* On
        March 9, 2005, Barden Nevada entered into a revolving promissory note with
        the Company, whereby Barden Nevada may request advances from time to time
        from
        the Company up to $5.0 million. Interest is calculated based on the prime
        rate
        (as published in the Money Section of the Wall Street Journal), plus the
        margin
        spread paid by the Company under prime rate borrowings with Wells Fargo
        Foothill, the agent bank under the Company’s Senior Secured Credit Facility.
        Interest is paid quarterly, in arrears. Any costs that are funded by the
        Company
        and not repaid by Barden Nevada within 30 days will be added to the principal
        amount outstanding. All amounts outstanding under the promissory note are
        due
        and payable on October 7, 2007 along with the accrued and unpaid interest.
        As of December 31, 2006, the principal balance of the promissory note was
        $0.
 
 REVIEW
        OF
        RELATED-PARTY TRANSACTIONS
 
 Since
        the
        formation of a formal Board of Directors, the Company has not had any material
        transactions with related persons other than Don H. Barden, its sole indirect
        beneficial owner, or entities controlled directly or indirectly by Mr. Barden.
        Accordingly, the Company does not have a formal written policy directly related
        to the review, approval or ratification of related party transactions required
        to be reported pursuant to Item 404 of Regulation S-K. The Company has adopted
        a
        Code of Business Conduct and Ethics applicable to all employees, officers
        and
        directors, which includes a conflict of interest provision that requires
        disclosure of all actual or apparent conflicts of interest. In addition,
        on an
        annual basis, officers and directors are required to complete questionnaires
        disclosing any related-party transactions with the Company by the individual
        or
        by any immediate family member. The Company's legal and financial staff reviews
        all such disclosures to determine whether any transaction is required to
        be
        disclosed under the SEC's rules. In additional, on an informal case-by-case
        basis, the Board of Directors may approve or ratify a disclosable related-party
        transaction based on the facts and circumstances of such transaction, including
        the nature of the related person's interest in the transaction, the terms
        of the
        transaction, the importance of the transaction to the Company, whether the
        transaction would impair the judgment of a director or executive officer
        to act
        in the best interest of the Company, and such other matters that the Board
        of
        Directors may deem appropriate.
 
 DIRECTOR
        INDEPENDENCE
 
 To
        determine the independence of outside board members, the Company uses the
        NASDAQ
        definition of independence as defined in Rule 4200(a)(15) which specifies,
        among
        other requirements, that a director not have been employed by the Company
        or by
        any parent or subsidiary of the Company at any time during the past three
        years.
 
 As
        of
        December 31, 2006, the Company has four outside directors, Mr. Cruzen, Mr.
        Warhola, Ms. Sherman and Ms. Brown. Mr. Cruzen and Mr. Warhola are considered
        to
        be independent directors. Ms. Sherman, as an employee of BDI, is not considered
        independent. Ms. Brown, because of her employment by the Company prior to
        becoming a board member, is not considered independent at this
        time.
 
 
 **ITEM
        14. PRINCIPAL ACCOUNTING FEES AND SERVICES**
 
 PricewaterhouseCoopers
        LLP (“PwC”) acted as our independent registered public accounting firm through
        October 20, 2005 and during 2004. On November 23, 2005, the Audit
        Committee appointed Ernst & Young LLP (“E&Y”) as our independent
        registered public accounting firm. Fees paid to PwC for 2006 and 2005 and
        to
        E&Y for 2006 and 2005 are included below.
 
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 AUDIT
        FEES
 
 The
        aggregate fees billed by PwC for professional services rendered for audit
        services in fiscal years 2006 and 2005 were $98,997 and $854,528, respectively.
        Services performed included:
 
 ·
              Audit
                  of the Company’s 2004 annual financial statements, including the audits of
                  various subsidiaries conducting gaming operations as required by
                  the
                  regulations of the respective
                  jurisdictions.
 
 ·
              Reviews
                  of the Company’s quarterly financial statements through the quarter ended
                  September 30, 2005.
 
 ·
              Services
                  related to the Company’s 2005 debt
                  offerings.
 
 ·
              Statutory
                  and regulatory audits, consents and other services related to SEC
                  matters.
 
 The
        aggregate fees billed by E&Y for professional services rendered for audit
        services in fiscal years 2006 and 2005 were $956,763 and $818,832, respectively.
        Services performed included:
  ·
              Audit
                  of the Company’s annual financial statements, including the audits of
                  various subsidiaries conducting gaming operations as required by
                  the
                  regulations of the respective
                  jurisdictions.
  AUDIT-RELATED
        FEES
 
 The
        aggregate fees billed by PwC for professional services rendered for
        audit-related services in fiscal years 2006 and 2005 were $71,122, and $168,821,
        respectively. Services performed included:
 
 ·
              Due
                  diligence services related to the Trump Indiana
                  Acquisition.
 
 The
          aggregate fees billed by E&Y for professional services rendered for
          audit-related services in fiscal years 2006 and 2005 were $127,177 and
          $0,
          respectively. Services performed included:
  ·
                Services
                    related to 401(k)
                    audit.
 ·
              Services
                  related to the Company's 2006 registration
                  statement.
 TAX
        FEES
 
 The
        aggregate fees billed by PwC for professional services rendered for tax-related
        services in fiscal year 2005 were $51,274. These fees were associated with
        federal and state tax compliance, tax advice, tax planning and tax return
        preparation. Fees billed by E&Y for tax-related services in the fiscal years
        2006 were $27,100.
 
 ALL
        OTHER
        FEES
 
 Neither
        PwC nor E&Y billed for services rendered for engagements other than audit
        fees, audit-related fees and tax fees during 2006 and 2005.
 
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 Table
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 **PART
        IV**
 
 **ITEM
        15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES**
  (a)
              1.
              Financial Statements as listed on the index on
                Page
                F-1. 2.
              Financial Statement Schedule as listed on the
                index
                Page F-1. 3.
              Exhibits:
                  The exhibits included as part of this report are listed in the
                  attached
                  Exhibit Index on Page E-1, which is incorporated herein by
                  reference.
 
 (b)  The
        exhibits included as part of this report are listed in the attached Exhibit
        Index on Page E-1, which is incorporated herein by reference.
 
 (c)  The
        response to this portion of Item 15 is submitted as a separate section of
        this
        report.
 
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 Table
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 **SIGNATURES**
 
 Pursuant
          to the requirements of Section 13 or 15(d) of the Securities Exchange Act
          of
          1934, the Registrant has duly caused this report to be signed on its behalf
          by
          the undersigned, thereunto duly authorized, on April 2, 2007.
 
 **THE
                  MAJESTIC STAR CASINO, LLC**By:
                /s/
                    Don H. BardenDon
                  H. BardenChairman,
                  President and
                  Chief Executive Officer**THE
                    MAJESTIC STAR CASINO CAPITAL CORP.**By:
                /s/
                    Don H. BardenDon H.
                  BardenPresident
                  and Chief
                  Executive Officer**MAJESTIC
                  STAR CASINO CAPITAL CORP. II**By:
                /s/
                    Don H. BardenDon H.
                  BardenPresident
                  and Chief
                  Executive Officer
 Pursuant
          to the requirements of the Securities Exchange Act of 1934, this report
          has been
          signed below by the following persons on April 2, 2007 on behalf of the
          Registrant and in the capacities indicated.
  **THE MAJESTIC
                  STAR
                  CASINO, LLC**By:
                /s/
                    Don H. BardenDon
                    H. BardenChairman,
                  President and Chief Executive Officer(Principal
                  Executive Officer)By:
                /s/
                    Jon S. BennettJon
                    S. BennettVice
                  President and Chief Financial Officer(Principal
                  Financial and Accounting Officer)By:
                /s/
                    Kirk SaylorKirk
                    SaylorDirector,
                  Executive
                  Vice President, and Chief Operating OfficerBy:
                /s/
                    Steven J. LembergSteven
                    J. LembergDirector,
                  Executive Vice President of Strategic InitiativesBy:
                /s/
                    Michelle R. ShermanMichelle
                    R. ShermanDirectorBy:
                /s/
                    Patrick R. CruzenPatrick
                    CruzenDirectorBy:
                /s/
                    Andrew J. WarholaAndrew
                    J. WarholaDirectorBy:
                /s/
                    Cara L. BrownCara
                    L. BrownDirector
  S-1
 
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            of Contents
  
 **THE
                  MAJESTIC STAR CASINO CAPITAL CORP.**By:
              /s/
                  Don H. BardenDon
                  H. BardenPresident,
                Chief Executive Officer and Director(Principal
                Executive Officer)By:
              /s/
                  Jon S. BennettJon
                  S. BennettVice
                President and Chief Financial Officer(Principal
                Financial and Accounting Officer)
  **MAJESTIC
                  STAR CASINO CAPITAL CORP. II**By:
              /s/
                  Don H. BardenDon
                  H. BardenPresident,
                Chief Executive Officer and Director(Principal
                Executive Officer)By:
              /s/
                  Jon S. BennettJon
                  S. BennettVice
                President and Chief Financial Officer(Principal
                Financial and Accounting Officer)
 
  
   
 
  S-2
 
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            of Contents
   **EXHIBIT
          INDEX**
 
 Certain
          of the following exhibits have been previously filed with the Securities
          and
          Exchange Commission by the Company pursuant to the requirements of the
          Securities Act of 1933 and the Securities Exchange Act of 1934. Such exhibits
          are identified by the parenthetical references following the listing of
          each
          such exhibit and are incorporated herein by reference. The Company’s Commission
          file number is 333-06489.
 
 
 **EXHIBIT
                    NO.**
                **DESCRIPTION
                    OF EXHIBITS**2.1
                Purchase
                    and Sale Agreement dated as of November 2, 2000, by and among
                    Majestic
                    Investor, LLC, Fitzgeralds Las Vegas, Inc., 101 Main Street Limited
                    Liability Company, Fitzgeralds Mississippi, Inc., Fitzgeralds
                    Gaming
                    Corporation and certain affiliates of the foregoing parties (filed
                    as
                    Exhibit 2.1 to the Company’s Annual Report on Form 10-K for the year ended
                    December 31, 2000)2.2
                First
                    Amendment to Purchase and Sale Agreement dated as of December
                    4, 2000 by
                    and among Majestic Investor, LLC, Fitzgeralds Las Vegas, Inc.,
                    101 Main
                    Street Limited Liability Company, Fitzgeralds Mississippi, Inc.,
                    Fitzgeralds Gaming Corporation and certain affiliates of the
                    foregoing
                    parties (filed as Exhibit 2.1 to the Company’s Annual Report on Form 10-K
                    for the year ended December 31, 2000)2.3
                Second
                    Amendment to Purchase and Sale Agreement dated as of November
                    1, 2001, by
                    and among Majestic Investor Holdings, LLC, Majestic Investor,
                    LLC, Barden
                    Nevada Gaming, LLC, Barden Mississippi Gaming, LLC, Barden Colorado
                    Gaming, LLC, Fitzgeralds Las Vegas, Inc., 101 Main Street Limited
                    Liability Company, Fitzgeralds Mississippi, Inc. and Fitzgeralds
                    Gaming
                    Corporation (filed as Exhibit 2.2 to the Company’s Current Report on Form
                    8-K dated December 13, 2001)2.4
                Assignment
                    of Interest by Barden Development, Inc. and Majestic Investor
                    Holdings,
                    LLC dated as of December 31, 2003 (filed as Exhibit 2.1 to the
                    Company’s
                    Annual Report on Form 10-K for the year ended December 31,
                    2003)2.5
                Asset
                    Purchase Agreement dated July 12, 2004 between Legends Gaming,
                    LLC and
                    Barden Colorado Gaming, LLC (filed as Exhibit 2.1 to the Company’s Current
                    Report on Form 8-K dated July 12, 2004)2.5.1
                Amendment
                    No. 1 dated February 1, 2005 to Asset Purchase Agreement dated
                    July 12,
                    2004 by and between Legends Gaming, LLC and Barden Colorado Gaming,
                    LLC
                    (filed as Exhibit 2.2.1 to the Company’s Annual Report on Form 10-K for
                    the year ended December 31, 2004)2.6
                Stock
                    Purchase Agreement, dated as of November 3, 2005 by and between
                    The
                    Majestic Star Casino, LLC and Trump Entertainment Resorts Holdings,
                    L.P.
                    (filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K dated
                    November 9, 2005)3.1
                Amended
                    and Restated Articles of Organization of The Majestic Star Casino,
                    LLC
                    (filed as Exhibit 3.1 to the Company’s Registration Statement, No.
                    333-06489)3.2
                Third
                    Amended and Restated Operating Agreement of The Majestic Star
                    Casino, LLC
                    dated as of March 29, 1996 (filed as Exhibit 3.2 to the Company’s
                    Registration Statement, No. 333-06489)3.2.1
                First
                    Amendment of Third Amended and Restated Operating Agreement of
                    The
                    Majestic Star Casino, LLC, dated as of June 18, 1999 (filed as
                    Exhibit 3.3
                    to the Company’s Registration Statement, No. 333-85089)3.3
                Articles
                    of Incorporation of The Majestic Star Casino Capital Corp. (filed
                    as
                    Exhibit 3.4 to the Company’s Registration Statement, No.
                    333-85089)3.4
                Bylaws
                    of The Majestic Star Casino Capital Corp. (filed as Exhibit 3.5
                    to the
                    Company’s Registration Statement, No.
                    333-85089)
  E-1
 
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 **EXHIBIT
                    NO.**
                **DESCRIPTION
                    OF EXHIBITS**3.5
                Articles
                    of Incorporation of Majestic Star Casino Capital Corp. II (filed
                    as
                    Exhibit 3.6 to the Company’s Registration Statement, No.
                    333-134325)3.6
                Bylaws
                    of Majestic Star Casino Capital Corp. II (filed as Exhibit 3.7
                    to the
                    Company’s Registration Statement, No. 333-134325)3.7
                Amendment
                    to Bylaws of Majestic Star Casino Capital Corp. II (filed as
                    Exhibit 3.8
                    to the Company’s Registration Statement, No.
                    333-134325)3.8
                Bylaws
                    of The Majestic Star Casino II, Inc. (filed as Exhibit 3.16 to
                    the
                    Company’s Registration Statement, No. 333-134325)4.1
                Indenture,
                    dated as of October 7, 2003, among The Majestic Star Casino,
                    LLC and
                    Majestic Star Casino Capital Corp., as issuers, and the subsidiary
                    guarantors, as subsidiary guarantors and The Bank of New York,
                    as trustee
                    (filed as Exhibit 4.1 to the Company’s Registration Statement, No.
                    333-110993)4.2
                Intercreditor
                    Agreement, dated as of October 7, 2003, between The Bank of New
                    York and
                    Wells Fargo Foothill, Inc. (filed as Exhibit 4.6 to the Company’s
                    Registration Statement, No. 333-110993)4.3
                Supplemental
                    Indenture, dated as of December 21, 2005, among The Majestic
                    Star Casino,
                    LLC, The Majestic Star Casino Capital Corp., the Subsidiary Guarantors
                    (as
                    defined therein), and The Bank of New York Trust Company, N.A.,
                    as
                    successor to The Bank of New York, as trustee for the purpose
                    of making
                    changes to the Indenture required for the issuance of additional
                    notes
                    (filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K dated
                    December 28, 2005)4.4
                Supplemental
                    Indenture, dated as of December 21, 2005, among The Majestic
                    Star Casino,
                    LLC, The Majestic Star Casino Capital Corp., the Subsidiary Guarantors
                    (as
                    defined therein), and The Bank of New York Trust Company, N.A.,
                    as
                    successor to The Bank of New York, as trustee for the purpose
                    of adding
                    new subsidiary guarantors (filed as Exhibit 10.4 to the Company’s Current
                    Report on Form 8-K dated December 28, 2005)4.5
                Indenture,
                    dated as of December 21, 2005, among The Majestic Star Casino,
                    LLC, The
                    Majestic Star Casino Capital Corp. II, the Subsidiary Guarantors
                    (as
                    defined therein), and The Bank of New York Trust Company N.A.,
                    as trustee
                    regarding the Senior Notes (filed as Exhibit 10.5 to the Company’s Current
                    Report on Form 8-K dated December 28, 2005)4.6
                First
                    Amendment to Intercreditor and Lien Subordination Agreement,
                    dated as of
                    December 21, 2005, by and among The Majestic Star Casino, LLC,
                    the Bank of
                    New York Trust company N.A., Inc. and Wells Fargo Foothill, Inc.,
                    filed
                    herewith10.1
                Loan
                    and Security Agreement, dated as of October 7, 2003, by and among
                    The
                    Majestic Star Casino, LLC, certain subsidiaries signatory thereto,
                    the
                    lenders signatories thereto and Wells Fargo Foothill, Inc., as
                    Agent
                    (filed as Exhibit 10.1 to the Company’s Registration Statement, No.
                    333-110993)10.1.1
                Amendment
                    Number One to Loan and Security Agreement, dated as of May 4,
                    2004, by and
                    among The Majestic Star Casino, LLC, certain subsidiaries signatory
                    thereto, the lender signatories thereto and Wells Fargo Foothill,
                    Inc., as
                    Agent (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form
                    10-Q for the period ended March 31,
                    2004)
  E-2
 
 Table
            of Contents
  
 EXHIBIT
                    NO.
                DESCRIPTION
                    OF EXHIBITS10.1.2
                Amendment
                    Number Two to Loan and Security Agreement, dated as of March
                    1, 2005, by
                    and among The Majestic Star Casino, LLC, certain subsidiaries
                    signatory
                    thereto, the lender signatories thereto and Wells Fargo Foothill,
                    Inc., as
                    Agent (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K
                    dated March 22, 2005)10.1.3
                Amendment
                    Number Three to Loan and Security Agreement, dated as of June
                    15, 2005, by
                    and among The Majestic Star Casino, LLC, certain subsidiary signatories
                    thereto, the lender signatories thereto and Wells Fargo Foothill,
                    Inc., as
                    Agent (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K
                    dated August 11, 2005)10.1.4
                Amendment
                    Number Four to Loan and Security Agreement, dated as of December
                    21, 2005,
                    by and among The Majestic Star Casino, LLC, certain subsidiary
                    signatories
                    thereto, the lender signatories and Wells Fargo Foothill, Inc.,
                    as Agent
                    (filed as Exhibit 10.8 to the Company’s Current Report on Form 8-K dated
                    December 28, 2005)10.1.5
                Amendment
                    Number Five to Loan and Security Agreement, dated as of April
                    13, 2006, by
                    and among The Majestic Star Casino, LLC, certain subsidiary signatories
                    thereto, the lender signatories at Wells Fargo Foothill, Inc.,
                    as Agent
                    (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated
                    April 17, 2006)10.1.6
                Amendment
                    Number Six to Loan and Security Agreement, dated as of July 31,
                    2006, by
                    and among The Majestic Star Casino, LLC, certain subsidiary signatories
                    thereto, the lender signatories at Wells Fargo Foothill, Inc.,
                    as Agent
                    (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated
                    August 4, 2006)10.2.1*
                Amendment
                    to Letter Agreement, dated as of January 1, 2005, between Don
                    H. Barden
                    and The Majestic Star Casino, LLC (filed as Exhibit 10.2 to the
                    Company’s
                    Annual Report on Form 10-K for the year ended December 31,
                    2004)10.3*
                Employment
                    Agreement, dated August 14, 2006, between Jon Scott Bennett and
                    The
                    Majestic Star Casino, LLC (filed as Exhibit 10.1 to the Company’s Current
                    Report on Form 8-K dated August 18, 2006)10.4*
                Employment
                    Agreement, dated as of December 17, 2004, between Steven J. Lemberg
                    and
                    The Majestic Star Casino, LLC (filed as Exhibit 10.4 to the Company’s
                    Annual Report on Form 10-K for the year ended December 31,
                    2004)10.5
                Management
                    Agreement, dated as of October 7, 2003, between The Majestic
                    Star Casino,
                    LLC and Barden Development, Inc. (filed as Exhibit 10.8 to the
                    Company’s
                    Registration Statement, No. 333-110993)10.6
                Expense
                    Reimbursement Agreement, dated as of October 7, 2003, between
                    Barden
                    Nevada Gaming, LLC and The Majestic Star Casino, LLC (filed as
                    Exhibit
                    10.9 to the Company’s Registration Statement, No.
                    333-110993)10.7
                First
                    Amended and Restated Operating Agreement of Buffington Harbor
                    Riverboats,
                    LLC, made as of October 31, 1995, by and between Trump Indiana,
                    Inc. and
                    The Majestic Star Casino, LLC, as amended by Amendment No. 1
                    to First
                    Amended and Restated Operating Agreement of Buffington Harbor
                    Riverboats,
                    LLC, dated as of April 23, 1996 (filed as Exhibit 10.6 to the
                    Company’s
                    Registration Statement No. 333-06489)10.7.1
                Second
                    Amendment to The First Amended and Restated Operating Agreement
                    of
                    Buffington Harbor Riverboats, LLC (filed as Exhibit 10.12 to
                    the Company’s
                    Registration Statement, No.
                    333-110993)
  E-3
 
 Table
            of Contents
  
 EXHIBIT
                    NO.
                DESCRIPTION
                    OF EXHIBITS10.8
                Development
                    Agreement, dated March 26, 1996, by and between the Company and
                    the City
                    of Gary, Indiana (filed as Exhibit 10.8 to the Company’s Registration
                    Statement, No. 333-06489)10.9
                Amendment
                    Number One to Development Agreement, dated October 19, 2005,
                    by and among
                    the Company, Trump Indiana, Inc. and the City of Gary, Indiana,
                    filed
                    herewith10.10
                Purchase
                    Agreement, dated December 21, 2005 by and between The Majestic
                    Star
                    Casino, LLC the Majestic Star Casino Capital Corp., each Subsidiary
                    Guarantor (as defined therein) and Jefferies & Company, Inc. regarding
                    the Senior Secured Notes (filed as Exhibit 10.1 to the Company’s Current
                    Report on Form 8-K dated December 28, 2005)10.11
                Purchase
                    Agreement, dated December 21, 2005, by and between The Majestic
                    Star
                    Casino, LLC Majestic Star Casino Capital Corp. II, each Subsidiary
                    Guarantor (as defined therein) and Jefferies & Company, Inc. regarding
                    the Senior Notes (filed as Exhibit 10.2 to the Company’s Current Report on
                    Form 8-K dated December 28, 2005)10.12
                Registration
                    Rights Agreement, dated December 21, 2005, among The Majestic
                    Star Casino,
                    LLC, and The Majestic Star Casino Capital Corp., and Jefferies
&
                    Company, Inc. regarding the Senior Secured Notes (filed as Exhibit
                    10.6 to
                    the Company’s Current Report on Form 8-K dated December 28,
                    2005)10.13
                Registration
                    Rights Agreement, dated December 21, 2005, among The Majestic
                    Star Casino,
                    LLC, and Majestic Star Casino Capital Corp. II, and Jefferies
&
                    Company, Inc. regarding the Senior Notes (filed as Exhibit 10.7
                    to the
                    Company’s Current Report on Form 8-K dated December 28, 2005)10.14*
                Employment
                    Agreement, dated April 6, 2006, between Kirk Saylor and The Majestic
                    Star
                    Casino, LLC (filed as Exhibit 10.1 to the Company’s Current Report on Form
                    8-K dated May 15, 2006)21
                List
                    of Subsidiaries of The Majestic Star Casino, LLC, filed
                    herewith31.1
                Certification
                    pursuant to Section 15d-14 of the Securities Exchange Act of
                    1934, as
                    adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
                    2002, filed
                    herewith31.2
                Certification
                    pursuant to Section 15d-14 of the Securities Exchange Act of
                    1934, as
                    adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
                    2002, filed
                    herewith32
                Certification
                    pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                    906 of
                    the Sarbanes-Oxley Act of 2002, filed
                    herewith
 
 *
          Identifies current management contracts or compensatory plans or arrangements.
 
 
 
  E-4
 
 Table
            of Contents
   
 THE
        MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES
 (A
        Wholly
        Owned Subsidiary of Majestic Holdco, LLC)
 
 INDEX
        OF
        CONSOLIDATED FINANCIAL STATEMENTS
 
 **Page**THE
                  MAJESTIC STAR CASINO, LLC AND SUBSIDIARIESReport
                  of Independent Registered Public Accounting Firm - Ernst & Young
                  LLP
              F-2Report
                  of Independent Registered Public Accounting Firm - PricewaterhouseCoopers
                  LLP
              F-3Consolidated
                  Balance Sheets as of December 31, 2006 and 2005
              F-4Consolidated
                  Statements of Operations for the years ended December 31, 2006, 2005
                  and 2004
              F-5Consolidated
                  Statements of Changes in Member’s Deficit for the years ended December 31,
                  2006, 2005 and 2004
              F-6Consolidated
                  Statements of Cash Flows for the years ended December 31, 2006, 2005
                  and 2004
              F-7Notes
                  to Consolidated Financial Statements
              F-9Schedule
                  II- Valuation and Qualifying Accounts
              F-42BUFFINGTON
                  HARBOR RIVERBOATS, LLC (1)Report
                  of Independent Auditors
              F-43Balance
                  Sheets as of December 31, 2004 and 2003
              F-44Statements
                  of Operations for the years ended December 31, 2004, 2003 and
                  2002
              F-45Statements
                  of Member’s Capital for the years ended December 31, 2004, 2003 and
                  2002
              F-46Statements
                  of Cash Flows for the years ended December 31, 2004, 2003 and
                  2002
              F-47Notes
                  to Financial Statements
              F-48
 
 (1)  The
        financial statements of Buffington Harbor Riverboats, LLC are included in
        this
        10-K in order to comply with Rule 3-09 of Regulation S-X.
  F-1
 Table
            of Contents
  
 
 
 
 
 
 REPORT
        OF
        INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To
        the
        Member of
 The
        Majestic Star Casino, LLC and Subsidiaries:
 
 We
        have
        audited the accompanying consolidated balance sheets of The Majestic Star
        Casino, LLC and its subsidiaries (the “Company”) as of December 31, 2006
        and 2005, and the related consolidated statements of operations, changes
        in
        member’s deficit and cash flows for each of the two years in the period ended
        December 31, 2006. Our audits also included the consolidated financial
        statement schedule listed in the Index at Item 15(a). These financial statements
        and schedule are the responsibility of the Company’s management. Our
        responsibility is to express an opinion on these financial statements and
        schedule based on our audits.
  We
        conducted our audits in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audit to obtain reasonable assurance about whether the financial
        statements are free of material misstatement. We were not engaged to perform
        an
        audit of the Company’s internal control over financial reporting. Our audits
        included consideration of internal control over financial reporting as a
        basis
        for designing audit procedures that are appropriate in the circumstances,
        but
        not for the purpose of expressing an opinion on the effectiveness of the
        Company’s internal control over financial reporting. Accordingly, we express no
        such opinion. An audit includes examining, on a test basis, evidence supporting
        the amounts and disclosures in the financial statements, assessing the
        accounting principles used and significant estimates made by management,
        and
        evaluating the overall financial statement presentation. We believe that
        our
        audits provide a reasonable basis for our opinion.
  In
        our
        opinion, the financial statements referred to above present fairly, in all
        material respects, the consolidated financial position of The Majestic Star
        Casino, LLC and its subsidiaries at December 31, 2006 and 2005, and
        the consolidated results of their operations and their cash flows for each
        of
        the two years in the period ended December 31, 2006, in conformity with
        U.S. generally accepted accounting principles. Also, in our opinion, the
        related
        financial statement schedule, when considered in relation to the financial
        statements taken as a whole, presents fairly in all material respects the
        information set forth therein.
  
 
 /s/
Ernst
&
        Young LLP
 Las
        Vegas, Nevada
 March 26,
        2007
 
 
  F-2
 Table
            of Contents
  
 
  **REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
  To
        the
        Member of
 The
        Majestic Star Casino, LLC
 and
        Subsidiaries
 
 
 In
        our
        opinion, the consolidated statement of operations, changes in member's deficit,
        and cash flows present fairly, in all material respects, the results of
        operations and cash flows of The Majestic Star Casino, LLC and its subsidiaries
        for the year ended December 31, 2004, in conformity with accounting principles
        generally accepted in the United States of America. In addition, in our opinion,
        the consolidated financial statement schedule of valuation and qualifying
        accounts for the year ended December 31, 2004 presents fairly in all material
        respects, the information set forth therein when read in conjunction with
        the
        related consolidated financial statements. These financial statements and
        financial statement schedule are the responsibility of the Company’s management.
        Our responsibility is to express an opinion on these financial statements
        based
        on our audit. We conducted our audit of these statements in accordance with
        the
        standards of the Public Company Accounting Oversight Board (United States).
        Those standards require that we plan and perform the audit to obtain reasonable
        assurance about whether the financial statements are free of material
        misstatement. An audit includes examining, on a test basis, evidence supporting
        the amounts and disclosures in the financial statements, assessing the
        accounting principles used and significant estimates made by management,
        and
        evaluating the overall financial statement presentation. We believe that
        our
        audit provides a reasonable basis for our opinion.
 
 
 
 /s/
        PricewaterhouseCoopers LLP
 
 Las
        Vegas, Nevada
 March
        17,
        2005, except for the third paragraph of
 Note
        2,
        as to which the date is
 April
        14,
        2005.
  F-3
 Table
            of Contents
  THE
        MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES
 (A
        Wholly
        Owned Subsidiary of Majestic Holdco, LLC)
 CONSOLIDATED
        BALANCE SHEETS
 (amounts
                  in thousands)December
                  31,
              
              December
                    31,2006
              
              2005ASSETSCurrent
                  assets:Cash
                  and cash equivalents
              
              $
              25,532
              
              $
              32,368Restricted
                  cash
              
              
              3,327
              
              
              3,190Accounts
                  receivable, less allowance for doubtful accounts of $871
                  and$669
                  as of December 31, 2006 and December 31, 2005,
                  respectively
              
              
              7,582
              
              
              4,600Inventories
              
              
              888
              
              
              788Prepaid
                  expenses and deposits
              
              
              2,306
              
              
              2,433Receivable
                  from affiliate
              
              
              456
              
              
              169Other
                  current assets
              
              
              -
              
              
              138Total
                  current assets
              
              
              40,091
              
              
              43,686Property,
                  equipment and improvements, net
              
              
              275,736
              
              
              278,133Intangible
                  assets, net
              
              
              125,396
              
              
              128,855Goodwill
              
              
              47,431
              
              
              47,251Deferred
                  financing costs, net of accumulated amortizationof
                  $5,762 and $2,529 as of December 31, 2006 andDecember
                  31, 2005, respectively
              
              
              13,083
              
              
              15,264Deferred
                  financing costs, pushed down from Majestic Holdco, net ofaccumulated
                  amortization of $523 and $20 as ofDecember
                  31, 2006 and December 31, 2005, respectively
              
              
              2,436
              
              
              2,804Other
                  assets
              
              
              2,187
              
              
              1,966Total
                  assets
              
              $
              506,360
              
              $
              517,959LIABILITIES
                  AND MEMBER'S DEFICITCurrent
                  liabilities:Accounts
                  payable
              
              $
              4,492
              
              $
              3,560Note
                  payable
              
              
              -
              
              
              985Current
                  portion of long-term debt
              
              
              165
              
              
              174Accrued
                  liabilities:Payroll
                  and related
              
              
              9,117
              
              
              9,266Interest
              
              
              10,751
              
              
              7,217Property
                  and franchise taxes
              
              
              8,943
              
              
              8,415Other
                  accrued liabilities
              
              
              15,555
              
              
              16,457Total
                  current liabilities
              
              
              49,023
              
              
              46,074Long-term
                  debt, net of current maturities
              
              
              545,804
              
              
              547,403Long-term
                  debt pushed down from Majestic Holdco, net of discount of
                  $12,376and
                  $18,204 as of December 31, 2006 and December 31, 2005,
                  respectively
              
              
              51,124
              
              
              45,296Total
                  liabilities
              
              
              645,951
              
              
              638,773Commitments
                  and contingencies (Note 14)Member's
                  deficit
              
              
              (139,591
              )
              
              (120,814
              )Total
                  liabilities and member's deficit
              
              $
              506,360
              
              $
              517,959
  The
        accompanying notes are an integral part of these consolidated financial
        statements.
  F-4
 Table
            of Contents
  
 THE
        MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES
 (A
        Wholly
        Owned Subsidiary of Majestic Holdco, LLC)
 CONSOLIDATED
        STATEMENTS OF OPERATIONS
 (amounts
        in thousands)
 
 For
                  The Year EndedDecember
                  31,2006
              
              2005
              
              2004OPERATING
                  REVENUES:Casino
              
              $
              375,114
              
              $
              280,919
              
              $
              274,769Rooms
              
              
              10,891
              
              
              7,726
              
              
              7,673Food
                  and beverage
              
              
              16,347
              
              
              14,030
              
              
              13,462Other
              
              
              6,942
              
              
              4,966
              
              
              4,579Gross
                  revenues
              
              
              409,294
              
              
              307,641
              
              
              300,483Less:
                  promotional allowances
              
              
              54,464
              
              
              45,669
              
              
              39,972Net
                  operating revenues
              
              
              354,830
              
              
              261,972
              
              
              260,511OPERATING
                  COSTS AND EXPENSES:Casino
              
              
              87,709
              
              
              67,911
              
              
              69,793Rooms
              
              
              3,329
              
              
              1,763
              
              
              1,784Food
                  and beverage
              
              
              8,437
              
              
              5,865
              
              
              6,124Other
              
              
              1,734
              
              
              1,041
              
              
              1,656Gaming
                  taxes
              
              
              87,097
              
              
              61,053
              
              
              59,180Advertising
                  and promotion
              
              
              19,239
              
              
              15,230
              
              
              16,270General
                  and administrative
              
              
              56,970
              
              
              42,931
              
              
              43,640Corporate
                  expense
              
              
              6,306
              
              
              7,717
              
              
              3,399Economic
                  incentive tax - City of Gary
              
              
              6,759
              
              
              4,709
              
              
              4,494Depreciation
                  and amortization
              
              
              31,723
              
              
              22,612
              
              
              17,986Loss
                  on investment in Buffington HarborRiverboats,
                  LLC
              
              
              -
              
              
              2,355
              
              
              2,466(Gain)
                  loss on disposal of assets
              
              
              (133
              )
              
              53
              
              
              (31
              )Total
                  operating costs and expenses
              
              
              309,170
              
              
              233,240
              
              
              226,761Operating
                  income
              
              
              45,660
              
              
              28,732
              
              
              33,750OTHER
                  INCOME (EXPENSE):Interest
                  income
              
              
              448
              
              
              332
              
              
              112Interest
                  expense
              
              
              (53,969
              )
              
              (30,363
              )
              
              (28,642
              )Interest
                  expense - debt pushed downfrom
                  Majestic Holdco
              
              
              (6,331
              )
              
              (188
              )
              
              -Loss
                  on early extinguishment of debt
              
              
              -
              
              
              (3,688
              )
              
              -Other
                  non-operating expense
              
              
              (115
              )
              
              (127
              )
              
              (201
              )Total
                  other expense
              
              
              (59,967
              )
              
              (34,034
              )
              
              (28,731
              )Net
                  (loss) income
              
              $
              (14,307
              )
              $
              (5,302
              )
              $
              5,019
 
 The
        accompanying notes are an integral part of these consolidated financial
        statements.
  F-5
 Table
            of Contents
  THE
        MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES
 (A
        Wholly
        Owned Subsidiary of Majestic Holdco, LLC)
 CONSOLIDATED
        STATEMENTS OF CHANGES IN MEMBER’S DEFICIT
 For
        the
        Years Ended December 31, 2006, 2005 and 2004
 (amounts
        in thousands)
 
 Member's
                  DeficitBalance,
                  December 31, 2003
              
              $
              (102,167
              )Net
                  income
              
              
              5,019Distribution
                  to Barden Development, Inc.
              
              
              (5,251
              )Balance,
                  December 31, 2004
              
              $
              (102,399
              )Net
                  loss
              
              
              (5,302
              )Contribution
                  of Deficit in BHPA from Affiliate
              
              
              (6,351
              )Distribution
                  to Barden Development, Inc.
              
              
              (6,762
              )Balance,
                  December 31, 2005
              
              $
              (120,814
              )Net
                  loss
              
              
              (14,307
              )Distribution
                  to Barden Development, Inc.
              
              
              (4,470
              )Balance,
                  December 31, 2006
              
              $
              (139,591
              )
 
 
 The
        accompanying notes are an integral part of these consolidated financial
        statements.
 
  F-6
 Table
            of Contents
  THE
        MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES
 (A
        Wholly
        Owned Subsidiary of Majestic Holdco, LLC)
 CONSOLIDATED
        STATEMENTS OF CASH FLOWS
 (amounts
        in thousands)
 
 For
                  The Year EndedDecember
                  31,2006
              
              2005
              
              2004CASH
                  FLOWS FROM OPERATING ACTIVITIES:Net
                  (loss) income
              
              $
              (14,307
              )
              $
              (5,302
              )
              $
              5,019Adjustments
                  to reconcile net (loss) income to net cashprovided
                  by operating activities:Depreciation
              
              
              28,264
              
              
              19,514
              
              
              15,502Amortization
              
              
              3,459
              
              
              3,098
              
              
              2,484Amortization
                  of deferred financing costs
              
              
              3,252
              
              
              -
              
              
              -Amortization
                  of bond discount on 12 1/2% senior discount notes anddeferred
                  financing costs pushed down from Majestic Holdco
              
              
              6,331
              
              
              188
              
              
              -Loss
                  on investment in Buffington Harbor Riverboats, LLC
              
              
              -
              
              
              2,355
              
              
              2,466(Gain)
                  loss on disposal of assets
              
              
              (133
              )
              
              53
              
              
              (31
              )Loss
                  on early extinguishment of debt
              
              
              -
              
              
              3,688
              
              
              -Changes
                  in operating assets and liabilities, net of effects of
                  acquisition:Accounts
                  receivable, net
              
              
              (2,983
              )
              
              168
              
              
              85Related
                  party receivable from affiliate
              
              
              (286
              )
              
              546
              
              
              (372
              )Inventories
              
              
              (100
              )
              
              140
              
              
              18Prepaid
                  expenses and deposits
              
              
              127
              
              
              398
              
              
              (174
              )Other
                  assets
              
              
              815
              
              
              197
              
              
              209Accounts
                  payable
              
              
              331
              
              
              699
              
              
              (5,263
              )Accrued
                  payroll and other expenses
              
              
              (150
              )
              
              698
              
              
              115Accrued
                  interest
              
              
              3,534
              
              
              1,536
              
              
              (500
              )Other
                  accrued liabilities
              
              
              (440
              )
              
              (137
              )
              
              2,602Net
                  cash provided by operating activities
              
              
              27,714
              
              
              27,839
              
              
              22,160CASH
                  FLOWS FROM INVESTING ACTIVITIES:Change
                  in restricted cash
              
              
              (137
              )
              
              390
              
              
              (1,140
              )Acquisition
                  of Trump Indiana, Inc., net of cash acquired
              
              
              (180
              )
              
              (231,994
              )
              
              -Payment
                  of gaming license transfer fee to State of Indiana
              
              
              -
              
              
              (2,000
              )
              
              -Payoff
                  of City of Gary development agreement
              
              
              -
              
              
              (3,507
              )
              
              -Acquisition
                  of property and equipment
              
              
              (25,409
              )
              
              (11,783
              )
              
              (36,012
              )Decrease
                  in prepaid leases and deposits
              
              
              -
              
              
              -
              
              
              13Increase
                  in Lakefront Capital Improvement Fund
              
              
              (897
              )
              
              -
              
              
              -Investment
                  in Buffington Harbor Riverboats, LLC
              
              
              -
              
              
              (174
              )
              
              (164
              )Proceeds
                  from disposal of equipment
              
              
              893
              
              
              135
              
              
              340Other
              
              
              -
              
              
              210
              
              
              -Net
                  cash used in investing activities
              
              
              (25,730
              )
              
              (248,723
              )
              
              (36,963
              )
 
 The
        accompanying notes are an integral part of these consolidated financial
        statements.
 
 
  F-7
 Table
            of Contents
  THE
        MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES
 (A
        Wholly
        Owned Subsidiary of Majestic Holdco, LLC)
 CONSOLIDATED
        STATEMENTS OF CASH FLOWS (CONTINUED)
 (amounts
        in thousands)
 
 For
                  The Year EndedDecember
                  31,2006
              
              2005
              
              2004CASH
                  FLOWS FROM FINANCING ACTIVITIES:Payment
                  of costs related to early extinguishment of debt
              
              
              -
              
              
              (1,054
              )
              
              -Issuance
                  costs for the 9 1⁄2% senior secured notes
              
              
              (245
              )
              
              (1,806
              )
              
              (230
              )Issuance
                  costs for the 9 3⁄4% senior notes
              
              
              (1,195
              )
              
              (9,026
              )
              
              -Costs
                  for the $80.0 million secured credit facility
              
              
              -
              
              
              (110
              )
              
              (58
              )Issuance
                  costs for the 12 1⁄2% senior discount notespushed
                  down from Majestic Holdco
              
              
              (206
              )
              
              (2,824
              )
              
              -Redemption
                  of the 11.653% notes
              
              
              -
              
              
              (16,290
              )
              
              -Proceeds
                  from issuance of the 9 1⁄2% senior secured notes
              
              
              -
              
              
              40,000
              
              
              -Proceeds
                  from issuance of the 9 3⁄4% senior notes
              
              
              -
              
              
              200,000
              
              
              -Proceeds
                  from issuance of the 12 1⁄2% senior discount notespushed
                  down from Majestic Holdco
              
              
              -
              
              
              45,129
              
              
              -Proceeds
                  from line of credit
              
              
              60,168
              
              
              43,877
              
              
              45,251Repayment
                  of line of credit
              
              
              (61,644
              )
              
              (37,630
              )
              
              (30,245
              )Repayment
                  of long-term debt
              
              
              (1,228
              )
              
              (16,974
              )
              
              -Distributions
                  to Barden Development, Inc.
              
              
              (4,470
              )
              
              (6,762
              )
              
              (5,251
              )Net
                  cash (used in) provided by financing activities
              
              
              (8,820
              )
              
              236,530
              
              
              9,467Net
                  (decrease) increase in cash and cash equivalents
              
              
              (6,836
              )
              
              15,646
              
              
              (5,336
              )Cash
                  and cash equivalents, beginning of period
              
              
              32,368
              
              
              16,722
              
              
              22,058Cash
                  and cash equivalents, end of period
              
              $
              25,532
              
              $
              32,368
              
              $
              16,722For
                  The Year EndedDecember
                  31,2006
              
              
              2005
              
              
              2004Supplemental
                  disclosure of cash flow information and non-cash investingand
                  financing activities:Cash
                  interest paid, net of amount capitalized
              
              $
              47,512
              
              $
              27,949
              
              $
              29,142NON-CASH
                  INVESTING AND FINANCING ACTIVITIES:Capital
                  assets acquired from incurring accounts payable and accrued
                  liabilities
              
              $
              1,108
              
              $
              535
              
              $
              1,296Purchase
                  of land by issuing note payable
              
              $
              -
              
              $
              985
              
              $
              -Purchase
                  of equipment through capital leases
              
              $
              110
              
              $
              70
              
              $
              -Deferred
                  financing and transaction costs related to the Trump
                  acquisitionincluded
                  in accrued liabilities
              
              $
              -
              
              $
              441
              
              $
              -Credit
                  received from Naming Rights Agreement and applied to acquisition
                  of170
                  acres of property from an affiliate
              
              $
              -
              
              $
              -
              
              $
              1,500
 
 The
        accompanying notes are an integral part of these consolidated financial
        statements.
 
  F-8
 Table
            of Contents
   **THE
        MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
        Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **NOTE
        1. ORGANIZATION**
 
 The
        Majestic Star Casino, LLC (the “Company”) is a wholly owned subsidiary of
        Majestic Holdco, LLC (“Majestic Holdco”) which is a wholly owned subsidiary of
        Barden Development, Inc. (“BDI”). The Company was formed on December 8,
        1993 as an Indiana limited liability company to provide gaming and related
        entertainment to the public. The Company commenced gaming operations in the
        City
        of Gary at Buffington Harbor, located in Lake County, Indiana on June 7,
        1996.
 
 The
        Company is a multi-jurisdictional gaming company with operations in three
        states
        - Indiana, Mississippi and Colorado. The Company owns and operates two riverboat
        gaming facilities located in Gary, Indiana (“Majestic Star” and “Majestic
        Star II”, together the “Majestic Properties”). As of December 21,
        2005, the Company also owned 100% of Buffington Harbor Riverboats, L.L.C.
        (“BHR”) that had previously been a 50% joint venture with Trump Indiana, Inc.
        (“Trump Indiana”). See Note 3 - Trump Indiana Acquisition. Also, as part of
        the Trump Indiana Acquisition, as defined below, the Company acquired 50%
        of
        Buffington Harbor Parking Association (“BHPA”) and through an affiliate of the
        Company, the other 50% interest in BHPA was contributed to the Company. In
        August 2006, BHPA was merged into Majestic Star. As of December 31, 2006,
        BHR
        was dissolved.
 
 The
        Company also owns other subsidiaries that operated the following
“Fitzgeralds-brand” casino properties during the periods presented in the
        accompanying consolidated financial statements:
 
 ·
              A
                  casino-hotel located in Tunica County, Mississippi (“Fitzgeralds
                  Tunica”).
 
 ·
              A
                  casino located in Black Hawk, Colorado (“Fitzgeralds Black Hawk”).
 
 The
        Company also has the following subsidiaries, which were formed for the purpose
        of facilitating financing transactions:
 
 ·
              The
                  Majestic Star Casino Capital Corp. (“MSCC”) is a co-obligor with the
                  Company for the $300.0 million 9 1⁄2% Senior Secured Notes (the “Senior
                  Secured Notes”) due 2010. MSCC has no assets or operations. See
                  Note 11 - Long Term Debt.
 
 ·
              Majestic
                  Star Casino Capital Corp. II (“MSCC II”) was formed in 2005 for
                  the purpose of facilitating the offering of the Company’s $200.0 million
                  9 3⁄4% Senior Notes (the “Senior Notes”). MSCC II is a co-obligor
                  with the Company for the Senior Notes. MSCC II has no assets or
                  operations. See Note 11 - Long Term
                  Debt.
 
 Following
        the completion of the defeasance of the remaining Majestic Investor Holdings,
        LLC (“Investor Holdings”) 11.653% notes (“Investor Notes”), we terminated the
        existence of Majestic Investor Capital Corp (an entity created to facilitate
        the
        issuance of the Investor Notes) effective March 6, 2006. We also merged
        Majestic Investor, LLC and Investor Holdings into The Majestic Star Casino,
        LLC
        on March 21, 2006 and March 22, 2006, respectively, thus making Barden
        Mississippi Gaming, LLC and Barden Colorado Gaming, LLC direct subsidiaries
        of
        The Majestic Star Casino, LLC.
 
 Except
        where otherwise noted, the words “we,” “us,” “our,” and similar terms, as well
        as the “Company,” refer to The Majestic Star Casino, LLC and all of its direct
        and indirect subsidiaries.
 
  F-9
 Table
            of Contents
 **THE
                MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
                Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **NOTES
                TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
   
 **NOTE
        2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
        POLICIES**
 
 The
        accompanying consolidated financial statements include the accounts of The
        Majestic Star Casino, LLC and its wholly owned direct and indirect subsidiaries.
        All inter-company transactions and balances have been eliminated. Prior to
        December 21, 2005, investments in affiliates in which the Company had the
        ability to exercise significant influence, but not control, were accounted
        for
        by the equity method. These financial statements have been prepared in
        accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) and with
        the instructions to Form 10-K. The preparation of financial statements in
        conformity with GAAP 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 period.
        Significant estimates incorporated into our consolidated financial statements
        include the estimated useful lives of depreciable and amortizable assets,
        the
        estimated allowance for doubtful accounts receivable, estimated cash flow
        in
        assessing the recoverability of long lived assets, and estimated liabilities
        for
        our self-insured medical and worker’s compensation plans, property taxes, slot
        club point programs and litigation, claims and assessments. Actual results
        could
        differ from those estimates.
 
 PUSH
        DOWN
        OF DISCOUNT NOTES FROM MAJESTIC HOLDCO - The Company’s consolidated financial
        statements for 2006 and 2005 include the $63.5 million of Discount Notes,
        net of
        discount of $12.4 million and $18.2 million, respectively, issued by Majestic
        Holdco in connection with the acquisition of Trump Indiana and other refinancing
        transactions. See Note 3 - Trump Indiana Acquisition. The Discount Notes
        are solely the obligation of Majestic Holdco and Majestic Holdco, Inc. (the
        co-issuer with Majestic Holdco) and are unsecured. Neither the Company nor
        any
        of its direct or indirect subsidiaries guarantees the Discount Notes nor
        are the
        equity or assets of the Company or its direct or indirect subsidiaries security
        for the Discount Notes. Further, the indentures governing the Senior Notes
        and
        the Senior Secured Notes and the loan and security agreement which governs
        our
        Senior Secured Credit Facility preclude distributions by the Company to Majestic
        Holdco unless certain financial tests are met. In addition to the push down
        of
        the Discount Notes, the Company is also reflecting $2.4 million and $2.8
        million
        of Discount Notes’ issuance costs, net of amortization, respectively, on its
        consolidated balance sheets as of December 31, 2006 and 2005, and
        amortization of issuance costs of $0.5 million and $20,000, respectively,
        and bond discount of $5.8 million and $0.2 million, respectively, on its
        consolidated statements of operations for the years ended December 31, 2006
        and 2005. A likely scenario for the repayment of the Discount Notes is from
        cash
        flows of the Company or a refinancing of the Company’s indebtedness, together
        with the indebtedness of Majestic Holdco. The Discount Notes have been
“pushed-down” to the Company pursuant to the guidelines of SEC Staff Accounting
        Bulletin 73 Topic 5(J).
 
 TERMINATED
        SALE OF FITZGERALDS BLACK HAWK - On July 12, 2004, the Company entered into
        an agreement to sell substantially all of the assets subject to certain
        liabilities of Fitzgeralds Black Hawk. On April 14, 2005, Barden Colorado
        and Legends Gaming, LLC (“Legends”) mutually agreed to terminate the Asset
        Purchase Agreement dated July 12, 2004, as amended (the “Purchase
        Agreement”), pursuant to which Barden Colorado had agreed to sell and Legends
        had agreed to purchase substantially all of the assets of the Fitzgeralds-brand
        casino located in Black Hawk, Colorado. Because the Purchase Agreement was
        mutually terminated on April 14, 2005, the financial information of
        Fitzgeralds Black Hawk for 2004 has been reclassified to be presented as
        continuing operations. When the sale was terminated in 2005, the Company
        paid
        Legends approximately $2.3 million as a termination fee and other related
        costs
        and expenses.
 
 CASH
        AND
        CASH EQUIVALENTS - The Company considers cash equivalents to include short-term
        investments with original maturities, or remaining maturities at time of
        purchase, of ninety days or less. Cash equivalents are carried at cost plus
        accrued interest, which approximates fair value. The Company places its cash
        primarily in checking and money market accounts with high credit quality
        financial institutions, which, at times, have exceeded federally insured
        limits.
 
 RESTRICTED
        CASH - At December 31, 2006 and December 31, 2005, restricted cash
        consists of $3.3 million and $3.2 million, respectively, which is held as
        certificates of deposits which serve as security for letters of credit
        supporting various self-insured workers’ compensation programs.
  F-10
 Table
            of Contents
 **THE
            MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
            Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
  CONCENTRATION
        OF CREDIT RISK - Financial instruments that potentially subject the Company
        to
        concentrations of credit risk consist principally of casino accounts receivable.
        The Company extends unsecured credit to approved casino customers following
        background checks and investigations of creditworthiness. An estimated allowance
        for doubtful accounts is maintained to reduce the Company’s receivables to their
        carrying amount, which approximates fair value. Management believes that
        as of
        December 31, 2006, no significant concentrations of credit risk existed for
        which an allowance had not already been determined and recorded.
 
 INVENTORIES
        - Inventories consisting principally of food, beverage, operating supplies
        and
        gift shop items are stated at the lower of cost or market value. Cost is
        determined by the first-in, first-out method.
 
 RECEIVABLE
        FROM AFFILIATE: Amounts reflected in receivable from affiliate represent
        non-interest bearing advances made by the Company to Fitzgeralds Las Vegas
        of
        approximately $0.3 million, to BDI of approximately $0.1 million, and to
        Majestic Holdco of approximately $0.1 million. For 2005, the Company had
        made
        advances of approximately $0.2 million to Fitzgeralds Las Vegas.
 
 PROPERTY
        AND EQUIPMENT - Property and equipment are stated at cost. Depreciation expense
        is computed utilizing the straight-line method over the estimated useful
        lives
        of the depreciable assets. Costs of major improvements are capitalized; costs
        of
        normal repairs and maintenance are charged to expense as incurred. Gains
        or
        losses on dispositions of property and equipment are recognized in the
        consolidated statements of operations when incurred.
 
 Estimated
                  useful lifeVessels,
                  buildings & improvements
              25-39
                  yearsSite
                  improvements
              9-15
                  yearsBarge
                  and improvements
              13-15
                  yearsLeasehold
                  improvements
              5-15
                  yearsFurniture,
                  fixtures and equipment
              3-10
                  years
 
 DEFERRED
        FINANCING COSTS - Deferred financing costs represent underwriter’s and agent’s
        commissions and fees, closing costs and professional fees incurred in connection
        with the issuance of the debt offerings. Deferred financing costs are amortized
        over the terms of the related notes and lines of credit using the straight-line
        method, which approximates the effective interest method.
 
 GOODWILL
        - Goodwill represents the excess purchase price over the net assets acquired
        for
        the Fitzgeralds properties, which was acquired in December 2001 (the
“Fitzgeralds Acquisition”), and the excess purchase price over the net assets
        acquired from Trump Indiana, which was acquired in December 2005. Goodwill
        for
        acquisitions after June 30, 2001 is not subject to amortization but is
        subject to impairment testing at least annually. The result of the test
        indicates that goodwill was not impaired for the years ended December 31,
        2006 and 2005.
 
 INTANGIBLE
        ASSETS - Intangible assets represent separately identifiable assets acquired
        in
        the Fitzgeralds Acquisition and the Trump Indiana Acquisition and are amortized
        over their estimated useful lives, generally eight to fifteen years.
 
 INVESTMENT
        IN BUFFINGTON HARBOR RIVERBOATS, L.L.C. - Prior to December 21, 2005, the
        Company accounted for its 50% interest in BHR under the equity method, whereby
        the initial investments are recorded at cost and then adjusted for the Company’s
        share of BHR’s net income or loss. As a result of the Trump Indiana Acquisition,
        the Company owns 100% of BHR. The December 31, 2005 consolidated balance
        sheet includes 100% of these assets and our equity investment account was
        eliminated. The consolidated statements of operations reflect 50% of BHR’s
        operating results for the years ended December 31, 2004, and the period
        from January 1, 2005 to December 20, 2005, and 100% of BHR’s operating
        results for the period from December 21, 2005 to December 31,
        2005.
 
 REVENUE
        RECOGNITION - Casino revenue is the net win from gaming activities, which
        is the
        difference between gaming wins and losses. Hotel, food and beverage, and
        other
        revenue are recognized at the time the related service is
        performed.
  F-11
 Table
            of Contents
 **THE
            MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
            Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
  
 PROMOTIONAL
        ALLOWANCES - Cash incentives related to gaming play are recorded as a reduction
        of gross revenues. In addition, the retail value of accommodations, food
        and
        beverage, and other services furnished to hotel/casino guests without charge
        is
        included in gross revenue and then deducted as promotional allowances. The
        estimated departmental cost of providing such promotional allowances is included
        primarily in casino expenses as follows:
 
 (amounts
                  in thousands)
              
              For
                  The Year Ended December 31,2006
              
              2005
              
              2004Rooms
              
              $
              3,291
              
              $
              2,377
              
              $
              2,364Food
                  and Beverage
              
              
              10,898
              
              
              8,840
              
              
              8,627Other
              
              
              552
              
              
              467
              
              
              471Total
              
              $
              14,741
              
              $
              11,684
              
              $
              11,462
 
 The
        following schedule lists total cash incentives and the retail cost of hotel,
        food, beverage, and other, which comprise the total promotional
        allowances.
 
 (amounts
                  in thousands)
              
              For
                  The Year Ended December 31,2006
              
              2005
              
              2004Cash
                  based promotional activities
              
              $
              27,447
              
              $
              24,479
              
              $
              19,252Slot
                  club and other
              
              
              7,929
              
              
              5,792
              
              
              5,038Retail
                  cost of rooms, food, beverage and other
              
              
              19,088
              
              
              15,398
              
              
              15,682Total
              
              $
              54,464
              
              $
              45,669
              
              $
              39,972
 
 DOWNLOADABLE
        PROMOTIONAL CREDITS — At Fitzgeralds Tunica, we have implemented promotions that
        allow customers to download promotional credits directly to the slot machine.
        While the Company does not recognize the playing of these credits as revenue
        and
        the customer cannot redeem the credits for cash, any jackpots won by the
        customer are a direct reduction of slot revenue.
 
 FEDERAL
        AND STATE INCOME TAXES - The Company is organized as a limited liability
        corporation and is an entity disregarded for U.S. federal and state income
        tax
        purposes. For the years ended December 31, 2006, 2005 and 2004, income of
        the Company was taxed directly to its member, and, accordingly, no provision
        for
        federal and state income taxes is reflected in the consolidated financial
        statements.
 
 ADVERTISING
        COSTS - Costs for advertising are expensed as incurred. Advertising costs
        included in advertising and promotion expenses, were $5.1 million, $4.3 million
        and $5.7 million for the years ended December 31, 2006, 2005 and 2004,
        respectively.
 
 LONG-LIVED
        AND INTANGIBLE ASSETS - Long-lived assets and certain identifiable intangibles
        held and used by the Company are reviewed for impairment when events or changes
        in circumstances warrant such a review. The carrying value of a long-lived
        or
        intangible asset is considered impaired when the anticipated undiscounted
        cash
        flow from such asset is less than its carrying value. In that event, an
        impairment loss is recognized. Losses on long-lived assets to be disposed
        of are
        determined in a similar manner, except that fair values are reduced for the
        cost
        of disposition. Impairment review procedures mandated under GAAP require
        an
        annual review of all intangible assets with indefinite lives.
 
 CAPITALIZED
        INTEREST - The Company capitalizes interest costs associated with debt incurred
        in connection with its construction projects. Interest capitalization will
        cease
        once the projects are substantially complete or no longer undergoing
        construction activities. The Company capitalized interest on amounts expended
        on
        the projects at the Company’s weighted average cost of borrowing on its senior
        secured credit facility. Interest of approximately $0.3 million was capitalized
        for the year ended December 31, 2006. No interest was capitalized in 2005
        or 2004.
  F-12
 Table
            of Contents
 **THE
            MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
            Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
  
 CASINO
        CLUB LIABILITY - The Company has accrued for the liability of points earned
        but
        not redeemed by its casino club members, less the points of inactive players
        and
        points that have expired. The liability is calculated based on an average
        historical redemption rate on a property by property basis. The increase
        in the
        liability is recorded as a reduction of gross revenue in accordance with
        GAAP
        for customer loyalty programs.
 
 PROGRESSIVE
        LIABILITY - The Company maintains a number of “progressive” slot machines and
        table games. As wagers are made by customers on the respective progressive
        games, there is a corresponding increase in the amount available to win (to
        be
        paid out when the appropriate jackpots are hit). The Company has recorded
        its
        liability for the progressive jackpots as a component of other accrued
        liabilities.
 
 SELF-INSURANCE
        LIABILITY - The Company maintains accruals for self-insured health and workers’
compensation costs, which are classified in payroll and related accrued
        liabilities in the accompanying consolidated balance sheets. Management
        determines the estimate of these accruals by periodically evaluating the
        historical experience and projects trends related to these accruals, including
        an accrual for incurred but not reported claims. Actual results could differ
        from these estimates.
 
 FAIR
        VALUE OF FINANCIAL INSTRUMENTS - The Company believes, based upon current
        information, that the carrying value of the Company’s cash and cash equivalents,
        restricted cash, accounts receivable and accounts payable approximates fair
        value due to the short term nature of these assets and liabilities. The fair
        value of the Company’s long-term debt is determined based on quoted market
        prices for the same or similar issues.
 
 RECLASSIFICATIONS
        - Certain amounts in the December 31, 2005 financial statements, having no
        effect on net loss, have been reclassified to conform to the December 31,
        2006 presentation.
 
 
 **NOTE
        3. TRUMP INDIANA ACQUISITION**
 
 On
        December 21, 2005, The Company acquired Trump Indiana (subsequently renamed
        Majestic Star II) pursuant to a Stock Purchase Agreement (“SPA”) dated
        November 3, 2005 with Trump Entertainment Resorts Holdings, L.P. (“TERH”).
        Trump Indiana owned and operated a riverboat casino and land-based hotel
        adjacent to Majestic Star. As a result of the stock purchase, we acquired
        Trump
        Indiana’s 50% interest in our joint venture, BHR, which owned and operated the
        land-based pavilion and docking facility. The Company also acquired Trump
        Indiana’s 50% interest in BHPA, a joint venture with an affiliate of ours (which
        contributed its interest in BHPA at closing of the Trump Indiana acquisition)
        which owned and operated the parking garage.
  The
        SPA
        contained customary seller representations and warranties of TERH, customary
        buyer representations and warranties and customary covenants and agreements
        between the parties. TERH remains responsible for pre-closing liabilities
        related to sales and use taxes, certain litigation, and workers’ compensation
        and patron liability claims above the amounts accrued on Trump Indiana’s
        December 20, 2005 balance sheet.
  F-13
 Table
            of Contents
 **THE
            MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
            Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
  
 The
        SPA
        provides for mutual indemnification for losses relating to breaches of
        representations and warranties, and for tax matters. At closing, $45.0 million
        was placed into an escrow account to secure TERH’s indemnity obligation to us
        for tax liabilities only. Although there currently is $27.0 million in escrow
        with respect to TERH’s obligation to indemnify us for federal tax liabilities,
        there is no security for any other indemnification obligation.
 
 The
        Company’s consolidated statement of operations for the year ended
        December 31, 2005 includes results for the last 11 days for Majestic
        Star II, BHR and BHPA. Prior to the purchase, the operations for BHR were
        accounted for under the equity method of accounting as an investment in a
        joint
        venture since the Company owned a 50% interest in BHR with Trump Indiana
        owning
        the other 50%. Also, prior to December 21, 2005, the Company was a lessee
        of the parking garage owned and operated by BHPA. With the acquisition of
        Trump
        Indiana and contribution of our affiliate’s equity interest in BHPA, we
        recognized all of the operating expenses of BHPA during the last 11 days
        of
        2005.
 
 The
        acquisition of Trump Indiana is being accounted for under the purchase method
        of
        accounting. In order to assist the Company in assigning values to the assets
        acquired and liabilities assumed, the Company engaged a third party to assist
        with the valuation of the significant identifiable intangible assets acquired,
        as well as the other tangible assets acquired and certain liabilities assumed.
 
 The
        following table sets forth the final allocation of purchase price.
 
 (amounts
                  in thousands)
              
              
              
              TrumpIndiana
              
              BHR
              
              BHPA
              
              TotalCurrent
                  assets (including cash of $11,885 at Trump Indiana,
              $
              14,912
              
              $
              591
              
              $
              716
              
              $
              16,219$208
                  at BHR and $2 at BHPA)Property
                  and equipment
              
              45,158
              
              
              26,719
              
              
              10,955
              
              
              82,832Goodwill
              
              41,509
              
              
              -
              
              
              -
              
              
              41,509Other
                  intangibles
              
              122,400
              
              
              -
              
              
              -
              
              
              122,400Other
                  assets
              
              1,168
              
              
              32
              
              
              412
              
              
              1,612Current
                  liabilities
              
              (9,511
              )
              
              (489
              )
              
              (1,607
              )
              
              (11,607
              )Long
                  term liabilities
              
              (157
              )
              
              (140
              )
              
              (6,160
              )
              
              (6,457
              )Total
              $
              215,479
              
              $
              26,713
              
              $
              4,316
              
              $
              246,508
 
 The
        amount allocated to intangible assets includes the estimated value of the
        gaming
        license at $105.7 million with an indefinite life and the estimated value
        of the
        Majestic Star II customer list of $16.7 million with an estimated useful
        life of
        eight years. Goodwill and indefinite-lived intangible assets are not amortized
        but are reviewed annually for impairment.
 
 
 **NOTE
        4. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS**
 
 The
        Company has or will be required to adopt the following accounting policies
        resulting from the following newly issued standards.
 
 ·
              In
                  September 2006, the FASB issued FASB No. 157 “Fair Value
                  Measurements,” (“FASB 157”) to establish a framework for measuring
                  fair value and expanding disclosures related to fair value measurements.
                  FASB 157 is effective for financial statements for fiscal years
                  beginning after November 15, 2007. The Company is evaluating, what
                  impact, if any, FASB 157 will have on future
                  reporting.
  F-14
 Table
            of Contents
 **THE
            MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
            Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
  
 ·
              In
                  September 2006, the SEC issued Staff Accounting Bulletin (“SAB”)
                  No. 108, “Considering the Effects of Prior Year Misstatements when
                  Quantifying Misstatements in Current Year Financial Statements”. SAB
                  No. 108 requires companies to evaluate the materiality of identified
                  unadjusted errors on each financial statement and related financial
                  statement disclosure using both the rollover approach and the iron
                  curtain
                  approach. The rollover approach quantifies misstatements based
                  on the
                  amount of the error in the current year financial statement whereas
                  the
                  iron curtain approach quantifies misstatements based on the effects
                  of
                  correcting the misstatement existing in the balance sheet at the
                  end of
                  the current year, irrespective of the misstatement’s year(s) of origin.
                  Financial statements would require adjustment when either approach
                  results
                  in quantifying a misstatement that is material. Correcting prior
                  year
                  financial statements for immaterial errors would not require previously
                  filed reports to be amended. SAB No. 108 is effective for interim
                  periods of the first fiscal year ending after November 15, 2006. The
                  Company has determined that SAB No. 108 will not have a
                  significant impact on its consolidated financial statements when it
                  is adopted on January 1, 2007.
 
 
 **NOTE
        5. CERTIFICATE OF SUITABILITY AND LICENSES**
 
 On
        December 9, 1994, the Indiana Gaming Commission (the “IGC”) awarded the
        Company a certificate for a riverboat owner’s license for a riverboat casino to
        be docked in the City of Gary. Currently, each license must be renewed annually
        with a complete reinvestigation every three years. In June 2004, Majestic
        Star
        underwent its requisite three-year reinvestigations with satisfactory results.
        Majestic Star’s current license expires in June 2007. In December 2005, after
        the Company completed its acquisition of Trump Indiana, the IGC granted to
        the
        Company’s subsidiary, The Majestic Star Casino II, Inc. a license that will
        also expire in June 2007. Thus, in June 2007, Majestic Star II will also
        be
        required by the IGC to go through a complete reinvestigation. There can be
        no
        assurance that any subsequent application for a license will be
        approved.
 
 The
        subsidiary that owns Fitzgeralds Mississippi and the Company must maintain
        gaming licenses from the Mississippi Commission in order to continue to operate
        a casino in Mississippi. Such licenses are issued by the Mississippi Commission
        subject to certain conditions, including continued compliance with all
        applicable state laws and regulations. Gaming licenses require the payment
        of
        periodic fees and taxes, are not transferable, are issued for a three-year
        period (and may be continued for two additional three-year periods) and must
        be
        renewed periodically thereafter. The current gaming license expires in December
        of 2007. There can be no assurance that any subsequent application for a
        license
        will be approved.
 
 On
        October 18, 2001, the Colorado Gaming Commission issued operator and retail
        licenses to the Company’s subsidiary that is the owner and operator of
        Fitzgeralds Black Hawk. The operator and retail gaming licenses were renewed
        by
        the Colorado Gaming Commission for a one-year period in September 2006. There
        can be no assurance that any subsequent application for a license will be
        approved.
 
 
 **NOTE
        6. CITY OF GARY, INDIANA DEVELOPMENT OBLIGATION**
 
 On
        March 26, 1996, the City of Gary (“City”) and Majestic Star entered into a
        development agreement (“Majestic Development Agreement”) which required Majestic
        Star, among other things, (1) to invest in various on-site improvements over
        the
        succeeding five years, and (2) to pay the City an economic incentive equal
        to 3%
        of Majestic Star’s adjusted gross receipts (as defined by the Riverboat Gaming
        Act). Majestic Star fulfilled all investment commitments with respect to
        the
        Majestic Development Agreement and has made all required economic incentive
        payments.
 
 Trump
        Indiana also entered into a development agreement with the City (as amended,
        the
“Trump Development Agreement”). The Trump Development Agreement required Trump
        Indiana, among other things, (1) to invest in its riverboat and certain related
        projects in the City, (2) establish and fund a private foundation (“Trump
        Foundation”) for charitable purposes primarily within the City and Lake County,
        Indiana, and (3) pay the City an economic incentive equal to 4% of Trump
        Indiana’s adjusted gross receipts (as defined by the Riverboat Gaming
        Act).
  F-15
 Table
            of Contents
 **THE
            MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
            Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
  
 In
        conjunction with the Company’s closing of the Trump Indiana Acquisition, the
        Company, Trump Indiana and the City entered into an amendment to the Majestic
        Development Agreement (the “Amended Majestic Development Agreement”), which,
        among other things, terminated the Trump Development Agreement effective
        upon
        the satisfaction of all outstanding amounts due to the City under the Trump
        Development Agreement. On the closing date of the Trump Indiana Acquisition,
        Majestic Star paid to the City Trump Indiana’s remaining $3.5 million investment
        obligation.
 
 The
        Amended Majestic Development Agreement also requires the Company to pay to
        the
        City an economic incentive payment equal to 3% of the adjusted gross receipts
        (as defined by the Riverboat Gaming Act) of Majestic Star and Majestic
        Star II, but in no event less than $6.0 million per year, with any amount
        in excess of $6.0 million being placed in a non-reverting improvement fund,
        of
        which 50% of the fund’s assets are to be used solely to pay for or reimburse
        certain development and environmental remediation obligations of the City,
        and
        50% of the fund’s assets are to be used by the Company for improvements on or
        for the benefit of the Buffington Harbor area, including our casino operations.
        At December 31, 2006, there was $0.9 million in the improvement fund. The
        Amended Majestic Development Agreement also requires the Company or its
        affiliates to (i) increase its minimum investment commitment from $50.0 million
        to $70.0 million (the Company has made in excess of $50.0 million of investments
        towards this commitment) and (ii) to establish a private charitable education
        foundation (“Barden Foundation”) and to fund the Barden Foundation with an
        annual contribution of $0.1 million (the Company has established and funded
        the
        Barden Foundation as required to date by the Amended
        Majestic Development Agreement) .
        We are
        obligated to complete such minimum investment within five years after the
        date
        the City has completed the City’s obligations under the Amended Majestic
        Development Agreement. However, if, within three years of the date of the
        Amended Majestic Development Agreement, the City has not satisfied its
        obligations with respect to environmental remediation, the completion of
        the
        access road and freeway interchange, and certain subdivision obligations,
        our
        minimum investment commitment terminates.
 
 On
        or
        about August 31, 2006 the City called into question the validity of the Amended
        Majestic Development Agreement .
        The
        Company's position is that the Amended Majestic Development Agreement
        is valid and binding. The City has discussed with the Company its need to
        receive more economic incentive payments from the Majestic Properties.
        The Company is continuing its discussions with the City.
 
 **NOTE
        7.  PROPERTY AND EQUIPMENT**
 
 Property
        and equipment at December 31, 2006 and 2005 consist of the
        following:
 
 (amounts
                  in thousands)
              
              December
                  31,
              
              December
                  31,2006
              
              2005Land
              
              $
              23,661
              
              $
              23,771Land
                  held for future development
              
              
              22,056
              
              
              22,056Vessel,
                  buildings & improvements
              
              
              174,436
              
              
              170,844Site
                  improvements
              
              
              40,493
              
              
              39,996Barge
                  and improvements
              
              
              20,121
              
              
              20,122Leasehold
                  improvements
              
              
              1,503
              
              
              1,217Furniture,
                  fixtures and equipment
              
              
              119,704
              
              
              104,178Construction
                  in progress
              
              
              5,475
              
              
              2,777407,449
              
              
              384,961Less
                  accumulated depreciation and amortization
              
              
              (131,713
              )
              
              (106,828
              )Property
                  and equipment, net
              
              $
              275,736
              
              $
              278,133
 
 Substantially
        all property and equipment are pledged as collateral. See Note 11 - Long
        Term Debt.
 
 
  F-16
 Table
            of Contents
 **THE
            MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
            Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
  **NOTE
        8. OTHER INTANGIBLE ASSETS**
 
 The
        gross
        carrying amount and accumulated amortization of the Company’s intangible assets,
        other than goodwill, as of December 31, 2006 and 2005 are as follows:
  **As
                  of December 31, 2006**
              
              Gross
                  Carrying
              
              Accumulated
              
              Net
                  Amount
              
              ExpectedAmount
              
              Amortization
              
              December
                  31, 2006
              
              LifeIntangible
                  assets:
              
              (amounts
                  in thousands)Customer
                  relationship
              
              $
              24,540
              
              $
              (7,117
              )
              $
              17,423
              
              
              8
                  yrsTrade
                  name
              
              
              3,450
              
              
              (1,749
              )
              
              1,701
              
              
              10
                  yrsGaming
                  license
              
              
              105,700
              
              
              -
              
              
              105,700
              
              
              indefiniteRiverboat
                  excursion license
              
              
              700
              
              
              (128
              )
              
              572
              
              
              15
                  yrsTotal
                  intangible assets
              
              $
              134,390
              
              $
              (8,994
              )
              $
              125,396**As
                  of December 31, 2005**
              
              
              Gross
                  Carrying
              
              
              Accumulated
              
              
              Net
                  Amount
              
              
              ExpectedAmount
              
              
              Amortization
              
              
              December
                  31, 2005
              
              
              LifeIntangible
                  assets:
              
              (amounts
                  in thousands)Customer
                  relationship
              
              $
              24,540
              
              $
              (4,050
              )
              $
              20,490
              
              
              8
                  yrsTrade
                  name
              
              
              3,450
              
              
              (1,403
              )
              
              2,047
              
              
              10
                  yrsGaming
                  license
              
              
              105,700
              
              
              -
              
              
              105,700
              
              
              indefiniteRiverboat
                  excursion license
              
              
              700
              
              
              (82
              )
              
              618
              
              
              15
                  yrsTotal
                  intangible assets
              
              $
              134,390
              
              $
              (5,535
              )
              $
              128,855
 
 In
        December 2005, the Company recorded intangible assets related to the Trump
        Indiana Acquisition of $105.7 million for the value of the gaming license
        and $16.7 million for the value assigned to the customer database. The Company
        utilized an independent third-party valuation to assist with the allocation
        of
        the purchase price.
 
 The
        amortization expense recorded on the intangible assets for the years ended
        December 31, 2006, 2005 and 2004 was $3.5 million, $1.7 million and $1.1
        million, respectively. The estimated amortization expense for all amortized
        intangible assets for each of the five succeeding fiscal years is as follows:
 
 For
                    the Years Ended December
                    31,(amounts
                    in thousands)2007
              
              $
              3,4592008
              
              
              3,4592009
              
              
              3,3922010
              
              
              2,4792011
              
              
              2,456Thereafter
              
              
              4,451$
              19,696
 
 
 **NOTE
        9. INVESTMENT IN BUFFINGTON HARBOR RIVERBOATS, L.L.C.**
 
 On
        October 31, 1995, the Company and Trump Indiana entered into the First
        Amended and Restated Operating Agreement of BHR for the purpose of acquiring
        and
        developing certain facilities for the gaming operations in the City of Gary
        (“BHR Property”). The Company and Trump Indiana each had a 50% non-controlling
        interest in BHR. Prior to December 21, 2005, the Company accounted for its
        interest in the joint venture under the equity method of accounting.
  F-17
 Table
            of Contents
 **THE
            MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
            Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
  
 BHR
        was
        responsible for the management, development and operation of the BHR Property.
        The Company and Trump Indiana had each entered into an agreement with BHR
        (the
“Berthing Agreement”) to use the BHR Property for their respective gaming
        operations and have committed to pay the cash operating losses of BHR as
        additional berthing fees. All expenditures requiring a cash outlay by BHR
        were
        billed to Trump Indiana and the Company at cost. Accordingly, BHR recorded
        as
        expenses the cost of providing such services and recorded as other revenues
        the
        amounts billed to Trump Indiana and the Company.
 
 The
        Company had paid to BHR approximately $4.9 million and $6.2 million of berthing
        fees for the period from January 1, 2005 through December 20, 2005, and for
        the
        year ended 2004, respectively. Such amounts were recorded in general and
        administrative expense in the consolidated statements of operations. On
        December 21, 2005, BHR became a wholly owned subsidiary and the Berthing
        Agreements between BHR and the Company and BHR and Trump Indiana were
        terminated.
 
 Majestic
        Star used the food and beverage operations at BHR to provide its casino
        customers with complimentary meals, beverages and services. Late in 2003,
        two
        restaurants opened at BHR that were run by a third party operator. The Company
        sent guests to these restaurants, and the other food and beverage operators
        at
        BHR and the proprietors of these businesses charged the Company for the meals
        served and the services provided. The Company paid approximately $3.1 million
        and $2.2 million to these restaurants, and other food and beverage operators
        at
        BHR, for the period from January 1, 2005 through December 20, 2005 and
        for the year 2004, respectively. In addition, the Company reimbursed BHR
        for
        valet services in the amount of $0.1 million, for both the period from
        January 1, 2005 through December 20, 2005 and for the year 2004. Food,
        beverage and valet costs were recorded in casino expense in the Company’s
        consolidated statements of operations. After the Company and Trump Indiana
        reimbursed BHR for all cash operational losses, the remaining net loss of
        BHR
        resulted from depreciation expense associated with the BHR property and was
        recorded as equity in loss of joint venture in the Company’s consolidated
        statements of operations. Such loss was approximately $2.4 million and $2.5
        million for the period from January 1, 2005 through December 20, 2005
        and for the year 2004, respectively.
 
 The
        following represents selected financial information for BHR for the period
        from
        January 1, 2005 through December 20, 2005 and the year ended
        December 31, 2004, when the Company accounted for its 50% interest in BHR
        under the equity method:
 
 STATEMENTS
                  OF OPERATIONSFor
                  the PeriodJanuary
                  1, 2005 to
              
              For
                  The Year Ended(amounts
                  in thousands)
              
              December
                  20, 2005
              
              December
                  31, 2004Net
                  revenues
              
              $
              11,514
              
              $
              11,145Operating
                  loss
              
              $
              (4,308
              )
              $
              (4,899
              )Net
                  loss
              
              $
              (4,738
              )
              $
              (4,931
              )
 
  F-18
 Table
            of Contents
 **THE
            MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
            Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
  
 **NOTE
        10. OTHER ACCRUED LIABILITIES**
 
 Other
        accrued liabilities at December 31, 2006 and 2005 were comprised of:
 
 (amounts
                  in thousands)
              
              As
                  of December 31,
              
              As
                  of December 31,2006
              
              2005Gaming
                  taxes
              
              $
              2,205
              
              $
              2,116Other
                  taxes
              
              
              556
              
              
              212Chip
                  & token liability
              
              
              810
              
              
              617Accrued
                  trade payables
              
              
              4,547
              
              
              5,343Professional
                  fees
              
              
              962
              
              
              1,203Other
              
              
              6,475
              
              
              6,966$
              15,555
              
              $
              16,457
 
 **NOTE
        11. LONG-TERM DEBT**
 
 (amounts
                  in thousands)
              
              December
                  31,
              
              December
                  31,2006
              
              2005Long-term
                  debt outstanding is as follows:9 1⁄2%
                  senior secured notes due 2010
              
              $
              300,000
              
              $
              300,0009 3⁄4%
                  senior notes due 2011
              
              
              200,000
              
              
              200,000Senior
                  secured credit facility
              
              
              45,737
              
              
              47,212Capital
                  leases and other debt
              
              
              232
              
              
              365Long-term
                  debt
              
              
              545,969
              
              
              547,577Less
                  current maturities
              
              
              (165
              )
              
              (174
              )Total
                  long-term debt
              
              $
              545,804
              
              $
              547,403
 
 The
        scheduled maturities of long-term debt are as follows:
 
 For
                  the Years Ended December 31,(amounts
                  in thousands)2007
              
              $
              1652008
              
              
              642009
              
              
              32010
              
              
              345,7372011
              
              
              200,000Thereafter
              
              
              -$
              545,969
 
 
 **DEBT
        OFFERINGS AND RELATED TRANSACTIONS**
 
 The
        Company refinanced the debt of BHPA as part of the debt offerings in connection
        with the Trump Indiana Acquisition. The BHPA debt was incurred to construct
        the
        parking garage owned by BHPA. As a result of refinancing the BHPA debt, the
        Company wrote off unamortized financing costs and original issue discount
        related to the debt. The write off of these items resulted in a loss on early
        extinguishment of debt of $2.1 million for the year ended December 31,
        2005.
  F-19
 Table
            of Contents
 **THE
            MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
            Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
  
 **SENIOR
        SECURED NOTES**
 
 The
        Company has issued $300.0 million of senior secured notes (“Senior Secured
        Notes”). The Senior Secured Notes bear interest at a fixed annual rate of
        9 1⁄2% payable on April 15 and October 15 of each year and have a maturity
        date of October 15, 2010. The Senior Secured Notes are guaranteed by all of
        our subsidiaries (other than Majestic Star Casino Capital Corp.).The Senior
        Secured Notes are secured by a pledge of substantially all of the Company’s and
        its subsidiaries’ current and future assets, other than certain excluded assets.
        The Senior Secured Notes are also collateralized by our equity interests
        held by
        Majestic Holdco and our equity interests in the subsidiary
        guarantors.
 
 The
        indenture governing the Senior Secured Notes (the “Senior Secured Notes
        Indenture”) contains covenants which, among other things, restrict the Company’s
        ability to (i) make asset sales; (ii) make certain payments to, or investments
        in, third parties; (iii) incur additional indebtedness or liens on any assets;
        (iv) enter into transactions with affiliates; and (v) sell any restricted
        subsidiaries’ assets. In addition, upon a Change of Control as defined in the
        indenture governing the Senior Secured Notes, the Company will be required
        to
        offer to repurchase all of the outstanding Senior Secured Notes at a cash
        price
        equal to 101% of the principal amount thereof, plus accrued and unpaid interest
        to the date of repurchase.
 
 On
        or
        after October 15, 2007, the Senior Secured Notes may be redeemed at the
        redemption prices that start at 104.75% of their aggregate principal amount,
        plus accrued and unpaid interest to the date of redemption.
 
 **SENIOR
        NOTES**
 
 The
        Company has issued $200.0 million of senior notes (“Senior Notes”). The Senior
        Notes bear interest at a fixed annual rate of 9 3⁄4% payable on April 15 and
        October 15 of each year and have a maturity date of January 15, 2011. The
        Senior Notes are guaranteed by all of our subsidiaries (other than Majestic
        Star
        Casino Capital Corp and Majestic Star Casino Capital Corp II).The Senior
        Notes
        are senior unsecured obligations of the Company, ranking equally with all
        of the
        Company’s and its subsidiaries’ existing and future subordinated indebtedness.
        The Senior Notes are effectively subordinated to the Senior Secured Notes
        and
        the Company’s $80.0 million senior secured credit facility (“Senior Secured
        Credit Facility”).
 
 The
        indenture governing the Senior Notes (the “Senior Notes Indenture”) contains
        covenants which, among other things, restrict the Company’s ability to (i) make
        asset sales; (ii) make certain payments to, or investments in, third parties;
        (iii) incur additional indebtedness or liens on any assets; (iv) enter into
        transactions with affiliates; and (v) sell any restricted subsidiaries’ assets.
        In addition, upon a Change of Control as defined in the Senior Notes Indenture,
        the Company will be required to offer to repurchase all of the outstanding
        Senior Notes at a cash price equal to 101% of the principal amount thereof,
        plus
        accrued and unpaid interest to the date of repurchase.
 
 On
        or
        after October 15, 2008, the Senior Notes may be redeemed at the redemption
        prices that start at 104.875% of their aggregate principal amount, plus accrued
        and unpaid interest to the date of redemption. Prior to October 15, 2008,
        up to 35% of the original aggregate principal amount of the Senior Notes
        may be
        redeemed at a redemption price of 109.75%, plus accrued and unpaid interest
        to
        the date of redemption with the net proceeds of certain equity
        offerings.
  F-20
 Table
            of Contents
 **THE
            MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
            Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
  
 **SENIOR
        SECURED CREDIT FACILITY**
 
 The
        Company has an $80.0 million Senior Secured Credit Facility, which is secured
        by
        all of the equity of the Company and its restricted subsidiaries and by its
        and
        its restricted subsidiaries’ current and future assets, other than certain
        excluded assets. The lien on the collateral securing the Senior Secured Credit
        Facility is senior to the lien on the collateral securing the Senior Secured
        Notes and the guarantees of the Senior Secured Notes. Borrowings under the
        Senior Secured Credit Facility bear interest at the Company’s choice of LIBOR
        plus a range of 2.50% to 3.00% or the agent bank’s base rate (which approximates
        the prime rate) plus a range of 0.00% to 0.50%. The range is determined based
        on
        Company’s EBITDA (as defined in the loan and security agreement governing the
        Senior Secured Credit Facility and amendments thereto). Full payment of any
        outstanding balance under the Senior Secured Credit Facility is due upon
        maturity of the agreement in April 2010. The Company’s Senior Secured Credit
        Facility contains customary conditions to borrowing and contains representations
        and warranties customary in other gaming-related financings. The loan and
        security agreement governing the Senior Secured Credit Facility contains
        certain
        financial covenants and restrictions, which among other things, restricts
        indebtedness, investments, distributions and mergers and requires the Company
        to
        maintain, as defined in the covenants (as amended), minimum EBITDA and interest
        coverage ratios, which increase periodically, and an annual limit on capital
        expenditures. At December 31, 2006 and 2005, the Company had available
        borrowing capacity under the Senior Secured Credit Facility of $34.3 million
        and
        $32.8 million, respectively
 
 The
        Company has entered into various amendments to the loan and security agreement
        governing the Senior Secured Credit Facility as listed below:
 
 On
        April 13, 2006, the Company entered into Amendment Number Five (“Amendment
        Five”). Amendment Five modified the interest coverage ratio financial covenant
        for the 12-month period ended March 31, 2006. The interest coverage ratio
        was amended to 1.80:1.0. In addition, the definition of Consolidated Interest
        Expense was amended to exclude interest expense related to the pushdown of
        Majestic Holdco’s Discount Notes.
 
 On
        July 31, 2006, the Company entered into Amendment Number Six (“Amendment
        Six”) to the Senior Secured Credit Facility. Amendment Six modified the last
        12-month minimum EBITDA covenant and the last 12-month interest coverage
        ratio
        covenant for the applicable calendar quarterly periods. The amended covenants
        required the Company to have a minimum EBITDA of $65.0 million for the 12
        months
        ended June 30, 2006, which periodically increased in $5.0 million
        increments to a maximum of $90.0 million for the 12 months ending March 31,
        2010 and periods thereafter. The interest coverage ratio was reduced to 1.50:1.0
        for the 12 months ended June 30, 2006, continuing through December 31,
        2007. The ratio increased to 1.60:1.0 in 2008, 1.70:1.0 in 2009 and to 1.80:1.0
        in 2010 and each period thereafter. In addition, the capital expenditures
        limitations were increased to $25.0 million for each of the fiscal years
        2006
        and 2007 and to $30.0 million for each of the fiscal years 2008, 2009 and
        2010.
 
 On
        March 15, 2007, the Company entered into Amendment Number Seven (“Amendment
        Seven”) to the Senior Secured Credit Facility. Amendment Seven modifies the
        Company’s minimum EBITDA requirement for the 12-month periods ended
        March 31, 2007, June 30, 2007 and September 30, 2007, to $65.0
        million, respectively, modifies the minimum EBITDA requirement for the 12-month
        periods ended December 31, 2007, March 31, 2008 and June 30,
        2008, to $70.0 million, respectively, and modifies the minimum EBITDA
        requirement to $72.0 million and $74.0 million, for the 12-month periods
        ended
        September 30, 2008 and December 31, 2008, respectively. Amendment
        Seven also modifies the Company’s interest coverage ratio requirement for the
        12-month periods ended March 31, 2007, June 30, 2007,
        September 30, 2007, December 31, 2007, March 31, 2008 and
        June 30, 2008, respectively, to 1.20:1.0, and modifies the interest
        coverage ratio requirement to 1.25:1.0, for the 12-month periods ended
        September 30, 2008 and December 31, 2008,
        respectively.
  F-21
 Table
            of Contents
 **THE
            MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
            Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
  
 We
        have
        amended the Senior Secured Credit Facility seven times. Many of these amendments
        were necessary so that the Company would be incompliance with either current
        or
        future financial covenants. Given the Company’s significant debt and competitive
        markets, there is a risk that the Company might not achieve the financial
        covenants as outlined in the most recent amendment seven to the Senior Secured
        Credit Facility. As such, the Company may need to seek further amendments
        to the
        financial covenants contained in the amended Senior Secured Credit Facility.
        Should the Company fail in receiving such future amendments, then a default
        would exist, which would accelerate the maturity of the debt outstanding
        under
        the Senior Secured Credit Facility with all such debt, with interest, being
        immediately due and payable. This would in turn cause a cross-default
        with the Company’s other outstanding indebtedness, which would similarly
        accelerate the maturity of this debt, with all such additional indebtedness,
        with interest, being due and payable. The Company was in compliance with
        the
        financial covenants under the Senior Secured Credit Facility as of December
        31,
        2006.
 
 
 **OTHER
        DEBT**
 
 The
        Company has various other capital leases of approximately $0.2 million and
        other
        debt for equipment. The debt obligations are of a short duration.
 
 **DISCOUNT
        NOTES**
 
 The
        Discount Notes, with a face value at maturity of $63.5 million, were issued
        on
        December 21, 2005, with Majestic Holdco receiving net proceeds of
        approximately $45.1 million. The net proceeds from the Discount Notes were
        pushed down to the Company to assist in funding the Trump Indiana Acquisition.
        The Discount Notes are not guaranteed by the Company. The Discount Notes
        are
        senior unsecured obligations of Majestic Holdco, ranking equally with all
        of its
        existing and future senior obligations and senior to all its future subordinated
        indebtedness. The Discount Notes are structurally subordinated to all of
        the
        Company’s indebtedness (including the Senior Notes, the Senior Secured Notes and
        the Company’s Senior Secured Credit Facility) and are effectively subordinated
        in respect of the membership interest of the Company pledged to secure the
        Company’s Senior Secured Credit Facility and the Senior Secured Notes. The
        Discount Notes pay interest, semiannually, on April 15 and October
        15  at
        a rate
        of 12 1⁄2%, which is paid in kind to October 15, 2008. On April 15,
        2009, Majestic Holdco will be required to cash pay the interest on the Discount
        Notes. Since Majestic Holdco has no operations or the ability to generate
        cash
        flow internally, Majestic Holdco will look to the Company or BDI to fund
        its
        cash interest expense. The Company is precluded from making distributions
        to
        Majestic Holdco unless certain financial tests are met. The Discount Notes
        mature on October 15, 2011. A likely scenario for the repayment of these
        Discount Notes is from cash flows of the Company or a refinancing of the
        Company’s indebtedness, including Majestic Holdco. The Discount Notes have been
“pushed-down” to the Company pursuant to the guidelines of SEC Staff Accounting
        Bulletin 73 Topic 5(J).
 
 **INTERCREDITOR
        AGREEMENT**
 
 The
        trustee under the Senior Secured Notes Indenture (as collateral agent) and
        Wells
        Fargo Foothill, Inc., the agent under the Senior Secured Credit Facility
        are
        party to the intercreditor agreement which provides for the contractual
        subordination of the liens on the collateral securing the Senior Secured
        Notes
        (and the related guarantees) to the liens on the collateral securing the
        indebtedness under the Senior Secured Credit Facility.
 
 The
        intercreditor agreement, among other things, limits the trustee’s rights in an
        event of default under the Senior Secured Notes. Under the intercreditor
        agreement, if the Senior Secured Notes become due and payable prior to the
        stated maturity or are not paid in full at the stated maturity at a time
        during
        which there is indebtedness outstanding under the Senior Secured Credit
        Facility, the trustee will not have the right to foreclose upon the collateral
        unless and until the lenders under the Senior Secured Credit Facility fail
        to
        take steps to exercise remedies with respect to or in connection with the
        collateral within 190 days following notice to such lenders of the occurrence
        of
        an event of default under the Senior Secured Notes Indenture. In addition,
        the
        intercreditor agreement prevents the trustee and the holders of the Senior
        Secured Notes from pursuing certain remedies with respect to the collateral
        in
        an insolvency proceeding. The intercreditor agreement also provides that
        the net
        proceeds from the sale of the collateral will first be applied to repay
        indebtedness outstanding under the Senior Secured Credit Facility and thereafter
        to the holders of the Senior Secured Notes.
  F-22
 Table
            of Contents
 **THE
            MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
            Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
  **NOTE
        12. FAIR VALUE OF FINANCIAL INSTRUMENTS**
 
 The
        following table presents the carrying value and estimated fair value as of
        December 31, 2006 and December 31, 2005 of the Company’s financial
        instruments.
 
 2006
              
              2005Carrying
              
              Estimated
              
              Carrying
              
              EstimatedValue
              
              Fair
                  Value
              
              Value
              
              Fair
                  Value(amounts
                  in thousands)Assets:Cash
                  and equivalents
              
              $
              25,532
              
              $
              25,532
              
              $
              32,368
              
              $
              32,368Restricted
                  Cash
              
              $
              3,327
              
              $
              3,327
              
              $
              3,190
              
              $
              3,190Liabilities:Short-term
                  debtNote
                  payable with City of Black Hawk
              
              $
              -
              
              $
              -
              
              $
              985
              
              $
              985Long-term
                  debt9
                  1⁄2% Senior Secured Notes
              
              
              300,000
              
              
              313,500
              
              
              300,000
              
              
              315,7509
                  3⁄4% Senior Notes
              
              
              200,000
              
              
              196,000
              
              
              200,000
              
              
              202,500Senior
                  Secured Credit Facility
              
              
              45,737
              
              
              45,737
              
              
              47,213
              
              
              47,213Capitalized
                  leases and other debt
              
              
              232
              
              
              232
              
              
              365
              
              
              365$
              545,969
              
              $
              555,469
              
              $
              547,578
              
              $
              565,82812
                  1/2% Discount Notes, pusheddown
                  from Majestic Holdco
              
              $
              51,124
              
              $
              42,310
              
              $
              45,296
              
              $
              45,168
 
 
 While
        our
        $300.0 million of Senior Secured Notes are not actively traded, we believe,
        based upon information received from investment institutions, that our $300.0
        million of Senior Secured Notes were priced at 104.5% of face value for a
        value
        of $313.5 million at December 31, 2006. Our $200.0 million of Senior Notes
        are not actively traded, but we believe, based upon information received
        from
        investment institutions, that our $200.0 million of Senior Notes were priced
        at
        98% of face value for a value of $196.0 million at December 31, 2006. The
        Discount Notes of our parent, Majestic Holdco, are not actively traded, but
        we
        believe, based upon information received from investment institutions, that
        Majestic Holdco’s $63.5 million (face value at maturity) of Discount
        Notes were priced at 66.63% at December 31, 2006.
 
 
 **NOTE
        13. SAVINGS PLAN**
 
 The
        Company contributes to defined contribution plans, which provide for
        contributions in accordance with the plan documents. The plans are available
        to
        certain employees with at least one year of service. The Company contributes
        a
        matching contribution up to a maximum of 3% of an employee’s salary limited to a
        specified dollar amount as stated in the plan documents. The Company’s
        contributions to the plans amounted to $1.0 million, $0.9 million and $1.0
        million during 2006, 2005 and 2004, respectively.
 
 
  F-23
 Table
            of Contents
 **THE
            MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
            Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
  **NOTE
        14. COMMITMENTS AND CONTINGENCIES**
 
 CONTINGENCIES
 
 In
        February 2006, the Company's previous stop-loss health insurance provider
        (“Insurance Provider”), through their third party auditor, contacted the Company
        and requested that the Company provide information to facilitate an audit
        of
        employee health insurance stop-loss coverage for the years of 2004 and 2005.
        Though the Company has provided and continues to provide the requested
        information, as a result of this audit process the Insurance Provider has
        withheld payment of ten individual claims that are payable under our stop-loss
        insurance policy with an aggregate outstanding value of approximately $0.7
        million. The Company believes that it is entitled to reimbursement for all
        claims paid under the obligations of the insurance policy. At this time,
        the
        Insurance Provider has not provided any information with regard to the results
        of the audit, thus the Company is unable to determine what claims, if any,
        could
        ultimately be denied payment by our Insurance Provider.
 
 SHORT-TERM
        NOTE PAYABLE
 
 The
        Company entered into a note in the amount of $1.0 million with the City of
        Black
        Hawk in December 2005 as part of the financing of the Company’s acquisition of
        2.45 acres of vacant land from the City of Black Hawk. The Company paid the
        note
        in full on March 31, 2006, the due date. The note contained no stipulated
        interest rate. The Company had imputed interest at 7.75%.
 
 LEASES
 
 The
        Company has operating leases for various office and gaming equipment. The
        following is a schedule by years of future minimum rental payments required
        under operating leases that have initial or remaining non-cancelable lease
        terms
        in excess of one year as of December 31, 2006:
 
 For
                  the Years Ended December 31,(amounts
                  in thousands)2007
              
              $
              5282008
              
              
              2052009
              
              
              952010
              
              
              692011
              
              
              16Thereafter
              
              
              -$
              913
 
 Rent
        expense for the years ended December 1, 2006, 2005 and 2004 was $8.8
        million, $7.4 million and $7.5 million, respectively.
 
 LEGAL
        PROCEEDINGS
 
 Various
        legal proceedings are pending against the Company. Management considers all
        such
        pending proceedings, comprised primarily of personal injury and equal employment
        opportunity claims, to be routine litigation incidental to the Company’s
        business. Except as described below, management believes that the resolution
        of
        these proceedings will not individually, or in the aggregate, have a material
        effect on the Company’s financial condition, results of operations or cash
        flows.
  F-24
 Table
            of Contents
 **THE
            MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
            Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
  
 Anti-trust
        litigation. In June
        2003, a complaint was filed in the U.S. District Court for the Northern District
        of Mississippi against Tunica County casino owners and operators, including
        Barden Mississippi, the Tunica Casino Operators Association and the Tunica
        County Tourism Commission alleging violation of federal and state anti-trust
        claims, as well as various other tort and contract claims. The plaintiffs
        claim
        the defendants made a joint decision to refuse to advertise on the plaintiffs’
website. The plaintiffs are seeking treble, compensatory and punitive damages
        totaling approximately $33.0 million, plus interest and attorney’s fees. Each of
        the casino defendants, including Barden Mississippi, filed counterclaims
        against
        the plaintiffs alleging, among other claims, trademark infringement. Since
        filing the complaint, the plaintiffs’ anti-trust and common law tort claims
        against the Tunica County Tourism Commission and the Tunica Casino Operators
        Association have been dismissed. One casino defendant has also entered into
        a
        settlement with the plaintiffs that resulted in its dismissal from the suit.
        The
        remaining casino defendants filed a motion for summary judgment on each of
        the
        claims alleged against them and the plaintiffs filed a motion for summary
        judgment with respect to each of the casino defendants’ counterclaims. On
        December 21, 2005, the Court entered an order (the “Order”) granting the
        casino defendants’ motion for summary judgment and dismissing with prejudice
        plaintiffs’ claims against them. The casino defendants’ counterclaims remain
        pending. On January 19, 2006, plaintiffs filed a Rule 54(b) motion
        requesting that the Court direct the Clerk of Court to enter a judgment based
        on
        the Order or, in the alternative, issue an order certifying the Order for
        interlocutory appeal. The casino defendants filed an opposition to the
        plaintiffs’ motion on February 6, 2006. On February 7, 2006, the Court
        granted the plaintiffs’ motion for partial final judgment and on March 8, 2006,
        the plaintiffs filed a notice of appeal. The trial date for the casino
        defendants’ counterclaims had been continued until such time as the Court of
        Appeals ruled on the plaintiffs’ appeal. On January 30, 2007, the Court of
        Appeals set the date of March 7, 2007 for hearing oral arguments on
        plaintiffs’ appeals. Without any objection by the defendants, Plaintiffs’
counsel requested a continuance to April 16, 2007 to accommodate a
        pre-existing conflict. The Court of Appeals then cancelled oral arguments
        and
        decided to instead rule on the briefs. The Company intends to vigorously
        defend
        the appeal. At this time, it is too early to determine the outcome of this
        litigation and the effect, if any, on the Company’s financial position and
        results of operations.
 
 Trump
        Indiana Litigations. At the
        time of the closing of the Trump Indiana Acquisition, Trump Indiana was a
        party
        to certain pending lawsuits. Pursuant to the terms of the Stock Purchase
        Agreement dated November 3, 2005 between the Company and TERH, TERH agreed
        to indemnify the Company and its affiliates against any and all losses arising
        out of certain of those lawsuits (the “Trump Litigation Indemnity”); however,
        the Trump Litigation Indemnity is unsecured. Included in the Trump Litigation
        Indemnity is that certain Trump Indiana ERISA lawsuit (described below) and
        an
        employment practices lawsuit (described below).
 
 The
        Trump
        Indiana ERISA lawsuit is pending in the United States District Court for
        the
        District of New Jersey. Plaintiffs, participants in the Trump Companies’ Capital
        Accumulation Plan, filed a Complaint on February 8, 2005 against certain
        individuals and organizations, including Trump Indiana, Inc. and members
        of the
        Trump Capital Accumulation Plan Administrative Committee. The Complaint alleges,
        among other things, that defendants breached certain fiduciary duties under
        the
        Employee Retirement Income Security Act of 1974, as amended, when Trump Hotel
        and Casino Resorts Common Stock held in employee accounts was sold by the
        Committee. The Complaint seeks, among other things, damages in an amount
        ranging
        from $1.1 million to $2.3 million plus costs and attorneys’ fees. Defendants
        filed an Answer denying any wrongdoing and the case has been certified as
        a
        class action. Discovery has been completed and defendants anticipate filing
        a
        summary judgment motion seeking dismissal of all claims by April 13, 2007.
 
 The
        employment practices lawsuit included in the Trump Litigation Indemnity is
        a
        lawsuit filed on October 12, 2001 by a former employee of Trump Indiana in
        the U.S. District Court, that alleges age, sex, race, and color discrimination
        claims as well as equal pay and retaliation claims. The litigation was stayed
        during the bankruptcy of Trump Indiana. At this time, we cannot predict the
        outcome of either the Trump Indiana ERISA lawsuit or the Trump Indiana
        employment practices litigation.
 
  F-25
 Table
            of Contents
 **THE
            MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
            Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
  
 TAX
        MATTERS
 
 Majestic
        Star Income Withholding Tax Protest .
        The
        Company has been assessed $2.6 million, plus interest, for the fiscal year
        1996
        and the period January 1, 1998 through June 18, 2001, by the Indiana
        Department of Revenue (“Department”). On September 7, 2004, the Department
        assessed BDI, the Company’s ultimate parent and member, $1.3 million, plus
        penalties and interest for the remainder of 2001 and all of fiscal year 2002.
        The Department held a hearing on the 1996 through 2002 tax years on
        April 7, 2006, and issued rulings on January 17, 2007. In those
        rulings, the Department sustained BDI’s protest of the imposition of a
        negligence penalty, holding that BDI’s failure to pay the assessed tax amount
        was due to reasonable cause and not due to negligence. The Department also
        concurred with the position taken by the Company and BDI that to the extent
        it
        is ultimately determined they had net operating losses for a taxable year,
        those
        net operating losses are to be applied to offset any add back of riverboat
        wagering tax for income tax purposes. The Department denied the Company’s
        protest that non-resident withholding taxes did not apply for the period
        January 1, 1998 through June 18, 2001.
 
 BDI's
        non-resident shareholder has been assessed $0.2 million, plus penalty and
        interest, for 2003. The protest for 2003 is currently pending before the
        Legal
        Division of the Department. The Department held a hearing on the 2003 protest
        on
        December 5, 2006, and has taken the matter under advisement. The Department
        is
        expected to issue a ruling on the 2003 protest later this year.
 
 The
        assessments relate to deductions for gaming taxes paid by the Company, which
        deductions were taken for Indiana income tax purposes. The Department has
        taken
        the position that the Company had an obligation to add back State gaming
        taxes
        in determining the Company’s taxable income, and to withhold and remit tax for
        the non-resident shareholder of BDI. On April 19, 2004, the Indiana Tax
        Court ruled in a similar case involving another Indiana casino, Aztar Indiana
        Gaming Corporation (“Aztar”), that the gross wagering tax is a tax based on or
        measured by income and that it must be added back to the taxable income base
        for
        the purpose of determining adjusted gross income for Indiana tax purposes.
        On
        September 28, 2004, the Indiana Supreme Court denied Aztar’s request to
        review the Indiana Tax Court’s decision, and thus, the Indiana Tax Court’s
        opinion in the Aztar case is controlling precedent on the wagering tax add-back
        issue. The Company continues to pursue its protest with the Department on
        the
        grounds that the assessments contain calculation errors and that its protest
        sets forth issues not decided in the Aztar case. No liability has been accrued
        by the Company relating to this matter.
 
 The
        Company’s indentures governing the Senior Secured Notes and the Senior Notes and
        the loan agreement related to the Senior Secured Credit Facility allow the
        Company to make distributions to BDI for tax purposes. Accordingly, should
        the
        Company’s member ultimately be found liable for additional state income taxes to
        the State of Indiana, the Company would make distributions sufficient to
        pay the
        additional tax. Any payments would be recorded as distributions in Member’s
        Deficit. The Company does not intend to make any distributions for the years
        in
        which an assessment was received until it has fully evaluated its options
        with
        BDI. For the years subsequent to 2003, BDI's non-resident shareholder has
        paid
        Indiana state income tax taking into account the add-back of gross wagering
        tax
        (see Note 15 for a discussion of tax distributions to BDI).
 
 Majestic
        Star Sales and Use Tax Assessments .
        In
        October 2005, the Department assessed Majestic Star for unpaid sales and
        use
        taxes, with penalties and interest, for the period 2001 through 2004. The
        sales
        and use tax assessments, with penalties and interest, total $0.3 million.
        The
        use tax portions of the assessments relate to capital and operating supply
        purchases, and food, merchandise and other products provided to the guests
        of
        Majestic Star at no charge. On November 15, 2005, Majestic Star paid $0.2
        million under the State of Indiana amnesty program to eliminate all use tax
        and
        a portion of the sales tax assessment. All penalties and interest associated
        with such payments are waived in their entirety pursuant to Indiana law.
        The
        remaining $0.1 million of the assessment relates to the difference between
        sales
        tax on the full retail price of merchandise and other products provided to
        Majestic Star’s customers at no charge less sales tax on the cost of this
        merchandise and other products, and sales tax on the retail value of
        complimentary food provided to Majestic Star’s customers. Both items relate to
        the period August 2003 through 2004. On November 15, 2005, Majestic Star
        filed a protest of the proposed assessments protesting the sales tax assessments
        related to this period.
  F-26
 Table
            of Contents
 **THE
            MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
            Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
  
 In
        addition, Majestic Star has a receivable on its balance sheet in the amount
        of
        $0.1 million related to the two items noted immediately above for the period
        2001 through July 2003. During this period of time, Majestic Star was remitting
        full sales tax on the retail value of complimentary food, merchandise and
        other
        products to the Department. In or around July 2003, the Department notified
        Majestic Star’s management that no sales tax should be paid on items provided on
        a complimentary basis to its customers. At the time Majestic Star established
        the receivable for sales taxes paid during the period 2001 through July 2003.
        In
        or around July 2003, Majestic Star also filed claims for refund with the
        Department in the total amount of $0.1 million for tax years 2001 and 2002
        and
        for the period January through July 2003, on food and other items provided
        to
        its customers on a complimentary basis. In December 2005, those refund claims
        were denied by the Department, and in March 2006, Majestic Star appealed
        those
        denials to the Indiana Tax Court on March 27, 2006. Majestic Star believes
        that it has no sales or use tax liability for food for human consumption
        purchased by it and prepared for serving to its customers on a complimentary
        basis based on the Hyatt decision (see below for a discussion of the Hyatt
        decision).
 
 Should
        the Department make similar assessments for 2005 and 2006, the Company estimates
        its tax exposure would be approximately $0.1 million and $0.2 million,
        respectively.
 
 BHR
        Sales and Use Tax Assessments
  1998-2001
        Tax Years. During
        the years at issue, the two 50% members of BHR were Majestic Star and Trump
        Indiana. In October 2002, the Department assessed BHR for unpaid use tax
        for
        1998 and unpaid sales and use taxes for 1999 through 2001 in the total amount
        of
        $0.4 million, excluding interest. The assessments related to purchases of
        capital assets and supplies, vehicle leases and rental of other items of
        personal property, for which no sales tax was paid and no use tax was
        self-assessed. In addition, included in the assessment for the years 1999
        through 2001, the Department assessed tax on BHR’s provision of food, provided
        on a complimentary basis, to the patrons and employees of BHR’s members,
        Majestic Star and Trump Indiana. Sales tax was assessed on BHR’s cost of the
        food, as measured by the members’ periodic reimbursements to BHR. BHR paid the
        use tax portion of the assessment and filed a protest of the proposed
        assessments of sales tax in December 2002. BHR is disputing the assessment
        of
        sales tax on food provided at no charge, to the employees and patrons of
        Majestic Star and Trump Indiana, pursuant to the decision in Hyatt Corp v.
        Indiana Department of State Revenue (“Hyatt”). In Hyatt, the Department assessed
        Hyatt for complimentary continental breakfasts and amenity meals provided
        to its
        customers, plus the free meals provided to Hyatt’s full time employees. Under
        Indiana Code, sales of food intended for human consumption are exempt from
        sales
        tax. Food includes many food products (cereal, milk, eggs, meat, fish,
        vegetables, fruit, spices, etc.) that are prepared for human consumption.
        In
        Hyatt, the petitioner, a hotel operator, sought a refund for use tax paid
        on
        food purchased for complimentary meals that were provided to both guests
        and
        employees. Hyatt prevailed. BHR is arguing that since its inception, it has
        acted as the agent of Majestic Star and Trump Indiana with authority to
        purchase, prepare and provide food to their employees and patrons. This
        arrangement was memorialized in a written Limited Agency Agreement dated
        effective January 1, 2001. BHR’s position has been that all acts performed by it
        in its agency capacity (including the purchase, preparation and delivery
        of
        food) should be treated as though the acts had been performed by BHR’s joint
        venture partners, Majestic Star and Trump Indiana.
 
 The
        Department conducted a hearing on the protest in August 2005 and in October
        2005, issued a ruling waiving penalties but upholding the proposed $0.4 million
        assessment. BHR filed a petition with the Indiana Tax Court in March 2006,
        protesting the Department’s ruling with regard to the 1999-2001 tax
        years.
  F-27
 Table
            of Contents
 **THE
            MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
            Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
  
 2002-2004
        Tax Years. In
        October 2005, the Department assessed BHR $0.3 million in sales and use taxes
        for the 2002 tax year, inclusive of interest and penalties, for many of the
        same
        sales tax and use tax items as were assessed for the earlier years. However,
        for
        2002, unlike prior years, the Department assessed sales tax on complimentary
        food provided to the patrons of Majestic Star and Trump Indiana based on
        the *retail* value of
        the items provided rather than on the *cost* of
        those
        items to BHR. BHR, prior to being dissolved, or Majestic Star, has not reserved
        for the assessment related to the prepared meals provided to the employees
        and
        patrons of Majestic Star and Trump Indiana. On November 15, 2005, BHR paid
        the use tax portion of the assessment for the 2002 tax year under Indiana’s tax
        amnesty program, thereby eliminating interest and penalties on the amount
        paid.
        The remaining amount outstanding of $0.2 million relates to the same issues
        as
        are faced by Majestic Star in its sales and use tax audits (see above). BHR
        has
        protested the remainder of the assessments for 2002 awaiting the Department’s
        ruling on its protest for the 2002 calendar year. In June 2006, the Department
        assessed BHR for unpaid sales and use taxes, with interest, for the 2003
        and
        2004 calendar years. The sales and use tax assessments total $0.3 million.
        The
        sales tax portion of the assessment involves the same issues as identified
        in
        the 2002 and prior years’ assessments. The use tax portion of the assessment
        relates to BHR’s provision of food, provided without charge, to its employees
        and employees and patrons of its owners through a third-party vendor. BHR
        protested these assessments in August 2006 and Majestic Star is awaiting
        a
        hearing on such protests before the Department. Should the Department maintain
        its position that sales taxes are due on the retail value of complimentary
        meals
        BHR provided to employees of Majestic Star and Trump Indiana, BHR’s estimated
        2005 sales tax exposure for the complimentary meals will be $0.1 million.
        Pursuant to the terms of the SPA, TERH is obligated to indemnify the Company
        for
        50% of BHR’s pre-closing tax liability.
 
 
 GAMING
        REGULATIONS
 
 The
        ownership and operation of riverboat gaming operations in Indiana are subject
        to
        strict state regulation under the Riverboat Gambling Act (the “Act”) and the
        administrative rules promulgated thereunder. The Indiana Gaming Commission
        (“IGC”) is empowered to administer, regulate and enforce the system of riverboat
        gaming established under the Act and has jurisdiction and supervision over
        all
        riverboat gaming operations in Indiana, as well as over all persons on
        riverboats where gaming operations are conducted. The IGC is empowered to
        regulate a wide variety of gaming and non-gaming related activities, including
        the licensing of suppliers to, and employees at, riverboat gaming operations
        and
        to approve the form of entity qualifiers and intermediary and holding companies.
        The IGC has broad rulemaking power, and it is impossible to predict what
        effect,
        if any, the amendment of existing rules or the finalization of proposed rules
        might have on the Company’s operations.
 
 The
        Indiana state law governing gaming imposes a graduated wagering tax based
        upon
        adjusted gross receipts. The graduated wagering tax has a starting rate of
        15%
        with a top rate of 35% for adjusted gross receipts in excess of $150 million.
        In
        addition to the wagering tax, an admissions tax of $3 per turnstile count
        is
        assessed.
 
 The
        ownership and operation of our casino gaming facilities in Mississippi and
        Colorado are also subject to various state and local regulations in the
        jurisdictions where they are located. In Mississippi, our gaming operations
        are
        subject to the Mississippi Gaming Control Act, and to the licensing and/or
        regulatory control of the Mississippi Gaming Commission, the Mississippi
        State
        Tax Commission and various state and local regulatory agencies, including
        liquor
        licensing authorities. In Colorado, our gaming operations are subject to
        the
        Limited Gaming Act of 1991, which created the Division of Gaming within the
        Colorado Department of Revenue and the Colorado Limited Gaming Control
        Commission which is empowered to license, implement, regulate and supervise
        the
        conduct of limited gaming. Our Colorado operations are also subject to the
        Colorado Liquor Code and the state and local liquor licensing
        authorities.
 
 The
        Company’s directors, officers, managers and key employees are required to hold
        individual licenses. These requirements vary from jurisdiction to jurisdiction.
        Licenses and permits for gaming operations and for individual licensees are
        subject to revocation or non-renewal for cause. Under certain circumstances,
        holders of our securities are required to secure independent licenses and
        permits.
 
  F-28
 Table
            of Contents
 **THE
            MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
            Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
  
 EMPLOYMENT
        AGREEMENTS
 
 Mr.
        Barden serves as our Chairman, President and Chief Executive Officer and
        currently receives annual compensation of $600,000 as an employee, pursuant
        to a
        letter agreement with the Company January 1, 2005. The Company provides Mr.
        Barden with an auto allowance. Mr. Barden is entitled to participate in the
        Company’s employee benefit plans as are generally made available to the
        Company’s senior executives and other customary employee benefits, including
        participation in the Company’s 401(k) plan.
 
 Mr.
        Saylor serves as our Executive Vice President and Chief Operating Officer,
        pursuant to an employment agreement with the Company dated April 6, 2006
        and effective as of May 15, 2006. Unless sooner terminated as provided
        therein, the agreement continues in effect for two years. Thereafter, the
        term
        automatically extends for successive one-year periods unless either party
        provides notice of its intention not to renew the agreement. The agreement
        provides for a base salary of $400,000 during the first year and $500,000
        during
        the second year and participation in the Company’s discretionary bonus program
        (2006) and Management Incentive Plan (“MIP”) (2007). Mr. Saylor is also entitled
        to participate in the Company’s employee benefits plans as are generally made
        available to the Company’s senior executives and other customary employee
        benefits, including participation in the Company’s 401(k) plan. Mr. Saylor also
        participates in an executive medical reimbursement plan with a maximum annual
        payout of $5,000 and receives a $500 per month car allowance. Under certain
        circumstances, Mr. Saylor is entitled to severance payments for a maximum
        of 12
        months or the remaining term of the agreement (but no less than six months),
        bonus compensation for the employment term and COBRA benefits for a period
        of
        six months as well as any earned and unused vacation.
 
 Mr.
        Bennett serves as our Vice President and Chief Financial Officer pursuant
        to an
        employment agreement with the Company dated August 14, 2006. Unless sooner
        terminated as provided therein, the agreement continues in effect for two
        years.
        The agreement provides for a base compensation of $300,000 effective
        July 3, 2006, subject to annual reviews. Mr. Bennett also participates in
        the Company’s discretionary bonus program (2006) and MIP (2007). In addition to
        such compensation, Mr. Bennett is entitled to participate in the Company’s
        employee benefit plans as are generally made available to the Company’s senior
        executives and other customary employee benefits, including participation
        in the
        Company’s 401(k) plan. Mr. Bennett also participates in an executive medical
        reimbursement plan with a maximum annual payout of $5,000 and receives a
        $500
        per month car allowance. Under certain circumstances, Mr. Bennett is entitled
        to
        severance payments for a maximum of six months or the remaining term of the
        agreement, bonus compensation for the employment term and COBRA benefits
        for a
        period of six months as well as any earned and unused vacation.
 
 Mr.
        Lemberg serves as a board member and, effective January 3, 2005, joined the
        Company as Executive Vice President of Strategic Initiatives pursuant to
        an
        employment agreement dated December 17, 2004. The agreement provided for a
        two-year term which automatically extends for successive one-year periods
        unless
        either party provides notice of its intention not to renew the agreement.
        The
        agreement provides for a base salary of $300,000 and participation in the
        Company’s discretionary bonus program (2006) and MIP (2007). Mr. Lemberg is also
        entitled to participate in the Company’s employee benefits plans as are
        generally made available to the Company’s senior executives and other customary
        employee benefits, including participation in the Company’s 401(k) plan. Mr.
        Lemberg also participates in an executive medical reimbursement plan with
        a
        maximum annual payout of $5,000. Under certain circumstances, Mr. Lemberg
        is
        entitled to severance payments for a maximum of six months or the remaining
        term
        of the agreement, bonus compensation for the employment term and COBRA benefits
        for a period of six months.
 
 
 LETTER
        OF
        CREDIT/SURETY BOND
 
 As
        part
        of a self-insured worker’s compensation program at Majestic Star, the Company
        was required to post a letter of credit in the amount of $0.9 million to
        secure
        payment of claims. To collateralize the letter of credit, the bank required
        that
        Majestic Star purchase a $0.9 million certificate of deposit. Majestic
        Star II also has a self-insured worker’s compensation program which
        required a $1.0 million letter of credit, which is collateralized by a $1.0
        million certificate of deposit.
  F-29
 Table
            of Contents
 **THE
            MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
            Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
  
 To
        secure
        payment of claims under the worker’s compensation programs at Fitzgeralds
        Tunica, Fitzgeralds Black Hawk and Fitzgeralds Las Vegas, the Company was
        required to post a letter of credit of $1.25 million. This letter of credit
        is
        secured by a certificate of deposit. Our certificates of deposit securing
        the
        letters of credit for our workers compensation programs are recorded in
        Restricted Cash on the Company's consolidated balance sheet (see
        Note 2 - Basis of Presentation and Summary of Significant Accounting
        Policies).
 
 The
        State
        of Mississippi has required Fitzgeralds Tunica to post surety bonds as security
        for current and future sales and gaming revenue tax obligations. Fitzgeralds
        Tunica has four surety bonds: a $0.6 million bond in place with the Mississippi
        State Tax Commission and three $5,000 bonds with the Mississippi Alcoholic
        Beverage Control. These surety bonds are secured only by personal guaranties
        of
        Don H. Barden. If Mr. Barden is required to make payments to the bonding
        companies as a result of the guaranties, the Company will be obligated to
        reimburse Mr. Barden for any such payments.
 
 Our
        Majestic Star and Majestic Star II properties are each required to have a
        $1.0
        million surety bond in place with the IGC. Majestic Star II’s surety bond
        is in place and is cash collateralized. The collateral is reflected in Other
        Assets on the Company's consolidated balance sheet. Majestic Star’s surety bond
        has not been placed pending surety bond language from the IGC.
 
 
 **NOTE
        15. RELATED PARTY TRANSACTIONS**
 
 TRANSACTIONS
        BY OR WITH AFFILIATES
 
 *Pushdown
        of Majestic Holdco Discount Notes.* The
        Company’s financial statements for 2006 and 2005 include the $63.5 million of
        Discount Notes, net of discount of $12.4 million and $18.2 million,
        respectively, issued by Majestic Holdco in connection with the acquisition
        of
        Trump Indiana and other refinancing transactions. The Discount Notes are
        solely
        the obligation of Majestic Holdco and are unsecured. Neither the Company
        nor any
        of its direct or indirect subsidiaries guarantees the Discount Notes nor
        are the
        equity or assets of the Company or its direct or indirect subsidiaries security
        for the Discount Notes. Further, the Indentures governing the Senior Notes
        and
        the Senior Secured Notes and the loan and security agreement which governs
        our
        Senior Secured Credit Facility preclude distributions by the Company to Majestic
        Holdco unless certain financial tests are met. A likely scenario for the
        repayment of these Discount Notes is from cash flows of the Company or a
        refinancing of the Company’s indebtedness, including Majestic Holdco. The
        Discount Notes have been “pushed-down” to the Company pursuant to the guidelines
        of SEC Staff Accounting Bulletin 73 Topic 5(J).
 
 *Manager
        Agreement.* Distributions to BDI under the Manager Agreement, dated October 7, 2003,
        are governed and limited by the terms of the indentures governing the Notes
        and
        by the terms of the Senior Secured Credit Facility. The distributions for
        each
        fiscal quarter may not exceed 1% of the Company’s consolidated net operating
        revenue and 5% of the Company’s consolidated cash flow (as defined in the
        indenture governing the Senior Secured Notes and the Senior Secured Credit
        Facility) for the immediately preceding fiscal quarter.
 
 During
        the year ended December 31, 2006, the Company made distributions of $3.6
        million to BDI pursuant to the Manager Agreement. The $3.6 million of
        distributions paid to BDI in 2006 pertain to the net revenues and consolidated
        cash flows of the Company during the three-month periods ended December 31,
        2005 and March 31, 2006. Though allowable, BDI chose to defer its
        distribution for the second and third quarters of 2006. The net revenue
        component of the distribution for the fourth quarter of 2006 was also deferred.
        The consolidated cash flow component of the distribution for the fourth quarter
        2006 was allowable at the Company level, but was not permissible at Majestic
        Holdco, since the required 1.5:1.0 interest coverage ratio was not achieved.
        Due
        to not achieving the interest coverage ratio covenant, the distribution could
        not be made to BDI. If allowable distributions were made for all three quarters,
        then the Company would be required to pay $4.5 million. During the years
        ended
        December 31, 2005 and 2004, the Company made distributions
        totaling $5.2 million and $5.3 million, respectively, to BDI pursuant to
        the
        Manager Agreement.
  F-30
 Table
            of Contents
 **THE
            MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
            Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
  
 *Tax
        Distributions* .
        Pursuant to the terms of the indentures governing the Notes and the Senior
        Secured Credit Facility, the Company is permitted to make distributions for
        its
        member’s state and federal income tax liabilities. In the second quarter of
        2006, the Company made a tax distribution of $0.9 million to BDI for 2005
        state
        tax liabilities and estimated 2006 taxes. In the second quarter of 2005,
        the
        Company made a tax distribution of $2.3 million to BDI for 2004 state tax
        liabilities and estimated 2005 taxes of which $0.7 million was reimbursed
        to the
        Company upon final determination of BDI’s tax liabilities in October
        2005.
 
 *BHPA
        Rent Expense.* During
        the period from January 1, 2005 to December 20, 2005 and the year
        ended December 31, 2004, we incurred rent expense payable to BHPA totaling
        $2.0 million, and $2.2 million, respectively. As a result of our acquisition
        of
        Trump Indiana and the contribution of AMB Parking’s equity interest in BHPA to
        the Company, on December 21, 2005, BHPA became an indirect wholly owned
        subsidiary of the Company and the parking leases between BHPA and the Company
        and BHPA and Trump Indiana were terminated.
 
 *Barden
        Nevada Expense Sharing Agreement* .
        The
        Company has entered into an expense sharing agreement dated October 7, 2003
        with Barden Nevada. The expense sharing agreement provides for a fee from
        Barden
        Nevada to the Company in the amount of the greater of (i) $0.5 million per
        year
        or (ii) the actual amount of certain specified expenses incurred by the Company
        in connection with providing services to Barden Nevada. For the years ended
        December 31, 2006, 2005 and 2004, the Company charged Barden Nevada $1.4
        million, $1.4 million and $1.1 million, respectively, pursuant to the
        expense sharing agreement.
 
 *Barden
        Nevada Revolving Promissory Note.* On
        March 9, 2005, Barden Nevada entered into a revolving promissory note with
        the Company, whereby Barden Nevada may request advances from time to time
        from
        the Company up to $5.0 million. Interest is calculated based on the prime
        rate
        (as published in the Money Section of the Wall Street Journal), plus the
        margin
        spread paid by the Company under prime rate borrowings with Wells Fargo
        Foothill, the agent bank under the Company’s Senior Secured Credit Facility.
        Interest is paid quarterly, in arrears. Any costs that are funded by the
        Company
        and not repaid by Barden Nevada within 30 days will be added to the principal
        amount outstanding. All amounts outstanding under the promissory note are
        due
        and payable on October 7, 2007 along with the accrued and unpaid interest.
        As of December 31, 2006 and 2005, the principal balance of the promissory
        note was $0.
 
 
 **NOTE
        16. SEGMENT INFORMATION**
 
 The
        Majestic Star Casino, LLC, either directly or indirectly through wholly owned
        subsidiaries, owns and operates four casino properties as follows: two riverboat
        casinos and a hotel located in Gary, Indiana; a casino and hotel located
        in
        Tunica, Mississippi; and a casino located in Black Hawk, Colorado (collectively,
        the “Properties”). The Majestic Properties for 2006 include Majestic Star
        and Majestic Star II. BHPA was merged into Majestic Star as of
        August 4, 2006 and is shown as if the merger had been completed as of
        January 1, 2006. BHR was dissolved as of December 31, 2006. All 2005
        information is for Majestic Star and 11 days of operations for Majestic
        Star II, BHR and BHPA. 2004 information is for Majestic Star
        only.
 
 The
        Company identifies its business in three segments based on geographic location.
        The Properties, in each of their segments, market primarily to mid-level
        gaming
        customers. The major products offered in each segment are as follows: casino,
        hotel rooms (at the Majestic Properties and Fitzgeralds Tunica), and food
        and
        beverage.
 
 The
        accounting policies of each business segment are the same as those described
        in
        the summary of significant accounting policies previously described in
        Note 2 -Basis of Presentation and Summary of Significant Accounting
        Policies. There are minimal inter-segment sales.
 
 A
        summary
        of the Properties’ operations by business segment for the years ended
        December 31, 2006, 2005 and 2004 and a summary of the Properties’ assets
        and goodwill as of December 31, 2006 and December 31, 2005 are
        presented below:
 
  F-31
 Table
            of Contents
 **THE
            MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
            Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
  **NOTE
        16. SEGMENT INFORMATION (CONTINUED)**
 For
                  The Year EndedDecember
                  31,2006
              
              2005
              
              2004(amounts
                  in thousands)Net
                  revenues:Majestic
                  Properties
              
              $
              237,422
              
              $
              143,624
              
              $
              141,058Fitzgeralds
                  Tunica
              
              
              83,979
              
              
              82,939
              
              
              83,218Fitzgeralds
                  Black Hawk
              
              
              33,429
              
              
              35,409
              
              
              36,235Total
              
              $
              354,830
              
              $
              261,972
              
              $
              260,511Operating
                  income (loss):Majestic
                  Properties
              
              $
              35,183
              
              $
              19,271
              
              $
              16,465Fitzgeralds
                  Tunica
              
              
              8,836
              
              
              10,253
              
              
              11,471Fitzgeralds
                  Black Hawk
              
              
              8,060
              
              
              7,393
              
              
              9,973Corporate
                  (1)
              
              
              (6,419
              )
              
              (7,896
              )
              
              (3,470
              )Majestic
                  Investor Holdings
              
              
              -
              
              
              (289
              )
              
              (689
              )Total
              
              $
              45,660
              
              $
              28,732
              
              $
              33,750Segment
                  depreciation and amortization:Majestic
                  Properties
              
              $
              20,291
              
              $
              8,976
              
              $
              7,785Fitzgeralds
                  Tunica
              
              
              9,157
              
              
              10,062
              
              
              8,858Fitzgeralds
                  Black Hawk
              
              
              2,163
              
              
              3,125
              
              
              994Corporate
              
              
              112
              
              
              180
              
              
              71Majestic
                  Investor Holdings
              
              
              -
              
              
              269
              
              
              278Total
              
              $
              31,723
              
              $
              22,612
              
              $
              17,986Expenditure
                  for additions to long-lived assets:Majestic
                  Properties
              
              $
              9,130
              
              $
              4,152
              
              $
              28,692Fitzgeralds
                  Tunica
              
              
              10,577
              
              
              4,860
              
              
              5,800Fitzgeralds
                  Black Hawk
              
              
              5,541
              
              
              2,655
              
              
              1,520Corporate
              
              
              161
              
              
              116
              
              
              -Total
              
              $
              25,409
              
              $
              11,783
              
              $
              36,012As
                  of
              
              
              As
                  ofDecember
                  31,
              
              
              December
                  31,2006
              
              
              2005Segment
                  assets:Majestic
                  Properties
              
              $
              478,896
              
              $
              519,215Fitzgeralds
                  Tunica
              
              
              79,664
              
              
              75,419Fitzgeralds
                  Black Hawk
              
              
              43,804
              
              
              36,746Corporate
              
              
              524,981
              
              
              289,353Majestic
                  Investor Holdings
              
              
              -
              
              
              20,550Total
              
              
              1,127,345
              
              
              941,283Less:
                  Intercompany
              
              
              (620,985
              )
              
              (423,324
              )Total
              
              $
              506,360
              
              $
              517,959Goodwill:Majestic
                  Properties
              
              $
              41,509
              
              $
              41,329Fitzgeralds
                  Tunica
              
              
              3,998
              
              
              3,998Fitzgeralds
                  Black Hawk
              
              
              1,924
              
              
              1,924Total
              
              $
              47,431
              
              $
              47,251
 (1)  Corporate
        expenses reflect payroll, benefits, travel and other costs associated with
        our
        corporate staff and are not allocated to the properties.
  F-32
 Table
            of Contents
 **THE
            MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
            Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
  
 **NOTE
        17. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION**
 
 The
        Majestic Star Casino, LLC is the co-issuer of $300.0 million of Senior Secured
        Notes and $200.0 million of Senior Notes. Under the indentures governing
        the
        Senior Secured Notes, the Senior Notes and the loan and security agreement
        for
        the Senior Secured Credit Facility, Majestic Star II, Fitzgeralds
        Tunica and Fitzgeralds Black Hawk are guarantor subsidiaries of the $300.0
        million of Senior Secured Notes.
 
 Our
        supplemental guarantor financial information contains financial information
        for
        The Majestic Star Casino, LLC, The Majestic Star Casino Capital Corp (co-issuer
        of the Senior Secured Notes but an entity with no operations) and the guarantor
        subsidiaries and our discontinued operation and the eliminating entries
        necessary to consolidate such entities.
 
 
  F-33
 Table
            of Contents
 **THE
            MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
            Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
  CONDENSED
        CONSOLIDATING BALANCE SHEET
 As
        of
        December 31, 2006 ****
 (amounts
        in thousands)
 
 The
                  Majestic
              
              The
                  MajesticStar
                  Casino,
              
              Star
                  Casino
              
              Guarantor
              
              Eliminating
              
              
              
              TotalLLC
              
              Capital
                  Corp.
              
              Subsidiaries
              
              Entries
              
              
              
              ConsolidatedASSETSCurrent
                  assets:Cash
                  and cash equivalents
              
              $
              8,849
              
              $
              -
              
              $
              16,683
              
              $
              -
              
              
              
              
              $
              25,532Restricted
                  cash
              
              
              2,167
              
              
              -
              
              
              1,160
              
              
              -
              
              
              
              
              
              3,327Accounts
                  receivable, net
              
              
              1,983
              
              
              -
              
              
              5,599
              
              
              -
              
              
              
              
              
              7,582Inventories
              
              
              58
              
              
              -
              
              
              830
              
              
              -
              
              
              
              
              
              888Prepaid
                  expenses and deposits
              
              
              781
              
              
              -
              
              
              1,525
              
              
              -
              
              
              
              
              
              2,306Receivable
                  from affiliate
              
              
              6,252
              
              
              -
              
              
              -
              
              
              (5,796
              )
              
              (a
              )
              
              456Investment
                  in subsidiaries
              
              
              106,182
              
              
              -
              
              
              -
              
              
              (106,182
              )
              
              (b
              )
              
              -Total
                  current assets
              
              
              126,272
              
              
              -
              
              
              25,797
              
              
              (111,978
              )
              
              
              
              
              40,091Property,
                  equipment and improvements, net
              
              
              94,794
              
              
              -
              
              
              180,942
              
              
              -
              
              
              
              
              
              275,736Intangible
                  assets, net
              
              
              -
              
              
              -
              
              
              125,396
              
              
              -
              
              
              
              
              
              125,396Goodwill
              
              
              -
              
              
              -
              
              
              47,431
              
              
              -
              
              
              
              
              
              47,431Deferred
                  financing costs, net
              
              
              13,083
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              13,083Deferred
                  financing and transaction costspushed
                  down from Majestic Holdco (1)
              
              
              2,436
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              2,436Long
                  term receivable - related party
              
              
              252,356
              
              
              -
              
              
              7,758
              
              
              (260,114
              )
              
              (a
              )
              
              -Other
                  assets
              
              
              433
              
              
              -
              
              
              1,754
              
              
              -
              
              
              
              
              
              2,187Total
                  assets
              
              $
              489,374
              
              $
              -
              
              $
              389,078
              
              $
              (372,092
              )
              
              
              
              $
              506,360LIABILITIES
                  AND MEMBER'S DEFICITCurrent
                  liabilities:Accounts
                  payable
              
              $
              1,877
              
              $
              -
              
              $
              2,615
              
              $
              -
              
              
              
              
              $
              4,492Current
                  portion of long-term debt
              
              
              60
              
              
              -
              
              
              105
              
              
              -
              
              
              
              
              
              165Payable
                  to related party
              
              
              2
              
              
              -
              
              
              5,794
              
              
              (5,796
              )
              
              (a
              )
              
              -Accrued
                  liabilities:Payroll
                  and related
              
              
              2,976
              
              
              -
              
              
              6,141
              
              
              -
              
              
              
              
              
              9,117Interest
              
              
              10,751
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              10,751Property
                  and franchise taxes
              
              
              3,574
              
              
              -
              
              
              5,369
              
              
              -
              
              
              
              
              
              8,943Other
                  accrued liabilities
              
              
              5,090
              
              
              -
              
              
              10,465
              
              
              -
              
              
              
              
              
              15,555Total
                  current liabilities
              
              
              24,330
              
              
              -
              
              
              30,489
              
              
              (5,796
              )
              
              
              
              
              49,023Due
                  to related parties
              
              
              7,758
              
              
              -
              
              
              252,356
              
              
              (260,114
              )
              
              (a
              )
              
              -Long-term
                  debt, net of current maturities
              
              
              545,753
              
              
              300,000
              
              
              51
              
              
              (300,000
              )
              
              (c
              )
              
              545,804Long-term
                  debt pushed down from Majestic Holdco (2)
              
              
              51,124
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              51,124Total
                  liabilities
              
              
              628,965
              
              
              300,000
              
              
              282,896
              
              
              (565,910
              )
              
              
              
              
              645,951Member's
                  (deficit) equity
              
              
              (139,591
              )
              
              (300,000
              )
              
              106,182
              
              
              193,818
              
              
              (b)
                  (c
              )
              
              (139,591
              )Total
                  liabilities and member's (deficit) equity
              
              $
              489,374
              
              $
              -
              
              $
              389,078
              
              $
              (372,092
              )
              
              
              
              $
              506,360
 
 (a)  To
        eliminate intercompany receivable and payables.
 (b)  To
        eliminate intercompany accounts and investment in subsidiaries.
 (c)  As
        more
        fully described in Note 11, Long Term Debt, The Majestic Star Casino
        Capital Corp. is a co-obligor of the Senior Secured Notes issued by the Company.
        Accordingly, such indebtedness has been presented as an obligation of both
        the
        issuer and the co-obligor in the above balance sheet.
 (1)  Reflects
        the pushdown of deferred financing costs related to the issuance of the Discount
        Notes of Majestic Holdco, net of amortization.
 (2)  Reflects
        the pushdown of Majestic Holdco’s Discount Notes pursuant to SEC Staff
        Accounting Bulletin 73 Topic 5(J).
 
  F-34
 Table
            of Contents
 **THE
            MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
            Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
  CONDENSED
        CONSOLIDATING BALANCE SHEET
 As
        of
        December 31, 2005
 (amounts
        in thousands)
 
 The
                  Majestic
              
              The
                  MajesticStar
                  Casino,
              
              Star
                  Casino
              
              Guarantor
              
              Eliminating
              
              
              
              TotalLLC
              
              Capital
                  Corp.
              
              Subsidiaries
              
              Entries
              
              
              
              ConsolidatedASSETSCurrent
                  assets:Cash
                  and cash equivalents
              
              $
              7,085
              
              $
              -
              
              $
              25,283
              
              $
              -
              
              
              
              
              $
              32,368Restricted
                  cash
              
              
              900
              
              
              -
              
              
              2,290
              
              
              -
              
              
              
              
              
              3,190Accounts
                  receivable, net
              
              
              1,529
              
              
              -
              
              
              3,071
              
              
              -
              
              
              
              
              
              4,600Inventories
              
              
              61
              
              
              -
              
              
              727
              
              
              -
              
              
              
              
              
              788Prepaid
                  expenses and deposits
              
              
              918
              
              
              -
              
              
              1,515
              
              
              -
              
              
              
              
              
              2,433Receivable
                  from affiliate
              
              
              9,851
              
              
              -
              
              
              -
              
              
              (9,682
              )
              
              (a
              )
              
              169Other
                  current assets
              
              
              -
              
              
              -
              
              
              138
              
              
              -
              
              
              
              
              
              138Total
                  current assets
              
              
              20,344
              
              
              -
              
              
              33,024
              
              
              (9,682
              )
              
              
              
              
              43,686Property,
                  equipment and improvements, net
              
              
              75,422
              
              
              -
              
              
              202,711
              
              
              -
              
              
              
              
              
              278,133Intangible
                  assets, net
              
              
              -
              
              
              -
              
              
              128,855
              
              
              -
              
              
              
              
              
              128,855Goodwill
              
              
              -
              
              
              -
              
              
              47,251
              
              
              -
              
              
              
              
              
              47,251Deferred
                  financing costs, net
              
              
              15,264
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              15,264Deferred
                  financing and transaction costspushed
                  down from Majestic Holdco (1)
              
              
              2,804
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              2,804Long
                  term receivable - related party
              
              
              418,766
              
              
              -
              
              
              -
              
              
              (418,766
              )
              
              (a
              )
              
              -Other
                  assets
              
              
              228
              
              
              -
              
              
              1,738
              
              
              -
              
              
              
              
              
              1,966Total
                  assets
              
              $
              532,828
              
              $
              -
              
              $
              413,579
              
              $
              (428,448
              )
              
              
              
              $
              517,959LIABILITIES
                  AND MEMBER'S DEFICITCurrent
                  liabilities:Accounts
                  payable
              
              $
              1,776
              
              $
              -
              
              $
              1,784
              
              $
              -
              
              
              
              
              $
              3,560Note
                  payable
              
              
              -
              
              
              -
              
              
              985
              
              
              -
              
              
              
              
              
              985Current
                  portion of long-term debt
              
              
              -
              
              
              -
              
              
              174
              
              
              -
              
              
              
              
              
              174Payable
                  to related party
              
              
              714
              
              
              -
              
              
              8,968
              
              
              (9,682
              )
              
              (a
              )
              
              -Accrued
                  liabilities:Payroll
                  and related
              
              
              3,096
              
              
              -
              
              
              6,170
              
              
              -
              
              
              
              
              
              9,266Interest
              
              
              7,216
              
              
              -
              
              
              1
              
              
              -
              
              
              
              
              
              7,217Property
                  and franchise taxes
              
              
              3,763
              
              
              -
              
              
              4,652
              
              
              -
              
              
              
              
              
              8,415Other
                  accrued liabilities
              
              
              5,466
              
              
              -
              
              
              10,991
              
              
              -
              
              
              
              
              
              16,457Total
                  current liabilities
              
              
              22,031
              
              
              -
              
              
              33,725
              
              
              (9,682
              )
              
              
              
              
              46,074Investment
                  in subsidiaries
              
              
              23,382
              
              
              -
              
              
              -
              
              
              (23,382
              )
              
              (b
              )
              
              -Due
                  to related parties
              
              
              15,721
              
              
              -
              
              
              403,045
              
              
              (418,766
              )
              
              (a
              )
              
              -Long-term
                  debt, net of current maturities
              
              
              547,212
              
              
              300,000
              
              
              191
              
              
              (300,000
              )
              
              (c
              )
              
              547,403Long-term
                  debt pushed down from Majestic Holdco (2)
              
              
              45,296
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              45,296Total
                  liabilities
              
              
              653,642
              
              
              300,000
              
              
              436,961
              
              
              (751,830
              )
              
              
              
              
              638,773Member's
                  deficit
              
              
              (120,814
              )
              
              (300,000
              )
              
              (23,382
              )
              
              323,382
              
              
              (b)
                  (c
              )
              
              (120,814
              )Total
                  liabilities and member's deficit
              
              $
              532,828
              
              $
              -
              
              $
              413,579
              
              $
              (428,448
              )
              
              
              
              $
              517,959
 
 (a)  To
        eliminate intercompany receivable and payables.
 (b)  To
        eliminate intercompany accounts and investment in subsidiaries.
 (c)  As
        more
        fully described in Note 11, Long Term Debt, The Majestic Star Casino
        Capital Corp. is a co-obligor of the Senior Secured Notes issued by the Company.
        Accordingly, such indebtedness has been presented as an obligation of both
        the
        issuer and the co-obligor in the above balance sheet.
 (1)  Reflects
        the pushdown of deferred financing costs related to the issuance of the Discount
        Notes of Majestic Holdco, net of amortization.
 (2)  Reflects
        the pushdown of Majestic Holdco’s Discount Notes pursuant to SEC Staff
        Accounting Bulletin 73 Topic 5(J).
 
  F-35
 Table
            of Contents
 **THE
            MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
            Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
  CONDENSED
        CONSOLIDATING STATEMENT OF OPERATIONS
 For
        the
        Year Ended December 31, 2006
 (amounts
        in thousands)
 
 The
                  Majestic
              
              The
                  MajesticStar
                  Casino,
              
              Star
                  Casino
              
              Guarantor
              
              Eliminating
              
              TotalLLC
              
              Capital
                  Corp.
              
              Subsidiaries
              
              Entries
                  (a)
              
              ConsolidatedOPERATING
                  REVENUES:Casino
              
              $
              134,809
              
              $
              -
              
              $
              240,305
              
              $
              -
              
              $
              375,114Rooms
              
              
              -
              
              
              -
              
              
              10,891
              
              
              -
              
              
              10,891Food
                  and beverage
              
              
              1,841
              
              
              -
              
              
              14,506
              
              
              -
              
              
              16,347Other
              
              
              2,938
              
              
              -
              
              
              4,004
              
              
              -
              
              
              6,942Gross
                  revenues
              
              
              139,588
              
              
              -
              
              
              269,706
              
              
              -
              
              
              409,294Less:
                  promotional allowances
              
              
              13,361
              
              
              -
              
              
              41,103
              
              
              -
              
              
              54,464Net
                  operating revenues
              
              
              126,227
              
              
              -
              
              
              228,603
              
              
              -
              
              
              354,830OPERATING
                  COSTS AND EXPENSES:Casino
              
              
              25,297
              
              
              -
              
              
              62,412
              
              
              -
              
              
              87,709Rooms
              
              
              -
              
              
              -
              
              
              3,329
              
              
              -
              
              
              3,329Food
                  and beverage
              
              
              1,984
              
              
              -
              
              
              6,453
              
              
              -
              
              
              8,437Other
              
              
              -
              
              
              -
              
              
              1,734
              
              
              -
              
              
              1,734Gaming
                  taxes
              
              
              38,450
              
              
              -
              
              
              48,647
              
              
              -
              
              
              87,097Advertising
                  and promotion
              
              
              5,663
              
              
              -
              
              
              13,576
              
              
              -
              
              
              19,239General
                  and administrative
              
              
              15,976
              
              
              -
              
              
              40,994
              
              
              -
              
              
              56,970Corporate
                  expense
              
              
              6,306
              
              
              -
              
              
              -
              
              
              -
              
              
              6,306Economic
                  incentive tax - City of Gary
              
              
              3,638
              
              
              -
              
              
              3,121
              
              
              -
              
              
              6,759Depreciation
                  and amortization
              
              
              8,342
              
              
              -
              
              
              23,381
              
              
              -
              
              
              31,723Gain
                  on disposal of assets
              
              
              (97
              )
              
              -
              
              
              (36
              )
              
              -
              
              
              (133
              )Total
                  operating costs and expenses
              
              
              105,559
              
              
              -
              
              
              203,611
              
              
              -
              
              
              309,170Operating
                  income
              
              
              20,668
              
              
              -
              
              
              24,992
              
              
              -
              
              
              45,660OTHER
                  INCOME (EXPENSE):Interest
                  income
              
              
              208
              
              
              -
              
              
              240
              
              
              -
              
              
              448Interest
                  expense
              
              
              (54,094
              )
              
              -
              
              
              125
              
              
              -
              
              
              (53,969
              )Interest
                  expense - debt pushed downfrom
                  Majestic Holdco (1) (2)
              
              
              (6,331
              )
              
              -
              
              
              -
              
              
              -
              
              
              (6,331
              )Other
                  non-operating expense
              
              
              (115
              )
              
              -
              
              
              -
              
              
              -
              
              
              (115
              )Equity
                  in net income of subsidiaries
              
              
              25,357
              
              
              -
              
              
              -
              
              
              (25,357
              )
              
              -Total
                  other expense
              
              
              (34,975
              )
              
              -
              
              
              365
              
              
              (25,357
              )
              
              (59,967
              )Net
                  (loss) income
              
              $
              (14,307
              )
              $
              -
              
              $
              25,357
              
              $
              (25,357
              )
              $
              (14,307
              )
 
 (a)  To
        eliminate equity in net income of subsidiaries.
 (1)  Reflects
        amortization of deferred financing costs related to the issuance of Majestic
        Holdco’s Discount Notes.
 (2)  Reflects
        interest expense on Majestic Holdco’s Discount Notes.
 
  F-36
 Table
            of Contents
 **THE
            MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
            Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
  CONDENSED
        CONSOLIDATING STATEMENT OF OPERATIONS
 For
        the
        Year Ended December 31, 2005
 (amounts
        in thousands)
 
 The
                  Majestic
              
              The
                  MajesticStar
                  Casino,
              
              Star
                  Casino
              
              Guarantor
              
              Eliminating
              
              TotalLLC
              
              Capital
                  Corp.
              
              Subsidiaries
              
              Entries
                  (a)
              
              ConsolidatedOPERATING
                  REVENUES:Casino
              
              $
              150,553
              
              $
              -
              
              $
              130,366
              
              $
              -
              
              $
              280,919Rooms
              
              
              -
              
              
              -
              
              
              7,726
              
              
              -
              
              
              7,726Food
                  and beverage
              
              
              1,761
              
              
              -
              
              
              12,269
              
              
              -
              
              
              14,030Other
              
              
              3,205
              
              
              -
              
              
              1,761
              
              
              -
              
              
              4,966Gross
                  revenues
              
              
              155,519
              
              
              -
              
              
              152,122
              
              
              -
              
              
              307,641Less:
                  promotional allowances
              
              
              16,514
              
              
              -
              
              
              29,155
              
              
              -
              
              
              45,669Net
                  operating revenues
              
              
              139,005
              
              
              -
              
              
              122,967
              
              
              -
              
              
              261,972OPERATING
                  COSTS AND EXPENSES:Casino
              
              
              27,581
              
              
              -
              
              
              40,330
              
              
              -
              
              
              67,911Rooms
              
              
              -
              
              
              -
              
              
              1,763
              
              
              -
              
              
              1,763Food
                  and beverage
              
              
              1,999
              
              
              -
              
              
              3,866
              
              
              -
              
              
              5,865Other
              
              
              -
              
              
              -
              
              
              1,041
              
              
              -
              
              
              1,041Gaming
                  taxes
              
              
              43,151
              
              
              -
              
              
              17,902
              
              
              -
              
              
              61,053Advertising
                  and promotion
              
              
              7,509
              
              
              -
              
              
              7,721
              
              
              -
              
              
              15,230General
                  and administrative
              
              
              24,589
              
              
              -
              
              
              18,342
              
              
              -
              
              
              42,931Corporate
                  expense
              
              
              7,717
              
              
              -
              
              
              -
              
              
              -
              
              
              7,717Economic
                  incentive tax - City of Gary
              
              
              4,520
              
              
              -
              
              
              189
              
              
              -
              
              
              4,709Depreciation
                  and amortization
              
              
              8,744
              
              
              -
              
              
              13,868
              
              
              -
              
              
              22,612Loss
                  on investment in BuffingtonHarbor
                  Riverboats, LLC
              
              
              2,355
              
              
              -
              
              
              -
              
              
              -
              
              
              2,355(Gain)
                  loss on disposal of assets
              
              
              (45
              )
              
              -
              
              
              98
              
              
              -
              
              
              53Total
                  operating costs and expenses
              
              
              128,120
              
              
              -
              
              
              105,120
              
              
              -
              
              
              233,240Operating
                  income
              
              
              10,885
              
              
              -
              
              
              17,847
              
              
              -
              
              
              28,732OTHER
                  INCOME (EXPENSE):Interest
                  income
              
              
              258
              
              
              -
              
              
              74
              
              
              -
              
              
              332Interest
                  expense
              
              
              (28,511
              )
              
              -
              
              
              (1,852
              )
              
              -
              
              
              (30,363
              )Interest
                  expense - debt pushed downfrom
                  Majestic Holdco (1) (2)
              
              
              (188
              )
              
              -
              
              
              -
              
              
              -
              
              
              (188
              )Loss
                  on extinguishment of debt
              
              
              -
              
              
              -
              
              
              (3,688
              )
              
              -
              
              
              (3,688
              )Other
                  non-operating expense
              
              
              (127
              )
              
              -
              
              
              -
              
              
              -
              
              
              (127
              )Equity
                  in net income of subsidiaries
              
              
              12,381
              
              
              -
              
              
              -
              
              
              (12,381
              )
              
              -Total
                  other expense
              
              
              (16,187
              )
              
              -
              
              
              (5,466
              )
              
              (12,381
              )
              
              (34,034
              )Net
                  (loss) income
              
              $
              (5,302
              )
              $
              -
              
              $
              12,381
              
              $
              (12,381
              )
              $
              (5,302
              )
 
 (a)  To
        eliminate equity in net income of subsidiaries.
 (1)  Reflects
        amortization of deferred financing costs related to the issuance of Majestic
        Holdco’s Discount Notes.
 (2)  Reflects
        interest expense on Majestic Holdco’s Discount Notes.
 
  F-37
 Table
            of Contents
 **THE
            MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
            Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
  CONDENSED
        CONSOLIDATING STATEMENT OF OPERATIONS
 For
        the
        Year Ended December 31, 2004
 (amounts
        in thousands)
 
 The
                  Majestic
              
              The
                  MajesticStar
                  Casino,
              
              Star
                  Casino
              
              Guarantor
              
              Eliminating
              
              TotalLLC
              
              Capital
                  Corp.
              
              Subsidiaries
              
              Entries
                  (a)
              
              ConsolidatedOPERATING
                  REVENUES:Casino
              
              $
              149,562
              
              $
              -
              
              $
              125,207
              
              $
              -
              
              $
              274,769Rooms
              
              
              -
              
              
              -
              
              
              7,673
              
              
              -
              
              
              7,673Food
                  and beverage
              
              
              1,819
              
              
              -
              
              
              11,643
              
              
              -
              
              
              13,462Other
              
              
              2,892
              
              
              -
              
              
              1,687
              
              
              -
              
              
              4,579Gross
                  revenues
              
              
              154,273
              
              
              -
              
              
              146,210
              
              
              -
              
              
              300,483Less:
                  promotional allowances
              
              
              13,215
              
              
              -
              
              
              26,757
              
              
              -
              
              
              39,972Net
                  operating revenues
              
              
              141,058
              
              
              -
              
              
              119,453
              
              
              -
              
              
              260,511OPERATING
                  COSTS AND EXPENSES:Casino
              
              
              28,770
              
              
              -
              
              
              41,023
              
              
              -
              
              
              69,793Rooms
              
              
              -
              
              
              -
              
              
              1,784
              
              
              -
              
              
              1,784Food
                  and beverage
              
              
              2,063
              
              
              -
              
              
              4,061
              
              
              -
              
              
              6,124Other
              
              
              637
              
              
              -
              
              
              1,019
              
              
              -
              
              
              1,656Gaming
                  taxes
              
              
              42,795
              
              
              -
              
              
              16,385
              
              
              -
              
              
              59,180Advertising
                  and promotion
              
              
              8,965
              
              
              -
              
              
              7,305
              
              
              -
              
              
              16,270General
                  and administrative
              
              
              26,697
              
              
              -
              
              
              16,943
              
              
              -
              
              
              43,640Corporate
                  expense
              
              
              3,399
              
              
              -
              
              
              -
              
              
              -
              
              
              3,399Economic
                  incentive tax - City of Gary
              
              
              4,494
              
              
              -
              
              
              -
              
              
              -
              
              
              4,494Depreciation
                  and amortization
              
              
              7,856
              
              
              -
              
              
              10,130
              
              
              -
              
              
              17,986Loss
                  on investment in BuffingtonHarbor
                  Riverboats, LLC
              
              
              2,466
              
              
              -
              
              
              -
              
              
              -
              
              
              2,466(Gain)
                  loss on disposal of assets
              
              
              (79
              )
              
              -
              
              
              48
              
              
              -
              
              
              (31
              )Total
                  operating costs and expenses
              
              
              128,063
              
              
              -
              
              
              98,698
              
              
              -
              
              
              226,761Operating
                  income
              
              
              12,995
              
              
              -
              
              
              20,755
              
              
              -
              
              
              33,750OTHER
                  INCOME (EXPENSE):Interest
                  income
              
              
              93
              
              
              -
              
              
              19
              
              
              -
              
              
              112Interest
                  expense
              
              
              (26,717
              )
              
              -
              
              
              (1,925
              )
              
              -
              
              
              (28,642
              )Other
                  non-operating expense
              
              
              (201
              )
              
              -
              
              
              -
              
              
              -
              
              
              (201
              )Equity
                  in net income of subsidiaries
              
              
              18,849
              
              
              -
              
              
              -
              
              
              (18,849
              )
              
              -Total
                  other expense
              
              
              (7,976
              )
              
              -
              
              
              (1,906
              )
              
              (18,849
              )
              
              (28,731
              )Net
                  income
              
              $
              5,019
              
              $
              -
              
              $
              18,849
              
              $
              (18,849
              )
              $
              5,019
 
 (a)  To
        eliminate equity in net income of subsidiaries.
 
  F-38
 Table
            of Contents
 **THE
            MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
            Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
  CONDENSED
        CONSOLIDATING STATEMENT OF CASH FLOWS
 For
        the
        Year Ended December 31, 2006
 (amounts
        in thousands)
 
 The
                  Majestic
              
              The
                  MajesticStar
                  Casino,
              
              Star
                  Casino
              
              Guarantor
              
              Eliminating
              
              TotalLLC
              
              Capital
                  Corp.
              
              Subsidiaries
              
              Entries
              
              ConsolidatedNET
                  CASH (USED IN) PROVIDED BYOPERATING
                  ACTIVITIES: (1)
              
              $
              (21,703
              )
              $
              -
              
              $
              49,417
              
              $
              -
              
              $
              27,714CASH
                  FLOWS FROM INVESTING ACTIVITIES:Increase
                  in restricted cash
              
              
              (17
              )
              
              -
              
              
              (120
              )
              
              -
              
              
              (137
              )Increase
                  in Lakefront Capital Improvement Fund
              
              
              (897
              )
              
              -
              
              
              -
              
              
              -
              
              
              (897
              )Additional
                  costs related toTrump Indiana acquisition
              
              
              -
              
              
              -
              
              
              (180
              )
              
              -
              
              
              (180
              )Acquisition
                  of property and equipment
              
              
              (6,437
              )
              
              -
              
              
              (18,972
              )
              
              -
              
              
              (25,409
              )Merger
                  of Majestic Investor Holdings into Majestic Star
              
              
              600
              
              
              -
              
              
              (600
              )
              
              -
              
              
              -Merger
                  of BHPA into Majestic Star
              
              
              3
              
              
              -
              
              
              (3
              )
              
              -
              
              
              -Proceeds
                  from disposal of assets
              
              
              241
              
              
              -
              
              
              652
              
              
              -
              
              
              893Net
                  cash used in investing activities
              
              
              (6,507
              )
              
              -
              
              
              (19,223
              )
              
              -
              
              
              (25,730
              )CASH
                  FLOWS FROM FINANCING ACTIVITIES:Issuance
                  costs for the 9 1⁄2% senior secured notes
              
              
              (245
              )
              
              -
              
              
              -
              
              
              -
              
              
              (245
              )Issuance
                  costs for the 9 3⁄4% senior notes
              
              
              (1,195
              )
              
              -
              
              
              -
              
              
              -
              
              
              (1,195
              )Issuance
                  costs for the 12 1⁄2% senior discount notespushed
                  down from Majestic Holdco (2)
              
              
              (206
              )
              
              -
              
              
              -
              
              
              -
              
              
              (206
              )Proceeds
                  from line of credit
              
              
              60,168
              
              
              -
              
              
              -
              
              
              -
              
              
              60,168Repayment
                  of line of credit
              
              
              (61,644
              )
              
              -
              
              
              -
              
              
              -
              
              
              (61,644
              )Repayment
                  of debt
              
              
              (34
              )
              
              -
              
              
              (1,194
              )
              
              -
              
              
              (1,228
              )Cash
                  advances from (to) affiliates
              
              
              37,600
              
              
              -
              
              
              (37,600
              )
              
              -
              
              
              -Distribution
                  to Barden Development, Inc.
              
              
              (4,470
              )
              
              -
              
              
              -
              
              
              -
              
              
              (4,470
              )Net
                  cash provided by (used in) financing activities
              
              
              29,974
              
              
              -
              
              
              (38,794
              )
              
              -
              
              
              (8,820
              )Net
                  increase (decrease) in cash and cash equivalents
              
              
              1,764
              
              
              -
              
              
              (8,600
              )
              
              -
              
              
              (6,836
              )Cash
                  and cash equivalents, beginning of period
              
              
              7,085
              
              
              -
              
              
              25,283
              
              
              -
              
              
              32,368Cash
                  and cash equivalents, end of period
              
              $
              8,849
              
              $
              -
              
              $
              16,683
              
              $
              -
              
              $
              25,532
 
 (1)  Includes
        interest expense of $6.3 million related to the amortization of the bond
        discount and deferred financings cost of the Majestic Holdco’s Discount
        Notes.
 (2)  Reflects
        the pushdown of issuance costs related to Majestic Holdco’s Discount Notes
        pursuant to SEC Staff Accounting Bulletin 73, Topic 5(J). The Discount Notes
        are
        not guaranteed by the Company or the guarantor subsidiaries.
  F-39
 Table
            of Contents
 **THE
            MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
            Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
  CONDENSED
        CONSOLIDATING STATEMENT OF CASH FLOWS
 For
        the
        Year Ended December 31, 2005
 (amounts
        in thousands)
 
 The
                  Majestic
              
              The
                  MajesticStar
                  Casino,
              
              Star
                  Casino
              
              Guarantor
              
              Eliminating
              
              TotalLLC
              
              Capital
                  Corp.
              
              Subsidiaries
              
              Entries
                  (a)
              
              ConsolidatedNET
                  CASH (USED IN) PROVIDED BYOPERATING
                  ACTIVITIES: (1)
              
              $
              (15,426
              )
              $
              -
              
              $
              38,265
              
              $
              5,000
              
              $
              27,839CASH
                  FLOWS FROM INVESTING ACTIVITIES:Decrease
                  in restricted cash
              
              
              -
              
              
              -
              
              
              390
              
              
              -
              
              
              390Acquisition
                  of Trump Indiana, Inc., net of cash acquired
              
              
              -
              
              
              -
              
              
              (231,994
              )
              
              -
              
              
              (231,994
              )Payment
                  of gaming license transfer fee to State of Indiana
              
              
              -
              
              
              -
              
              
              (2,000
              )
              
              -
              
              
              (2,000
              )Payoff
                  of City of Gary development agreement
              
              
              -
              
              
              -
              
              
              (3,507
              )
              
              -
              
              
              (3,507
              )Acquisition
                  of property and equipment
              
              
              (3,841
              )
              
              -
              
              
              (7,942
              )
              
              -
              
              
              (11,783
              )Investment
                  in Buffington Harbor Riverboats, L.L.C.
              
              
              (174
              )
              
              -
              
              
              -
              
              
              -
              
              
              (174
              )Proceeds
                  from disposal of assets
              
              
              102
              
              
              -
              
              
              33
              
              
              -
              
              
              135Other
              
              
              -
              
              
              -
              
              
              210
              
              
              -
              
              
              210Net
                  cash used in investing activities
              
              
              (3,913
              )
              
              -
              
              
              (244,810
              )
              
              -
              
              
              (248,723
              )CASH
                  FLOWS FROM FINANCING ACTIVITIES:Payment
                  of costs related to early extinguishment of debt
              
              
              -
              
              
              -
              
              
              (1,054
              )
              
              -
              
              
              (1,054
              )Issuance
                  costs for the 9 1⁄2% senior secured notes
              
              
              (1,806
              )
              
              -
              
              
              -
              
              
              -
              
              
              (1,806
              )Issuance
                  costs for the 9 3⁄4% senior notes
              
              
              (9,026
              )
              
              -
              
              
              -
              
              
              -
              
              
              (9,026
              )Amendment costs
                  for the $80.0 million secured credit facility
              
              
              (110
              )
              
              -
              
              
              -
              
              
              -
              
              
              (110
              )Issuance
                  costs for the 12 1⁄2% senior discount notespushed
                  down from Majestic Holdco (2)
              
              
              (2,824
              )
              
              -
              
              
              -
              
              
              -
              
              
              (2,824
              )Redemption
                  of 11.653% notes
              
              
              -
              
              
              -
              
              
              (16,290
              )
              
              -
              
              
              (16,290
              )Proceeds
                  from issuance of 9 1⁄2% notes
              
              
              40,000
              
              
              -
              
              
              -
              
              
              -
              
              
              40,000Proceeds
                  from issuance of 9 3⁄4% notes
              
              
              200,000
              
              
              -
              
              
              -
              
              
              -
              
              
              200,000Proceeds
                  from issuance of 12 1⁄2% senior discount notespushed
                  down from Majestic Holdco (2)
              
              
              45,129
              
              
              -
              
              
              -
              
              
              -
              
              
              45,129Proceeds
                  from line of credit
              
              
              43,877
              
              
              -
              
              
              -
              
              
              -
              
              
              43,877Repayment
                  of line of credit
              
              
              (37,630
              )
              
              -
              
              
              -
              
              
              -
              
              
              (37,630
              )Repayment
                  of debt
              
              
              -
              
              
              -
              
              
              (16,974
              )
              
              -
              
              
              (16,974
              )Cash
                  advances (to) from affiliates
              
              
              (252,858
              )
              
              -
              
              
              257,858
              
              
              (5,000
              )
              
              -Distributions
                  to Barden Development, Inc.
              
              
              (6,762
              )
              
              -
              
              
              -
              
              
              -
              
              
              (6,762
              )Net
                  cash provided by financing activities
              
              
              17,990
              
              
              -
              
              
              223,540
              
              
              (5,000
              )
              
              236,530Net
                  (decrease) increase in cash and cash equivalents
              
              
              (1,349
              )
              
              -
              
              
              16,995
              
              
              -
              
              
              15,646Cash
                  and cash equivalents, beginning of period
              
              
              8,434
              
              
              -
              
              
              8,288
              
              
              -
              
              
              16,722-
              -
              
              -
              -
              
              -
              -
              
              -
              -
              
              -
              -Cash
                  and cash equivalents, end of period
              
              $
              7,085
              
              $
              -
              
              $
              25,283
              
              $
              -
              
              $
              32,368
 
 (a)  To
        eliminate intercompany receivables and payables.
 (1)
              Includes
                  interest expense of $0.2 million related to Majestic Holdco’s Discount
                  Notes.
 (2)
              Reflects
                  the pushdown of Majestic Holdco’s Discount Notes and associated issuance
                  costs pursuant to SEC Staff Accounting Bulletin 73, Topic 5(J).
                  The
                  Discount Notes are not guaranteed by the Company or the guarantor
                  subsidiaries.
 
  F-40
 Table
            of Contents
 **THE
            MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
            Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
  
 CONDENSED
        CONSOLIDATING STATEMENT OF CASH FLOWS
 For
        the
        Year Ended December 31, 2004
 (amounts
        in thousands)
 
 The
                  Majestic
              
              The
                  MajesticStar
                  Casino,
              
              Star
                  Casino
              
              Guarantor
              
              Eliminating
              
              TotalLLC
              
              Capital
                  Corp.
              
              Subsidiaries
              
              Entries
              
              ConsolidatedNET
                  CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES:
              
              $
              (5,875
              )
              $
              -
              
              $
              28,035
              
              $
              -
              
              $
              22,160CASH
                  FLOWS FROM INVESTING ACTIVITIES:Increase
                  in restricted cash
              
              
              -
              
              
              -
              
              
              (1,140
              )
              
              -
              
              
              (1,140
              )Acquisition
                  of property and equipment
              
              
              (28,692
              )
              
              -
              
              
              (7,320
              )
              
              -
              
              
              (36,012
              )Decrease
                  in prepaid leases and deposits
              
              
              13
              
              
              -
              
              
              -
              
              
              -
              
              
              13Investment
                  in Buffington Harbor Riverboats, L.L.C.
              
              
              (164
              )
              
              -
              
              
              -
              
              
              -
              
              
              (164
              )Proceeds
                  from disposal of assets
              
              
              245
              
              
              -
              
              
              95
              
              
              -
              
              
              340Net
                  cash used in investing activities
              
              
              (28,598
              )
              
              -
              
              
              (8,365
              )
              
              -
              
              
              (36,963
              )CASH
                  FLOWS FROM FINANCING ACTIVITIES:Issuance
                  costs for the 9 1⁄2% senior secured notes
              
              
              (230
              )
              
              -
              
              
              -
              
              
              -
              
              
              (230
              )Issuance
                  costs for credit facility
              
              
              (58
              )
              
              -
              
              
              -
              
              
              -
              
              
              (58
              )Proceeds
                  from line of credit
              
              
              45,251
              
              
              -
              
              
              -
              
              
              -
              
              
              45,251Repayment
                  of line of credit
              
              
              (30,245
              )
              
              -
              
              
              -
              
              
              -
              
              
              (30,245
              )Cash
                  advances (to) from affiliates
              
              
              22,511
              
              
              -
              
              
              (22,511
              )
              
              -
              
              
              -Distribution
                  to Barden Development, Inc.
              
              
              (5,251
              )
              
              -
              
              
              -
              
              
              -
              
              
              (5,251
              )Net
                  cash provided by (used in) financing activities
              
              
              31,978
              
              
              -
              
              
              (22,511
              )
              
              -
              
              
              9,467Net
                  decrease in cash and cash equivalents
              
              
              (2,495
              )
              
              -
              
              
              (2,841
              )
              
              -
              
              
              (5,336
              )Cash
                  and cash equivalents, beginning of period
              
              
              10,929
              
              
              -
              
              
              11,129
              
              
              -
              
              
              22,058Cash
                  and cash equivalents, end of period
              
              $
              8,434
              
              $
              -
              
              $
              8,288
              
              $
              -
              
              $
              16,722
 
 
 
  F-41
 Table
            of Contents
 **THE
              MAJESTIC STAR CASINO, LLC AND SUBSIDIARIES**
 **(A
              Wholly Owned Subsidiary of Majestic Holdco, LLC)**
 **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
   SCHEDULE
        II
 
  
 VALUATION
        AND QUALIFYING ACCOUNTS
 FOR
        THE
        YEARS ENDED DECEMBER 31, 2006, 2005, AND 2004
 
 Balance
                  at
              
              Charged
                  to
              
              
              
              Balance
                  atbeginning
              
              costs
                  and
              
              
              
              endDescriptions
              
              of
                  year
              
              expenses
              
              Deductions
              
              of
                  yearAllowance
                  for doubtful accounts:Year
                  ended December 31, 2004
              
              $
              258,546
              
              
              576,136
              
              
              203,442
              
              $
              631,240Year
                  ended December 31, 2005
              
              $
              631,240
              
              
              306,673
              
              
              269,337
              
              $
              668,576Year
                  ended December 31, 2006
              
              $
              668,576
              
              
              559,805
              
              
              356,932
              
              $
              871,449
 
 
  F-42
 Table
            of Contents
  
 
 
 Report
        of
        Independent Auditors
 
 Members
 Buffington
        Harbor Riverboats, L.L.C.
 
 We
        have
        audited the accompanying balance sheets of Buffington Harbor Riverboats,
        L.L.C.
        as of December 31, 2004 and 2003, and the related statements of operations,
        members’ capital, and cash flows for each of the three years in the period ended
        December 31, 2004. These financial statements are the responsibility of the
        Company’s management. Our responsibility is to express an opinion on these
        financial statements based on our audits.
 
 We
        conducted our audits in accordance with auditing standards generally accepted
        in
        the United States. Those standards require that we plan and perform the audit
        to
        obtain reasonable assurance about whether the financial statements are free
        of
        material misstatement. We were not engaged to perform an audit of the Company’s
        internal control over financial reporting. Our audit included consideration
        of
        internal control over financial reporting as a basis for designing audit
        procedures that are appropriate in the circumstances, but not for the purpose
        of
        expressing an opinion on the effectiveness of the Company’s internal control
        over financial reporting. Accordingly, we express no such opinion. An audit
        also
        includes examining, on a test basis, evidence supporting the amounts and
        disclosures in the financial statements, assessing the accounting principles
        used and significant estimates made by management, and evaluating the overall
        financial statement presentation. We believe that our audits provide a
        reasonable basis for our opinion.
 
 In
        our
        opinion, the financial statements referred to above present fairly, in all
        material respects, the financial position of Buffington Harbor Riverboats,
        L.L.C. at December 31, 2004 and 2003, and the results of its operations and
        its
        cash flows for each of the three years in the period ended December 31, 2004,
        in
        conformity with accounting principles generally accepted in the United
        States.
 
 
 /s/
        Ernst
& Young LLP
 Philadelphia,
        Pennsylvania
 February
        28, 2005
 
  F-43
 Table
            of Contents
  Buffington
        Harbor Riverboats, L.L.C.
 
 Balance
        Sheets
 
 
 December
                  31,2004
              
              2003ASSETSCurrent
                  Assets:Cash
              
              $
              311,052
              
              $
              82,639Trade
                  Receivables
              
              
              32,723
              
              
              56,626Inventory
              
              
              95,707
              
              
              186,768Prepaid
                  expenses and other current assets
              
              
              261,621
              
              
              241,824Due
                  from members
              
              
              1,843,853
              
              
              4,527,999Total
                  current assets
              
              
              2,544,956
              
              
              5,095,856Property,
                  plant, and equipment, net
              
              
              57,199,307
              
              
              61,881,975Other
                  assets
              
              
              82,359
              
              
              101,248Total
                  assets
              
              $
              59,826,622
              
              $
              67,079,079LIABILITIES
                  AND MEMBERS’ CAPITALCurrent
                  liabilities:Current
                  portion of capital lease obligations
              
              $
              83,788
              
              $
              71,152Account
                  payable
              
              
              838,069
              
              
              1,414,654Accrued
                  expense
              
              
              443,772
              
              
              390,012Accrued
                  property taxes
              
              
              3,291,748
              
              
              5,347,584Total
                  current liabilities
              
              
              4,657,377
              
              
              7,223,402Capital
                  lease obligations, net of current portion
              
              
              304,704
              
              
              388,491Members'
                  capital
              
              
              54,864,541
              
              
              59,467,186Total
                  liabilities and members’ capital
              
              $
              59,826,622
              
              $
              67,079,079
 
 
 See
        accompanying notes.
 
  F-44
 Table
            of Contents
  Buffington
        Harbor Riverboats, L.L.C.
 
 Statements
        of Operations
 
 Year
                  Ended December 31,2004
              
              2003
              
              2002Revenues:Food
                  and beverage
              
              $
              -
              
              $
              757,381
              
              $
              1,343,800Related
                  party
              
              
              10,500,908
              
              
              16,827,528
              
              
              13,988,248Other
              
              
              644,549
              
              
              849,718
              
              
              763,317Net
                  revenues
              
              
              11,145,457
              
              
              18,434,627
              
              
              16,095,365Costs
                  and expenses:Food
                  and beverage
              
              
              1,161,267
              
              
              1,732,499
              
              
              2,646,737General
                  and administrative
              
              
              9,805,323
              
              
              16,495,832
              
              
              13,026,312Depreciation
              
              
              4,897,362
              
              
              4,788,031
              
              
              4,848,501Other
              
              
              180,931
              
              
              203,724
              
              
              368,375Total
                costs and expenses
              
              
              16,044,883
              
              
              23,220,086
              
              
              20,889,925Loss
                  from operations
              
              
              (4,899,426
              )
              
              (4,785,459
              )
              
              (4,794,560
              )Interest
                  (expense) income, net
              
              
              (31,799
              )
              
              (5,409
              )
              
              (54,303
              )Net
                  loss
              
              $
              (4,931,225
              )
              $
              (4,790,868
              )
              $
              (4,848,863
              )
 
 See
        accompanying notes.
 
  F-45
 Table
            of Contents
  
 Buffington
        Harbor Riverboats, L.L.C.
 
 Statements
        of Member’s Capital
 
 
 Member
              
              RetainedContributions
              
              Deficit
              
              TotalBalance,
                  December 31, 2001
              
              $
              101,316,444
              
              $
              (33,518,795
              )
              $
              67,797,649Capital
                  contributions made by Trump Indiana, Inc.
              
              
              358,918
              
              
              -
              
              
              358,918Capital
                  contributions made by The Majestic Star Casino, LLC
              
              
              358,918
              
              
              -
              
              
              358,918Net
                  loss
              
              
              -
              
              
              (4,848,863
              )
              
              (4,848,863
              )Balance,
                  December 31, 2002
              
              $
              102,034,280
              
              $
              (38,367,658
              )
              $
              63,666,622Capital
                  contributions made by Trump Indiana, Inc.
              
              
              295,716
              
              
              -
              
              
              295,716Capital
                  contributions made by The Majestic Star Casino, LLC
              
              
              295,716
              
              
              -
              
              
              295,716Net
                  loss
              
              
              -
              
              
              (4,790,868
              )
              
              (4,790,868
              )Balance,
                  December 31, 2003
              
              $
              102,625,712
              
              $
              (43,158,526
              )
              $
              59,467,186Capital
                  contributions made by Trump Indiana, Inc.
              
              
              164,290
              
              
              -
              
              
              164,290Capital
                  contributions made by The Majestic Star Casino, LLC
              
              
              164,290
              
              
              -
              
              
              164,290Net
                  loss
              
              
              -
              
              
              (4,931,225
              )
              
              (4,931,225
              )Balance,
                  December 31, 2004
              
              $
              102,954,292
              
              $
              (48,089,751
              )
              $
              54,864,541
 
 
 See
        accompanying notes.
 
  F-46
 Table
            of Contents
  
 Buffington
        Harbor Riverboats, L.L.C.
 Statements
        of Cash Flows
 
 Years
                  Ended December 31,2004
              
              2003
              
              2002Cash
                  flows from operating activities:Net
                  loss
              
              $
              (4,931,225
              )
              $
              (4,790,868
              )
              $
              (4,848,863
              )Adjustments
                  to reconcile net loss to net cash flows provided byoperating
                  activities:Depreciation
              
              
              4,897,362
              
              
              4,788,031
              
              
              4,848,501Loss
                  on disposal of fixed assets
              
              
              32,476
              
              
              -
              
              
              10,861Changes
                  in operating assets and liabilities:Decrease
                  in trade receivables
              
              
              23,903
              
              
              36,161
              
              
              (66,773
              )Decrease
                  (increase) in inventory
              
              
              91,061
              
              
              (5,476
              )
              
              129,056Increase
                  in prepaid expenses and other current assets
              
              
              (19,797
              )
              
              (124,873
              )
              
              11,042Decrease
                  in other assets
              
              
              18,889
              
              
              7,166
              
              
              3,064(Decrease)
                  increase in accounts payable
              
              
              (576,585
              )
              
              701,778
              
              
              277,551(Decrease)
                  increase in accrued expenses and accrued property taxes
              
              
              (2,002,076
              )
              
              4,302,270
              
              
              (316,779
              )Decrease
                  (increase) in due from members
              
              
              2,684,146
              
              
              (4,879,166
              )
              
              (207,302
              )Net
                  cash flows provided by operating activities
              
              
              218,154
              
              
              35,023
              
              
              (159,642
              )Cash
                  flows from investing activities:Purchases
                  of property, plant, and equipment, net
              
              
              (247,170
              )
              
              (594,321
              )
              
              (825,335
              )Cash
                  flows from financing activities:Capital
                  contributions, net
              
              
              328,580
              
              
              591,432
              
              
              717,836Principal
                  payments under capital lease obligations
              
              
              (71,151
              )
              
              -
              
              
              -Net
                  cash flows provided by financing activities
              
              
              257,429
              
              
              591,432
              
              
              717,836Net
                  increase in cash and cash equivalents
              
              
              228,413
              
              
              32,134
              
              
              (267,141
              )Cash
                  at beginning of year
              
              
              82,639
              
              
              50,505
              
              
              317,646Cash
                  at end of year
              
              $
              311,052
              
              $
              82,639
              
              $
              50,505Supplemental
                  disclosure of noncash information:Equipment
                  obtained through capital lease
              
              $
              -
              
              $
              459,643
              
              $
              -
 
 
  F-47
 Table
            of Contents
  
 Buffington
        Harbor Riverboats, L.L.C.
 
 Notes
        to
        Financial Statements
 
 December
        31, 2004
 
 1.  ORGANIZATION
        AND OPERATIONS
 
 Trump
        Indiana, Inc. (Trump Indiana) and The Majestic Star Casino, LLC (Barden),
        the
        two holders of certificates of suitability for the Gary, Indiana riverboat
        casinos, formed Buffington Harbor Riverboats, L.L.C. (BHR or the Company)
        on
        September 27, 1995 and have entered into an agreement (the BHR Agreement)
        relating to the joint ownership, development, and operation of all common
        land-based and waterside operations in support of the Trump Indiana and Barden
        riverboat casinos. Under the BHR Agreement, BHR acquired property and
        constructed common roadways, utilities, and other infrastructure improvements
        on
        BHR’s property.
 
 The
        BHR
        Agreement terminates on December 31, 2035, but may be extended through Trump
        Indiana’s and Barden’s mutual consent.
 
 The
        BHR
        Agreement provides the framework for the operations of BHR. BHR relies on
        the
        continued financial support of Trump Indiana and Barden in order to support
        its
        operating activities and to meet its current working capital
        obligations.
 
 On
        November 21, 2004, Trump Hotels & Casino Resorts, Inc. (THCR) and
        substantially all of its subsidiaries including Trump Indiana filed voluntary
        petitions in the Bankruptcy Court under Chapter 11 of the United States
        Bankruptcy Code. On December 15, 2004, THCR filed a Plan of Reorganization
        and
        the related Disclosure Statement containing the terms of the proposed financial
        restructuring plan with the Bankruptcy Court. During the bankruptcy period,
        Trump Indiana has maintained its normal business operations and continues
        to
        maintain its capacity under the BHR Agreement. The BHR Agreement specifies
        that
        if at any time one of the partners were to become insolvent, the other partner
        would be required to maintain full support of BHR’s operating activities and to
        meet BHR’s working capital obligations.
 
 2.  SUMMARY
        OF SIGNIFICANT ACCOUNTING POLICIES
 
 USE
        OF
        ESTIMATES
 
 The
        preparation of financial statements in conformity with accounting principles
        generally accepted in the United States 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 period. Actual results could differ from those estimates.
 
 INVENTORY
 
 Inventory
        consists of food, souvenirs, clothing, and other miscellaneous items. Inventory
        is stated at cost on the first-in, first-out method.
 
 REVENUE
        RECOGNITION
 
 Under
        the
        terms of the BHR Agreement, all expenditures requiring a cash outlay by BHR
        are
        billed to Trump Indiana and Barden at cost. Accordingly, BHR records as expenses
        the cost of providing such services and records as other revenues the amounts
        billed to Trump Indiana and Barden.
 
 In
        December of 2003, BHR entered into an agreement to outsource its food services
        to a third party. All related revenues from food and beverage sales during
        2004
        were recognized by this third party.
 
  F-48
 Table
            of Contents
   
 ADVERTISING
        COSTS
 
 Included
        in the land-based and waterside operations is the advertising of joint venture
        interests. BHR expenses advertising costs as incurred. Advertising costs
        were
        approximately $290,000, $252,000 and $291,000 for the years ended December
        31,
        2004, 2003, and 2002, respectively.
 
 PROPERTY,
        PLANT, AND EQUIPMENT
 
 Property,
        plant, and equipment is carried at cost. Property, plant, and equipment is
        depreciated on the straight-line method over the following useful
        lives:
 
 Land
                  improvements
              15
                  yearsBuilding
              40
                  yearsBuilding
                  improvements
              5-10
                  yearsHarbor
                  improvements
              10-15
                  yearsFurniture,
                  fixtures, and equipment
              5
                  years
 
 INCOME
        TAXES
 
 BHR
        makes
        no provision (benefit) for income taxes since taxable income (loss) is allocated
        to the members for inclusion in their respective income tax
        returns.
 
 LONG-LIVED
        ASSETS
 
 BHR
        accounts for long-lived assets under the provisions of Statement of Financial
        Accounting Standard No. 144, Accounting for the Impairment or Disposal of
        Long-Lived Assets (SFAS No. 144). SFAS No. 144 requires, among other things,
        that an entity review its long-lived assets and certain related intangibles
        for
        impairment whenever changes in circumstances indicate that the carrying amount
        of an asset may not be fully recoverable.
 
 There
        were no impairments during the years ended December 31, 2004 and 2003. BHR
        took
        a loss on impairment charge of $18,694 in 2002 to record the disposal of
        assets
        no longer operable and in use, in compliance with SFAS No. 144.
 
 3.  PROPERTY,
        PLANT, AND EQUIPMENT
 
 Property,
        plant, and equipment is comprised of the following:
 
 2004
              
              2003Land
                  and land improvements
              
              $
              34,500,080
              
              $
              34,500,080Building
                  and improvements
              
              
              41,346,655
              
              
              41,205,469Harbor
                  improvements
              
              
              19,573,497
              
              
              19,564,697Furniture,
                  fixtures, and equipment
              
              
              8,260,014
              
              
              8,625,177Construction-in-progress
              
              
              75,919
              
              
              50,476103,756,165
              
              
              103,945,899Less
                  accumulated depreciation
              
              
              46,556,858
              
              
              42,063,924Total
                  property, plant, and equipment, net
              
              $
              57,199,307
              
              $
              61,881,975
 
 Depreciation
        expense, which includes amortization of assets recorded under capital lease
        obligations, was $4,897,362, $4,788,031, and $4,848,501 for the years ended
        December 31, 2004, 2003, and 2002, respectively.
 
 4.  LEASES
 
 During
        the year ended December 31, 2003, BHR acquired equipment through a capital
        lease
        with a vendor. The lease had no stated interest rate so the Company has imputed
        interest at a rate of 8%. A summary of payments due under the capital lease
        obligation is as follows:
  F-49
 Table
            of Contents
  
 Capital
                  Lease Obligations2005
              
              $
              111,8392006
              
              
              111,8392007
              
              
              111,8392008
              
              
              111,8392009
              
              
              9,320456,676Amounts
                  representing interest
              
              
              (68,184
              )388,492Current
                  portion
              
              
              (83,788
              )Long-term
                  portion
              
              $
              304,704
 
 5.  EMPLOYEE
        BENEFIT PLAN
 
 BHR
        sponsors a defined contribution benefit plan for substantially all employees
        who
        meet certain eligibility criteria. BHR matches employee contributions up
        to 50%
        of the first 5% of base compensation that a participant contributes to the
        plan.
        Total contributions to the plan were approximately $26,000, $31,000, and
        $124,000 for the years ended December 31, 2004, 2003, and 2002,
        respectively.
 
 6.  COMMITMENTS
        AND CONTINGENCIES
 
 INDIANA
        GAMING REGULATIONS
 
 The
        ownership and operation of riverboat gaming operations in Indiana are subject
        to
        state regulation under the Riverboat Gambling Act (Act) and the administrative
        rules promulgated thereunder. The Indiana Gaming Commission (IGC) is empowered
        to administer, regulate, and enforce the system of riverboat gaming established
        under the Act and has jurisdiction and supervision over all riverboat gaming
        operations in Indiana, as well as all persons on riverboats where gaming
        operations are conducted. The IGC is empowered to regulate a wide variety
        of
        gaming- and nongaming-related activities, including the licensing of suppliers
        to, and employees at, riverboat gaming operations and to approve the form
        of
        ownership and financial structure of not only riverboat owner and supplier
        licensees, but also their entity qualifiers and intermediary and holding
        companies. Indiana regulations continue to be revised and adopted by the
        IGC.
        The IGC has broad rulemaking power, and it is impossible to predict what
        effect,
        if any, the amendment of existing rules or the finalization of currently
        new
        rules might have on the operations of BHR, Trump Indiana, and
        Barden.
 
 OTHER
 
 BHR
        is
        currently undergoing a sales and use tax examination by the Indiana Department
        of Revenue for the tax years 2002 to 2003 and although the outcome of this
        examination is not complete, BHR believes there will be no material impact
        to
        its financial condition or results of operations.
 
  F-50
 Table
            of Contents
  During
        January 2004, BHR received a reassessment notice that increased the valuation
        of
        its property in Lake County, Indiana where BHR is located. The valuation
        assessments were a part of a county-wide reassessment, and these reassessments
        were effective as of March 1, 2002. The reassessment was a result of a 1998
        Indiana Supreme Court ruling that declared the method of property assessment
        previously used as unconstitutional. Although the valuation was received
        by BHR
        prior to issuance of its December 31, 2003 financial statements, the tax
        rate
        had not yet been set for Lake County. For 2003 financial statement purposes,
        BHR
        calculated its property tax liability by multiplying the new 2002 valuation
        by
        the 2001 tax rate which was the most recent legislative rate in place. This
        resulted in a substantially larger amount of property tax accrued for each
        of
        the years ended December 31, 2002 and 2003. During 2004, the Company received
        the 2002 property tax rates and paid the tax bills related to 2002 during
        July
        of 2004. There was a decrease in the property tax rate from 2001 to 2002
        due to
        the significant upward revisions in the assessed values for the 2002 property
        tax year. The Company has not yet received property tax bills for the years
        ended December 31, 2003 or 2004. The 2003 property tax rates were legislated
        and
        published during the first quarter of 2005. The Company has developed its
        2003
        property tax accruals at December 31, 2004 based on the assessed values
        effective for the 2002 bills multiplied by the published tax rates for 2003.
        As
        2004 rates have not yet been legislated, the Company developed its 2004 property
        taxes payable at the 2003 legislated rates with an assumed rate increase.
        The
        Company believes that an assumed increase in rates is reasonable for the
        2004
        tax year as it anticipates no significant upward revisions to the assessed
        values. As a result of the above, BHR recorded property tax (credit)/expense
        of
        ($862,000) and $5,144,000 for the years ended December 31, 2004 and 2003,
        respectively.
 
 The
        majority of BHR’s employees are covered by a collective bargaining agreement.
        Such agreement expired in October 2004 and is still in negotiations. Management
        believes the agreement will be renewed with no material impact to its financial
        condition or results of operations.
 
               F-51