UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





þ  QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d)


OF THE
SECURITIES EXCHANGE ACT OF 1934





For the quarterly period
ended September 30, 2008





OR





 ̈  TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d)


OF THE
SECURITIES EXCHANGE ACT OF 1934





For
the transition period from ____________ to ___________





Commission
file
number                                                     0-22290











CENTURY CASINOS,
INC.


(Exact
name of registrant as specified in its charter)





DELAWARE
            84-1271317(State
      or other jurisdiction of
              incorporation
      or organization)
            (I.R.S.
      Employer Identification No.)





2860 South Circle Drive,
Suite 350, Colorado Springs, Colorado 80906


(Address
of principal executive offices)


(Zip
Code)





(719)
527-8300


(Registrant’s
telephone number, including area code)





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.  Yes þ  No  ̈





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


Large
      accelerated filer  ̈
            
            Accelerated
      filer þ
            
            Non-accelerated
      filer  ̈
            
            Smaller
      reporting company  ̈(Do
      not check if a smaller reporting company)





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





Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practical date:


23,884,067
shares of common stock, $0.01 par value per share, were outstanding as of
September 30, 2008.





CENTURY
CASINOS, INC.




FORM
10-Q INDEX




PagePART
      I
            
            FINANCIAL
      INFORMATION
            NumberItem
      1.
            
            Condensed
      Consolidated Financial Statements (unaudited)Condensed
      Consolidated Balance Sheets as ofSeptember
      30, 2008 and December 31, 2007
            1Condensed
      Consolidated Statements of Operations for theThree
      and Nine Months Ended September 30, 2008 and 2007
            2Condensed
      Consolidated Statements of Comprehensive Earnings for the Three and Nine
      Months Ended September 30, 2008 and 2007
            3Condensed
      Consolidated Statements of Cash Flows forthe
      Nine Months Ended September 30, 2008 and 2007
            4Notes
      to Condensed Consolidated Financial Statements (unaudited)
            6Item
      2.
            
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
            15Item
      3.
            
            Quantitative
      and Qualitative Disclosures About Market Risk
            34Item
      4.
            
            Controls
      and Procedures
            34PART
      II
            
            OTHER
      INFORMATIONItem
      1A.
            
            Risk
      Factors
            35Item
      5.
            
            Other
      Information
            36Item
      6.
            
            Exhibits
            37SIGNATURES
            38





CENTURY
CASINOS, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS (Unaudited)





Amounts
      in thousands, except for share information
            
            September 30, 2008
            
            
            December 31, 2007ASSETSCurrent
      Assets:Cash
      and cash equivalents
            
            $
            8,345
            
            
            $
            17,850Restricted
      cash
            
            
            117
            
            
            
            112Receivables,
      net
            
            
            648
            
            
            
            798Prepaid
      expenses
            
            
            962
            
            
            
            1,234Inventories
            
            
            514
            
            
            
            442Other
      current assets
            
            
            511
            
            
            
            426Deferred
      income taxes – foreign
            
            
            525
            
            
            
            247Total
      current assets
            
            
            11,622
            
            
            
            21,109Property
      and Equipment, net
            
            
            119,849
            
            
            
            131,877Goodwill
            
            
            5,429
            
            
            
            15,217Casino
      Licenses
            
            
            8,891
            
            
            
            10,780Deferred
      Income Taxes – domestic
            
            
            -
            
            
            
            3,318– foreign
            
            
            139
            
            
            
            971Equity
      Investment
            
            
            13,117
            
            
            
            11,974Other
      Assets
            
            
            2,574
            
            
            
            2,837Total
            
            $
            161,621
            
            
            $
            198,083





LIABILITIES
      AND SHAREHOLDERS’ EQUITYCurrent
      Liabilities:Current
      portion of long-term debt
            
            $
            9,906
            
            
            $
            8,745Accounts
      payable and accrued liabilities
            
            
            6,612
            
            
            
            9,389Accrued
      payroll
            
            
            2,397
            
            
            
            2,230Taxes
      payable
            
            
            2,436
            
            
            
            3,534Deferred
      income taxes – domestic
            
            
            -
            
            
            
            5Total
      current liabilities
            
            
            21,351
            
            
            
            23,903Long-Term
      Debt, less current portion
            
            
            39,460
            
            
            
            55,919Other
      Long-Term Accrued Liabilities
            
            
            436
            
            
            
            463Minority
      Interest
            
            
            5,223
            
            
            
            5,809Commitments
      and ContingenciesShareholders’
      Equity:Preferred stock; $.01 par value; 20,000,000 shares authorized; no shares
      issued or outstanding
            
            
            -
            
            
            
            -Common stock; $.01 par value;
      50,000,000 shares authorized;23,895,443
      and 23,668,443 shares issued, respectively;23,884,067
      and 23,657,067 shares outstanding, respectively
            
            
            239
            
            
            
            237Additional paid-in
      capital
            
            
            72,962
            
            
            
            71,223Accumulated other
      comprehensive earnings
            
            
            1,978
            
            
            
            7,735Retained
    earnings
            
            
            19,998
            
            
            
            32,82095,177
            
            
            
            112,015Treasury
      stock – 11,376 shares at cost
            
            
            (26
            )
            
            
            (26
            )Total
      shareholders’ equity
            
            
            95,151
            
            
            
            111,989Total
            
            $
            161,621
            
            
            $
            198,083





See notes to condensed consolidated
financial statements.




--1--


CENTURY
CASINOS, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)





For
      the three months
                  ended
      September 30,
              
              
              For
      the nine months
                  ended
      September 30,Amounts
      in thousands, except for share information
              
              2008
              
              
              2007
              
              
              2008
              
              
              2007Operating
      revenue:Gaming
              
              $
              19,816
              
              
              $
              23,163
              
              
              $
              58,753
              
              
              $
              64,541Hotel,
      food and beverage
              
              
              3,729
              
              
              
              3,479
              
              
              
              10,390
              
              
              
              9,325Other
              
              
              581
              
              
              
              550
              
              
              
              1,659
              
              
              
              1,489Gross
      revenue
              
              
              24,126
              
              
              
              27,192
              
              
              
              70,802
              
              
              
              75,355Less
      promotional allowances
              
              
              2,265
              
              
              
              2,468
              
              
              
              6,415
              
              
              
              6,897Net
      operating revenue
              
              
              21,861
              
              
              
              24,724
              
              
              
              64,387
              
              
              
              68,458Operating
      costs and expenses:Gaming
              
              
              8,289
              
              
              
              9,222
              
              
              
              24,618
              
              
              
              25,790Hotel,
      food and beverage
              
              
              2,827
              
              
              
              2,802
              
              
              
              7,864
              
              
              
              7,927General
      and administrative
              
              
              6,316
              
              
              
              7,239
              
              
              
              19,888
              
              
              
              20,024Impairments
      and other write-offs, net of recoveries
              
              
              9,357
              
              
              
              9
              
              
              
              9,357
              
              
              
              34Depreciation
              
              
              2,369
              
              
              
              1,987
              
              
              
              6,945
              
              
              
              6,310Total
      operating costs and expenses
              
              
              29,158
              
              
              
              21,259
              
              
              
              68,672
              
              
              
              60,085Earnings
      from equity investment
              
              
              218
              
              
              
              37
              
              
              
              766
              
              
              
              91(Loss)
      earnings from operations
              
              
              (7,079
              )
              
              
              3,502
              
              
              
              (3,519
              )
              
              
              8,464Non-operating
      income (expense):Interest
      income
              
              
              37
              
              
              
              85
              
              
              
              162
              
              
              
              802Interest
      expense
              
              
              (1,197
              )
              
              
              (1,649
              )
              
              
              (4,106
              )
              
              
              (5,280
              )Other
      (expense) income, net
              
              
              (71
              )
              
              
              (73
              )
              
              
              108
              
              
              
              714Non-operating
      (expense), net
              
              
              (1,231
              )
              
              
              (1,637
              )
              
              
              (3,836
              )
              
              
              (3,764
              )(Loss)
      earnings before income taxes, minority interest and preferred
      dividends
              
              
              (8,310
              )
              
              
              1,865
              
              
              
              (7,355
              )
              
              
              4,700Provision
      for income taxes
              
              
              5,710
              
              
              
              27
              
              
              
              5,006
              
              
              
              655(Loss)
      earnings before minority interest and preferred dividends
              
              
              (14,020
              )
              
              
              1,838
              
              
              
              (12,361
              )
              
              
              4,045Minority
      interest in subsidiary (earnings) losses, net
              
              
              (131
              )
              
              
              170
              
              
              
              (311
              )
              
              
              822Preferred
      dividends issued by subsidiary
              
              
              (47
              )
              
              
              (59
              )
              
              
              (150
              )
              
              
              (335
              )Net
      (loss) earnings
              
              $
              (14,198
              )
              
              $
              1,949
              
              
              $
              (12,822
              )
              
              $
              4,532(Loss)
      earnings per share:Basic
              
              $
              (0.60
              )
              
              $
              0.08
              
              
              $
              (0.55
              )
              
              $
              0.20Diluted
              
              $
              (0.60
              )
              
              $
              0.08
              
              
              $
              (0.55
              )
              
              $
              0.19


See notes to condensed consolidated
financial statements.




--2--


CENTURY
CASINOS, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (Unaudited)





For
      the three months
              ended September 30,
            
            
            For
      the nine months
              ended September 30,Amounts
      in thousands
            
            2008
            
            
            2007
            
            
            2008
            
            
            2007Net
      (loss) earnings
            
            $
            (14,198
            )
            
            $
            1,949
            
            
            $
            (12,822
            )
            
            $
            4,532Foreign
      currency translation adjustments
            
            
            (3,948
            )
            
            
            2,712
            
            
            
            (5,757
            )
            
            
            3,875Comprehensive
      (loss) earnings
            
            $
            (18,146
            )
            
            $
            4,661
            
            
            $
            (18,579
            )
            
            $
            8,407








See notes
to condensed consolidated financial statements.


--3--


CENTURY
CASINOS, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)





For
      the nine months
              ended September 30,Amounts
      in thousands
            
            2008
            
            
            2007Cash
      Flows from Operating Activities:Net
      (loss) earnings
            
            $
            (12,822
            )
            
            $
            4,532Adjustments
      to reconcile net earnings to net cash provided by operating
      activities:Depreciation
            
            
            6,945
            
            
            
            6,310Impairments
      of goodwill
            
            
            9,357
            
            
            
            -Tax
      valuation allowance
            
            
            6,021
            
            
            
            -Loss
      on disposition of fixed assets
            
            
            63
            
            
            
            -Imputed
      interest
            
            
            1
            
            
            
            124Amortization
      of share-based compensation
            
            
            1,045
            
            
            
            458Amortization
      of deferred financing costs
            
            
            369
            
            
            
            352Deferred
      tax expense
            
            (2,283
            )
            
            
            (505
            )Minority
      interest in subsidiary earnings (losses)
            
            
            311
            
            
            
            (822
            )Earnings
      from unconsolidated subsidiary
            
            
            (766
            )
            
            
            (91
            )Other
            
            
            -
            
            
            
            78Excess
      tax benefits from stock-based payment arrangements
            
            
            (24
            )
            
            
            (62
            )Changes
      in operating assets and liabilities:Receivables
            
            
            120
            
            
            
            (136
            )Prepaid
      expenses and other assets
            
            
            77
            
            
            
            (186
            )Accounts
      payable and accrued liabilities
            
            
            (2,339
            )
            
            
            (2,807
            )Accrued
      payroll
            
            
            276
            
            
            
            167Taxes
      payable
            
            
            (845
            )
            
            
            35Net
      cash provided by operating activities
            
            
            5,506
            
            
            
            7,447Cash
      Flows from Investing Activities:Purchases
      of property and equipment
            
            
            (2,779
            )
            
            
            (7,141
            )Decrease
      in restricted cash
            
            
            -
            
            
            
            218Investment
      in CC Tollgate LLC
            
            
            (74
            )
            
            
            -Investment
      in G5 Sp. z o.o.
            
            
            -
            
            
            
            (2,016
            )Proceeds
      from disposition of assets
            
            
            218
            
            
            
            17Net
      cash used in investing activities
            
            
            (2,635
            )
            
            
            (8,922
            )





(continued)


--4--


CENTURY
CASINOS, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)





For
      the nine months
              ended September 30,Amounts
      in thousands
            
            2008
            
            
            2007Cash
      Flows from Financing Activities:Proceeds
      from borrowings
            
            $
            12,766
            
            
            $
            19,047Principal
      repayments
            
            
            (24,523
            )
            
            
            (34,321
            )Excess
      tax benefits from stock-based payment arrangements
            
            
            24
            
            
            
            62Deferred
      financing charges
            
            
            (199
            )
            
            
            (40
            )Proceeds
      from exercise of options
            
            
            672
            
            
            
            106Net
      cash used in financing activities
            
            
            (11,260
            )
            
            
            (15,146
            )Effect
      of Exchange Rate Changes on Cash
            
            
            (1,116
            )
            
            
            (164
            )Decrease
      in Cash and Cash Equivalents
            
            
            (9,505
            )
            
            
            (16,785
            )Cash
      and Cash Equivalents at Beginning of Period
            
            
            17,850
            
            
            
            34,969Cash
      and Cash Equivalents at End of Period
            
            $
            8,345
            
            
            $
            18,184





Supplemental
Disclosure of Cash Flow Information:





Amounts
      in Thousands
            
            For
      the nine months
              ended September 30,2008
            
            
            2007Interest
      paid
            
            $
            3,829
            
            
            $
            5,607Income
      taxes paid
            
            $
            1,232
            
            
            $
            1,437





Supplemental
Disclosure of Non-cash Financing Activities:




Please
refer to Note 3 to the Company’s condensed consolidated financial statements for
details of the Company’s recent acquisitions.






See notes
to condensed consolidated financial statements.


--5--


CENTURY
CASINOS, INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)





1.           DESCRIPTION
OF BUSINESS AND BASIS OF PRESENTATION





Century
Casinos, Inc. (“CCI” or the “Company”) is an international casino entertainment
company. As of September 30, 2008, the Company owns and/or manages casino
operations in North America, South Africa, the Czech Republic and international
waters through various entities that are wholly owned or in which the Company
has a majority ownership position. The Company also holds a 33.3% ownership
interest in Casinos Poland Ltd (”CPL”), the owner and operator of seven full
casinos and one slot casino in Poland. The Company continues to pursue other
international projects in various stages of development.





The
accompanying condensed consolidated financial statements and related notes have
been prepared in accordance with accounting principles generally accepted in the
United States of America (“US GAAP”) for interim financial reporting and the
instructions to Form 10-Q and


Rule
10-01 of Regulation S-X. The accompanying condensed consolidated financial
statements include the accounts of CCI and its majority-owned subsidiaries. All
intercompany transactions and balances have been eliminated. The financial
statements of all foreign subsidiaries consolidated herein have been converted
to US GAAP for financial statement presentation purposes. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with US GAAP have been condensed or omitted. Certain
reclassifications have been made to the 2007 financial information in order to
conform to the 2008 presentation.





In the
opinion of management, all adjustments considered necessary for fair
presentation of financial position, results of operations and cash flows have
been included. These condensed consolidated financial statements should be read
in conjunction with the consolidated financial statements and notes thereto
included in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2007. The results of operations for the period ended
September 30, 2008 are not necessarily indicative of the operating results for
the full year.





*****





Presentation of Foreign Currency
Amounts - Historical transactions that are denominated in a foreign
currency are translated and presented at the United States exchange rate in
effect on the date of the transaction.  Commitments that are
denominated in a foreign currency and all balance sheet accounts other than
shareholders’ equity are translated and presented based on the exchange rate at
the end of the reported periods.  Current period transactions
affecting the profit and loss of operations conducted in foreign currencies are
valued at the average exchange rate for the period in which they are
incurred.  The exchange rates to the U.S. dollar used to translate
balances at the end of the reported periods are as follows:





September 30, 2008
            
            
            December 31, 2007
            
            
            September 30, 2007Canadian
      dollar (CAD)
            
            
            1.0599
            
            
            
            0.9881
            
            
            
            0.9963Czech
      koruna (CZK)
            
            
            17.4240
            
            
            
            18.2240
            
            
            
            19.3420Euros
      (€)
            
            
            0.7103
            
            
            
            0.6849
            
            
            
            0.7033Polish
      zloty (PLN)
            
            
            2.4094
            
            
            
            2.4703
            
            
            
            2.6519South
      African rand (ZAR)
            
            
            8.3195
            
            
            
            6.8618
            
            
            
            6.8853


Source:
Pacific Exchange Rate Service





--6--


2.           RECENTLY
ISSUED ACCOUNTING PRONOUNCEMENTS





In May
2008, the Financial Accounting Standards Board (“FASB”) issued Statement
No. 162, “Hierarchy of Generally Accepted Accounting Principles” (“SFAS
162”). SFAS 162 is intended to improve financial reporting by identifying a
consistent framework, or hierarchy, for selecting accounting principles to be
used in preparing financial statements of nongovernmental entities that are
presented in conformity with U.S. GAAP. This statement will be effective 60 days
following the Securities and Exchange Commission’s approval of the Public
Company Accounting Oversight Board amendment to AU Section 411, “The
Meaning of Present Fairly in Conformity with Generally Accepted Accounting
Principles.” The Company does not expect the adoption of SFAS 162 to have a
material impact on its condensed consolidated financial statements.





In April
2008, the FASB issued FASB Staff Position No. SFAS 142-3, “Determination of the
Useful Life of Intangible Assets” (“FSP SFAS 142-3”). FSP SFAS 142-3 amends the
factors that should be considered in developing renewal or extension assumptions
used to determine the useful life of a recognized intangible asset under SFAS
No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”). The intent of
FSP SFAS 142-3 is to improve the consistency between the useful life of a
recognized intangible asset under SFAS 142 and the period of expected cash flows
used to measure the fair value of the asset under SFAS No. 141R (revised
2007), “Business Combinations” and other applicable accounting literature. FSP
SFAS 142-3 is effective for financial statements issued for fiscal years
beginning after December 15, 2008 and must be applied prospectively to
intangible assets acquired after the effective date. The Company is currently
evaluating the potential impact of FSP SFAS 142-3 on its condensed consolidated
financial statements.





In March
2008, the FASB issued Statement No. 161, "Disclosures about Derivative
Instruments and Hedging Activities - an amendment of FASB Statement No. 133"
(“SFAS 161”). SFAS 161 requires companies to provide enhanced disclosures
regarding derivative instruments and hedging activities. It requires companies
to better convey the purpose of derivative use in terms of the risks that such
company is intending to manage. Disclosures about (a) how and why an entity uses
derivative instruments, (b) how derivative instruments and related hedged items
are accounted for under SFAS No. 133 and its related interpretations, and (c)
how derivative instruments and related hedged items affect a company's financial
position, financial performance, and cash flows are required. SFAS 161 retains
the same scope as SFAS No. 133 and is effective for fiscal years and interim
periods beginning after November 15, 2008. The Company does not expect the
adoption of SFAS 161 to have a material impact on its condensed consolidated
financial statements.





3. ACQUISITION





On March
12, 2007, Century Casinos Europe (“CCE”) purchased G5 Sp. z o.o, a Polish entity
that owns a 33.3% interest in CPL. The following table summarizes the fair
values of the assets acquired and liabilities assumed at the date of
acquisition:





Amounts
      in thousandsInvestment
      in Casinos Poland Ltd.
            
            $
            9,164Accounts
      payable and accrued liabilities
            
            
            (497
            )Long-term
      debt, including intercompany debt assumed
            
            
            (6,651
            )Cash
      paid
            
            $
            2,016





The
assets acquired and liabilities assumed, other than intercompany debt, are
reported in the condensed consolidated balance sheets.





--7--


4.
            GOODWILL







Changes
in the carrying amount of goodwill from December 31, 2007 to September 30, 2008
are as follows:




Amounts
      in thousandsBalance
      – December 31, 2007
            
            $
            15,217Additional
      investment in CC Tollgate LLC
            
            
            74Impairment
      – CC Tollgate LLC
            
            
            (2,124
            )Impairment
      – WMCK Venture Corp
            
            
            (7,233
            )Foreign
      currency translation
            
            
            (505
            )Balance
      – September 30, 2008
            
            $
            5,429





For the
nine months ended September 2008, our casinos in Cripple Creek, Colorado and
Central City, Colorado have experienced a significant decline in gaming revenue.
The Company deems this factor to be an indicator of potential impairment under
the guidance set forth in SFAS No. 142, “Goodwill and Other Intangible Assets.”
As a result, the Company performed interim goodwill impairment analyses of each
U.S. operation as of September 30, 2008. The value of each operation was
determined using the present value of future cash flows, which is dependent on a
number of significant estimates including long-term revenue growth, each
operation’s ability to manage operating expenses, expected operating margins of
future operations and the discount rate used to calculate the present value of
the cash flows. Based on the results of these analyses, it was determined that
the net book value for each operation exceeded its respective estimated fair
value. As a result, the Company performed the second step of the impairment test
to determine the implied fair value of goodwill. Under step two, the difference
between the estimated fair value of each operation and the fair value of its
respective identified net assets results in the residual value of goodwill. The
results of step two of the goodwill analysis indicated that there would be no
remaining implied value at either property attributable to goodwill.
Accordingly, the Company wrote-off the entire goodwill balance for each
operation and recognized goodwill impairment charges in the aggregate of $9.4
million in the condensed consolidated statement of operations under operating
expenses, “Impairments and other write-offs, net of recoveries” in the third
quarter of 2008.





5.
            EQUITY
      INVESTMENT IN UNCONSOLIDATED
SUBSIDIARY





The
Company has a 33.3% ownership interest in CPL, and the Company accounts for this
investment under the equity method.





Following
is the summarized unaudited financial information of CPL:





Amounts
      in thousands
            
            As
      of
              September
      30, 2008
            
            
            As
      of
              December
      31, 2007Balance
      Sheet:Current
      assets
            
            $
            3,824
            
            
            $
            3,225Noncurrent
      assets
            
            $
            20,462
            
            
            $
            20,978Current
      liabilities
            
            $
            15,779
            
            
            $
            17,757Noncurrent
      liabilities
            
            $
            1,946
            
            
            $
            1,825






--8--




For
      the three
              months
      ended
              September
      30, 2008
            
            
            For
      the three
              months
      ended
              August
      31, 2007Operating
      Results:Net
      operating revenue
            
            $
            14,036
            
            
            $
            11,330Net
      earnings
            
            $
            654
            
            
            $
            110





For
      the nine
              months
      ended
              September
      30, 2008
            
            
            March
      12, 2007 through
              August
      31, 2007Operating
      Results:Net
      operating revenue
            
            $
            44,340
            
            
            $
            25,462Net
      earnings
            
            $
            2,298
            
            
            $
            274





The
Company’s maximum exposure to losses at September 30, 2008 is $13.1 million, the
value of its equity investment in CPL. Of the $13.1 million, $10.3 million
relates to goodwill recorded at the time of the Company’s acquisition of its
33.3% ownership interest in CPL.





6.           LONG-TERM
DEBT





Term
Loan and Revolving Credit Facility – Central City





On
November 6, 2008, the Company entered into a third amendment of the term loan
agreement with Wells Fargo Bank (the “Bank”). Prior to the amendment, the
Company’s interest rate of the loan was the greater of 6.5% or the Prime Rate
plus 2.0%. The amendment permits the Company to set the interest rate of the
loan based on one of the following options:





a.
            Prime
      Rate + 6.5%;


b.
            The
      greater of 3.75% or the 30-day LIBOR rate + 6.5%;
  or


c.
            The
      greater of 3.75% or the 90-day LIBOR rate +
  6.5%.





This
amendment also permits the Company to convert the interest rate of the loan on
three business days notice, redefines the covenant requirements for the Adjusted
Fixed Charge Coverage Ratio and Maximum Senior Leverage Ratio and permits CCI to
make contributions to CC Tollgate LLC to ensure compliance with these covenants.
In return, the amendment revises the repayment schedule of the term loan to
require monthly payments of $0.2 million in lieu of quarterly payments of $0.6
million and eliminates the $2.5 million revolving credit facility. As of
September 30, 2008, $18.0 million of principal is outstanding, of which $15.6
million is considered long-term in the accompanying September 30, 2008 condensed
consolidated balance sheet.





For the
three months ended March 31, 2008 and the three months ended June 30, 2008, the
Company met all financial covenant terms related to this agreement except the
adjusted fixed charge coverage (“AFCC”) ratio covenant related to the term loan.
On April 28, 2008 and July 23, 2008, the Company received written waivers from
the Bank related to this covenant in exchange for approximately $0.2 million and
$0.1 million, respectively.





Revolving Credit Facility –
Cripple Creek





On
November 6, 2008, the Company entered into a Second Amended and Restated Credit
Agreement with the Bank (“Amended Agreement”). The Amended Agreement converts
the existing  revolving credit facility for Womacks to a 44-month term
loan facility requiring monthly principal repayments of $0.1 million beginning
on December 1, 2008 through maturity (July 1, 2012). The amended agreement also
redefines the covenant requirements for the Adjusted Fixed Charge Coverage Ratio
and Senior Leverage Ratio and requires the Company to maintain a consolidated
leverage ratio of 4:00 to 1:00. The Amended Agreement increases the interest
rate on the outstanding debt from Wells Fargo Prime (currently 4.0%) to Wells
Fargo Prime + 5.5%. As of September 30, 2008, $4.0 million of principal is
outstanding, of which $2.3 million is considered long-term in the accompanying
September 30, 2008 condensed consolidated balance sheet.





--9--


7.           PROMOTIONAL
ALLOWANCES





Hotel
accommodations and food and beverage furnished without charge to customers is
included in gross revenue at a value which approximates retail and is then
deducted as complimentary services to arrive at net operating
revenue.





The
Company issues free play or coupons for the purpose of generating future
revenue. Coupons are issued the month prior to when they can be redeemed and are
valid for defined periods of time in the subsequent month. The Company expects
the net win from a customer visit to be in excess of the value of the coupon
utilized. The cost of the coupons redeemed is applied against the revenue
generated on the day of the redemption.





Members
of the Company’s casinos’ player clubs earn points based on their volume of play
(typically as a percentage of coin-in) at certain of our casinos. Players can
accumulate points over time that they may redeem at their discretion under the
terms of the program. Points can be redeemed for cash and/or various amenities
at the casino, such as meals, hotel stays and gift shop items. The cost of the
points is offset against the revenue in the period that the revenue generated
the points. The value of unused or unredeemed points is included in accounts
payable and accrued liabilities on our condensed consolidated balance sheet. The
expiration of unused points results in a reduction of the
liability.





Promotional
allowances presented in the condensed consolidated statements of operations for
the three and nine-month periods ended September 30, 2008 and 2007 include the
following:





For
      the three months
              ended
      September 30,
            
            
            For
      the nine months
              ended
      September 30,Amounts
      in thousands
            
            2008
            
            
            2007
            
            
            2008
            
            
            2007Hotel,
      Food & Beverage
            
            $
            1,023
            
            
            $
            894
            
            
            $
            2,656
            
            
            $
            2,355Free
      Plays or Coupons
            
            
            683
            
            
            
            755
            
            
            
            2,097
            
            
            
            2,366Player
      Points
            
            
            559
            
            
            
            819
            
            
            
            1,662
            
            
            
            2,176Total
      Promotional Allowances
            
            $
            2,265
            
            
            $
            2,468
            
            
            $
            6,415
            
            
            $
            6,897





8.           INCOME
TAXES





The
Company records deferred tax assets and liabilities based on the difference
between the financial statement and income tax basis of assets and liabilities
using the enacted statutory tax rate in effect for the year these differences
are expected to be taxable or refunded.Deferred
income tax expenses or credits are based on the changes in the asset or
liability from period to period. The recorded deferred tax assets are reviewed
for impairment on a quarterly basis by reviewing our internal estimates for
future net income. Due to the uncertainty of future taxable income, deferred tax
assets of $6.0 million resulting from our net operating losses in the U.S. were
fully reserved during the three months ended September 30, 2008.





In
accordance with SFAS No. 109, “Accounting for Income Taxes” ("SFAS
No. 109"), the Company will assess the continuing need for a valuation
allowance that results from uncertainty regarding its ability to realize the
benefits of the Company’s deferred tax assets. The ultimate realization of
deferred income tax assets is dependent upon generation of future taxable income
during the periods in which those temporary differences become deductible. If
the Company concludes that its prospects for the realization of its deferred tax
assets are more likely than not, the Company will then reduce its valuation
allowance as appropriate and credit income tax expense after considering the
following factors:





·
            The
      level of historical taxable income and projections for future taxable
      income over periods in which the deferred tax assets would be deductible,
      and


·
            Accumulation
      of net income before tax utilizing a look-back period of three
      years.





--10--


The
Company adopted the provisions of Financial Accounting Standards Board
Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”), on
January 1, 2007. FIN 48 seeks to reduce the diversity in practice associated
with certain aspects of the recognition and measurement related to accounting
for income taxes. The Company has analyzed filing positions in all of the
federal, state and foreign jurisdictions where it is required to file income tax
returns, as well as all open tax years in these jurisdictions.  As a
result of the implementation of FIN 48, the Company recognized a $0.1 million
liability for unrecognized tax liabilities related to tax positions taken in
prior periods, which is recorded as a component of other long-term accrued
liabilities. This increase was accounted for as an adjustment to the opening
balance of retained earnings on January 1, 2007.





The
income tax provisions are based on estimated full-year earnings for financial
reporting purposes adjusted for permanent differences. The (benefit) provision
for income tax expense consists of the following:





For
      the three months
              ended
      September 30,
            
            
            For
      the nine months
              ended
      September 30,Amounts
      in thousands
            
            2008
            
            
            2007
            
            
            2008
            
            
            2007Provision
      for U.S. federal income taxes
            
            $
            (780
            )
            
            $
            (335
            )
            
            $
            (2,349
            )
            
            $
            (473
            )Provision
      for state income taxes
            
            
            (111
            )
            
            
            (8
            )
            
            
            (335
            )
            
            
            (28
            )Valuation
      allowance for U.S. and state income taxes
            
            
            6,020
            
            
            
            -
            
            
            
            6,020
            
            
            
            -Provision
      for foreign income taxes
            
            
            581
            
            
            
            370
            
            
            
            1,670
            
            
            
            1,156Total
      provision for income taxes
            
            $
            5,710
            
            
            $
            27
            
            
            $
            5,006
            
            
            $
            655





The
provision for income taxes is summarized by jurisdiction in the table
below:





Amounts
      in thousands
            
            For
      the three months
              ended
      September 30, 2008
            
            
            For
      the three months
              ended
      September 30, 2007Pre-tax
              income
            
            
            Income
              tax
            
            
            Effective
              tax rate
            
            
            Pre-tax
              income
            
            
            Income
              tax
            
            
            Effective
              tax rateCanada
            
            $
            998
            
            
            $
            314
            
            
            
            31.5
            %
            
            $
            183
            
            
            $
            59
            
            
            
            32.2
            %United
      States
            
            
            (11,163
            )
            
            
            5,130
            
            
            
            (46.0
            %)
            
            
            (431
            )
            
            
            (343
            )
            
            
            79.6
            %
            (a)South
      Africa
            
            
            729
            
            
            
            226
            
            
            
            31.0
            %
            
            
            716
            
            
            
            262
            
            
            
            36.6
            %Mauritius
            
            
            1,025
            
            
            
            34
            
            
            
            3.3
            %
            
            
            1,444
            
            
            
            43
            
            
            
            3.0
            %Austria
            
            
            82
            
            
            
            6
            
            
            
            7.3
            %
            
            
            (18
            )
            
            
            6
            
            
            
            (33.3
            %)Czech
      Republic
            
            
            58
            
            
            
            -
            
            
            
            -
            %
            
            
            64
            
            
            
            -
            
            
            
            -
            %Poland
            
            
            (39
            )
            
            
            -
            
            
            
            -
            %
            
            
            (93
            )
            
            
            -
            
            
            
            -
            %Total
            
            $
            (8,310
            )
            
            $
            5,710
            
            
            
            (68.7
            %)
            
            $
            1,865
            
            
            $
            27
            
            
            
            1.4
            %


(a)
pre-tax income in the United States for the three months ended September 30,
2007 includes $0.2 million in losses that were allocated to the former minority
partner of CC Tollgate LLC.


--11--





Amounts
      in thousands
            
            For
      the nine months
              ended
      September 30, 2008
            
            
            For
      the nine months
              ended
      September 30, 2007Pre-tax
              income
            
            
            Income
              tax
            
            
            Effective
              tax rate
            
            
            Pre-tax
              income
            
            
            Income
              tax
            
            
            Effective
              tax rateCanada
            
            $
            2,782
            
            
            $
            840
            
            
            
            30.2
            %
            
            $
            138
            
            
            $
            53
            
            
            
            38.4
            %United
      States
            
            
            (16,468
            )
            
            
            3,337
            
            
            
            (20.3
            %)
            
            
            (1,588
            )
            
            
            (501
            )
            
            
            31.5
            %
            (a)South
      Africa
            
            
            2,213
            
            
            
            698
            
            
            
            31.5
            %
            
            
            2,391
            
            
            
            968
            
            
            
            40.5
            %Mauritius
            
            
            3,659
            
            
            
            113
            
            
            
            3.1
            %
            
            
            3,868
            
            
            
            118
            
            
            
            3.0
            %Austria
            
            
            15
            
            
            
            18
            
            
            
            120.0
            %
            
            
            75
            
            
            
            17
            
            
            
            22.7
            %Czech
      Republic
            
            
            (114
            )
            
            
            -
            
            
            
            -
            %
            
            
            12
            
            
            
            -
            
            
            
            -
            %Poland
            
            
            558
            
            
            
            -
            
            
            
            -
            %
            
            
            (196
            )
            
            
            -
            
            
            
            -
            %Total
            
            $
            (7,355
            )
            
            $
            5,006
            
            
            
            (68.1
            %)
            
            $
            4,700
            
            
            $
            655
            
            
            
            13.9
            %


(a)
pre-tax income in the United States for the nine months ended September 30, 2007
includes $0.9 million in losses that were allocated to the former minority
partner of CC Tollgate LLC.





On
December 31, 2007, the Company purchased the 35% interest in CC Tollgate LLC
that it did not already own from the minority partner in the project. Prior to
this date, the Company did not record a provision for income tax on the losses
allocated to the minority partner.





9.           (LOSS)
EARNINGS PER SHARE





Basic
      and diluted (loss) earnings per share for the three and nine months ended
      September 30, 2008 and 2007 were computed as
  follows:





Amounts
      in thousands,except
      for share information
            
            For
      the three months
              ended
      September 30,
            
            
            For
      the nine months
              ended
      September 30,2008
            
            
            2007
            
            
            2008
            
            
            2007Basic
      (Loss) Earnings Per Share:Net
      (loss) earnings
            
            $
            (14,198
            )
            
            $
            1,949
            
            
            $
            (12,822
            )
            
            $
            4,532Weighted
      average common shares
            
            
            23,522,763
            
            
            
            23,051,067
            
            
            
            23,432,279
            
            
            
            23,043,351Basic
      (loss) earnings per share
            
            $
            (0.60
            )
            
            $
            0.08
            
            
            $
            (0.55
            )
            
            $
            0.20Diluted
      Earnings Per Share:Net
      (loss) earnings
            
            $
            (14,198
            )
            
            $
            1,949
            
            
            $
            (12,822
            )
            
            $
            4,532Weighted
      average common shares
            
            
            23,522,763
            
            
            
            23,051,067
            
            
            
            23,432,279
            
            
            
            23,043,351Effect
      of dilutive securities using the treasury stock method:Stock
      options and warrants
            
            
            3,542
            
            
            
            782,431
            
            
            
            109,706
            
            
            
            861,510Dilutive
      potential common shares
            
            
            23,526,305
            
            
            
            23,833,498
            
            
            
            23,541,985
            
            
            
            23,904,861Diluted
      (loss) earnings per share
            
            $
            (0.60
            )
            
            $
            0.08
            
            
            $
            (0.55
            )
            
            $
            0.19





The
following stock options, warrants and unvested restricted stock are
anti-dilutive and have not been included in the weighted average diluted shares
outstanding calculation:





For
      the three months
              ended
      September 30,
            
            
            For
      the nine months
              ended
      September 30,2008
            
            
            2007
            
            
            2008
            
            
            2007Stock
      options and warrants
            
            
            975,210
            
            
            
            85,000
            
            
            
            77,500
            
            
            
            85,000Unvested
      restricted stock
            
            
            360,000
            
            
            
            400,000
            
            
            
            360,000
            
            
            
            400,000





--12--


10.           SEGMENT
AND GEOGRAPHIC INFORMATION





Beginning
in the fourth quarter of 2007, the Company modified its segment reporting from
seven reportable segments to one reportable segment, because the Company now
believes that its properties can be aggregated together in accordance with SFAS
131, “Disclosures about Segments of an Enterprise and Related Information”
(“SFAS 131”). Based on a review of SFAS 131, the Company has determined that it
operates primarily in one segment, the operation of casino facilities, which
includes the provision of gaming, hotel accommodations, dining facilities and
other amenities. As a gaming company, the Company’s operating results are highly
dependent on the volume of customers at its casinos. Most of the Company’s
revenue is essentially cash-based, through customers wagering with cash or
paying for non-gaming services with cash or credit cards. Prior period segments
have been restated to conform to the current presentation.





The
following summary provides information concerning the Company’s principal
geographic areas:





Long-Lived
      Assets*Amounts
      in thousands
            
            September
      30, 2008
            
            
            December
      31, 2007United
      States
            
            $
            63,598
            
            
            $
            75,782International:Canada
            
            $
            34,210
            
            
            $
            37,419Africa
            
            
            34,912
            
            
            
            42,979Europe
            
            
            14,566
            
            
            
            13,668Total
      international
            
            
            83,688
            
            
            
            94,066Total
            
            $
            147,286
            
            
            $
            169,848


*
Long-lived assets consist of property and equipment, goodwill, casino licenses
and equity investment.





Net
      Operating RevenueFor
      the three months
              ended
      September 30,
            
            
            For
      the nine months
              ended
      September 30,Amounts
      in thousands
            
            2008
            
            
            2007
            
            
            2008
            
            
            2007United
      States
            
            $
            7,741
            
            
            $
            11,008
            
            
            $
            22,509
            
            
            $
            29,089International:Canada
            
            $
            5,656
            
            
            $
            4,930
            
            
            $
            17,008
            
            
            $
            13,562Africa
            
            
            7,011
            
            
            
            7,411
            
            
            
            20,899
            
            
            
            21,919Europe
            
            
            1,453
            
            
            
            1,375
            
            
            
            3,971
            
            
            
            3,888Total
      international
            
            
            14,120
            
            
            
            13,716
            
            
            
            41,878
            
            
            
            39,369Total
            
            $
            21,861
            
            
            $
            24,724
            
            
            $
            64,387
            
            
            $
            68,458





--13--


11.           COMMITMENTS,
CONTINGENCIES AND OTHER MATTERS





Sale of interest
in South Africa – In September 2008, the Company announced that it had
received verbal expressions of interest, the Company is considering the sale of
all or part of its interest in The Caledon Hotel, Spa & Casino in the
Western Cape province and the Century Casino and Hotel in Newcastle,
KwaZulu-Natal province.  The Company has evaluated the potential sale
in accordance with Statement No. 144, “Accounting for the Impairment or Disposal
of Long-Lived Assets” (“SFAS 144”) which outlines the criteria under which an
investment is classified as held for sale and subsequently accounted for as a
discontinued operation. While the Company has established a protocol for
tendering offers, the Company currently believes that not all the criteria under
SFAS 144 relating to discontinued operations have been met.









--14--


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





Forward-Looking
Statements, Business Environment and Risk Factors





This
quarterly report on Form 10-Q contains “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995.  In
addition, Century Casinos, Inc. (the “Company”) may make other written and oral
communications from time to time that contain such
statements.  Forward-looking statements include statements as to
industry trends and future expectations of the Company and other matters that do
not relate strictly to historical facts and are based on certain assumptions by
management.  These statements are often identified by the use of words
such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,”
“estimate,” or “continue,” and similar expressions or
variations.  These statements are based on the beliefs and assumptions
of the management of the Company based on information currently available to
management.  Such forward-looking statements are subject to risks,
uncertainties and other factors that could cause actual results to differ
materially from future results expressed or implied by such forward-looking
statements.  Important factors that could cause actual results to
differ materially from the forward-looking statements include, among others, the
risks described in the sections entitled “Risk Factors” under Item 1A in our
Annual Report on Form 10-K for the year ended December 31, 2007 and Item 1A of
Part II of this report. We caution the reader to carefully consider such
factors.  Furthermore, such forward-looking statements speak only as
of the date on which such statements are made.  We undertake no
obligation to update any forward-looking statements to reflect events or
circumstances after the date of such statements.





References
in this item to “we,” “our,” or “us” are to the Company and its subsidiaries on
a consolidated basis unless the context otherwise requires.





Amounts
presented in this Item 2 are rounded to whole dollar amounts. As such, rounding
differences could occur in period over period changes and percentages reported
throughout this Item 2.





OVERVIEW





Since our
inception in 1992, we have been primarily engaged in developing and operating
gaming establishments and related lodging and restaurant facilities. Our primary
source of revenue is from the net proceeds of our gaming machines and tables,
with ancillary revenue generated from the hotel and restaurant facilities that
are a part of the casinos.





We own,
operate and manage the following casinos through either wholly-owned or
majority-owned subsidiaries:





-
            The
      Century Casino & Hotel in Edmonton, Alberta,
  Canada;


-
            Womacks
      Casino & Hotel in Cripple Creek,
Colorado;


-
            The
      Century Casino & Hotel in Central City,
  Colorado;


-
            The
      Caledon Hotel, Spa & Casino near Cape Town, South
    Africa;


-
            The
      Century Casino & Hotel in Newcastle, South Africa;
  and


-
            The
      Century Casino Millennium in the Marriott Hotel in Prague, Czech
      Republic.





We also
operate ship-based casinos aboard the Silver Cloud and the vessels of Oceania
Cruises. Effective October 16, 2008, we have terminated operations aboard the
World of Residensea.





--15--


We also
hold a 33.3% ownership interest in and actively participate in the management of
Casinos Poland Ltd (“CPL”), the owner and operator of seven full casinos and one
slot casino in Poland. At CPL, day to day decision making is controlled by a
management board consisting of three persons. Long term decision making is
controlled by a supervisory board consisting of three persons. As we are the
only shareholder with experience in the gaming industry, we chair both the
management board and the supervisory board. No material decisions can be made
without our consent, including the removal of the chairman of each
board. Based on this influence, management believes that it is appropriate
to account for our investment in CPL as a component of our
operations.





Beginning
in the fourth quarter of 2007, we modified our segment reporting from seven
reportable segments to one reportable segment in accordance with SFAS 131, we
have determined that we operate primarily in one segment, the operation of
casino facilities, which includes the provision of gaming, hotel accommodations,
dining facilities and other amenities. Prior period segments have been restated
to conform to the current presentation.





Our
industry is capital intensive, and we rely heavily on the ability of our casinos
to generate operating cash flow to repay debt financing, fund maintenance
capital expenditures and provide excess cash for future
development.





As a
gaming company, our operating results are highly dependent on the volume of
customers at our casinos. Most of our revenue is essentially cash-based, through
customers wagering with cash or paying for non-gaming services with cash or
credit cards. Management believes that in South Africa and Colorado, rising fuel
prices and lower consumer discretionary income have significantly impacted our
operations.





On
November 4, 2008, voters in Colorado approved a ballot initiative that will
permit raising the maximum betting limit from $5 to $100, will permit gaming
establishments to be open for 24-hours and allows the introduction of roulette
and craps to the Colorado gaming market beginning July 1, 2009. The local gaming
communities must approve these changes. While management currently cannot
project the estimated impact of this change, we believe that if the local gaming
communities approve these changes, our gaming revenues in Cripple Creek,
Colorado and Central City, Colorado will be positively impacted.





Presentation of Foreign Currency
Amounts - Historical transactions that are denominated in a foreign
currency are translated and presented at the United States exchange rate in
effect on the date of the transaction.  Commitments that are
denominated in a foreign currency and all balance sheet accounts other than
shareholders’ equity are translated and presented based on the exchange rate at
the end of the reported periods.  Current period transactions
affecting the profit and loss of operations conducted in foreign currencies are
valued at the average exchange rate for the period in which they are
incurred.  The average exchange rates to the U.S. dollar used to
translate balances during each reported period are as follows:





For
      the three months
              ended
      September 30,
            
            
            For
      the nine months
              ended
      September 30,2008
            
            
            2007
            
            
            2008
            
            
            2007Canadian
      dollar (CAD)
            
            
            1.0407
            
            
            
            1.0507
            
            
            
            1.0185
            
            
            
            1.1049Czech
      koruna (CZK)
            
            
            16.0745
            
            
            
            20.3677
            
            
            
            16.3418
            
            
            
            20.8563Euros
      (€)
            
            
            0.6668
            
            
            
            0.7282
            
            
            
            0.6582
            
            
            
            0.7424Polish
      zloty (PLN)
            
            
            2.2040
            
            
            
            2.7627
            
            
            
            2.2571
            
            
            
            2.8084South
      African rand (ZAR)
            
            
            7.7805
            
            
            
            7.1068
            
            
            
            7.6998
            
            
            
            7.1468


Source:
Pacific Exchange Rate Service





--16--


RESULTS
OF OPERATIONS





The
results of operations for the three and nine months ended September 30, 2008 and
2007 are below (in thousands):





For
      the three months
              ended
      September 30,
            
            
            For
      the nine months
              ended
      September 30,2008
            
            
            2007
            
            
            2008
            
            
            2007Gaming
      revenue
            
            $
            19,816
            
            
            $
            23,163
            
            
            $
            58,753
            
            
            $
            64,541Net
      operating revenue
            
            
            21,861
            
            
            
            24,724
            
            
            
            64,387
            
            
            
            68,458Total
      operating costs and expenses
            
            
            29,158
            
            
            
            21,259
            
            
            
            68,672
            
            
            
            60,085Earnings
      from equity investment
            
            
            218
            
            
            
            37
            
            
            
            766
            
            
            
            91(Loss)
      earnings from operations
            
            
            (7,079
            )
            
            
            3,502
            
            
            
            (3,519
            )
            
            
            8,464Net
      (loss) earnings
            
            
            (14,198
            )
            
            
            1,949
            
            
            
            (12,822
            )
            
            
            4,532(Loss)
      earnings per shareBasic
            
            
            (0.60
            )
            
            
            0.08
            
            
            
            (0.55
            )
            
            
            0.20Diluted
            
            
            (0.60
            )
            
            
            0.08
            
            
            
            (0.55
            )
            
            
            0.19





The
decrease in net operating revenue from $24.7 million for the three months ended
September 30, 2007 to $21.9 million for the three months ended September 30,
2008 is primarily the result of a $3.4 million decline in gaming revenue at our
properties in Colorado, a $0.7 million decline in gaming revenue at the Caledon
and a 9.5% decline in the average exchange rate between the U.S. dollar and
South African rand, partially offset by increased gaming revenue at our casino
in Edmonton.





The
decrease in net operating revenue from $68.5 million for the nine months ended
September 30, 2007 to $64.4 million for the nine months ended September 30, 2008
can be attributed to the same factors described above. Further declines in the
average exchange rate between the U.S. dollar and South African rand may harm
our U.S. results.





The
increase in operating costs and expenses from $21.3 million for the three months
ended September 30, 2007 to $29.2 million for the three months ended September
30, 2008 is the result of the write-off of $9.4 million of goodwill related to
our investments in our properties in Central City, Colorado and Cripple Creek,
Colorado, an increase in overall depreciation charges resulting from gaming and
non-gaming equipment additions in 2007 and the completion of a renovation
project at Womacks in the first quarter of 2008, which contributed an additional
$1.8 million of depreciable assets, partially offset by a decline in gaming
expenses primarily due to the decrease in gaming revenue and a decline in
general and administrative expenses.





The
increase in operating costs and expenses from $60.1 million for the nine months
ended September 30, 2007 to $68.7 million for the nine months ended September
30, 2008 is primarily due to the write-off of $9.4 million of goodwill related
to our investments in our properties in Central City, Colorado and Cripple
Creek, Colorado and increased charges related to the amortization of restricted
stock and an increase in overall depreciation charges resulting from gaming and
non-gaming equipment additions in 2007 and 2008, partially offset by a decline
in gaming expense resulting from reduced gaming revenue.





The
decrease from net earnings of $1.9 million for the three months ended September
30, 2007 to a net loss of $14.2 million for the three months ended September 30,
2008 was due to a decline in operations, the write-off of $9.4 million of
goodwill and an increase in tax expense of $5.7 million, due primarily to the
establishment of a valuation allowance for our U.S. deferred tax asset of
approximately $6.0 million.





--17--


The
decrease from net earnings of $4.5 million for the nine months ended September
30, 2007 to a net loss of $12.8 million for the nine months ended September 30,
2008 is primarily the result of the decline in overall operations, the write-off
of $9.4 million of goodwill and an increase in tax expense of $4.4 million, due
primarily to the establishment of a valuation allowance for our U.S. deferred
tax assets of approximately $6.0 million.





Net
operating revenue by property for the three and nine months ended September 30,
2008 and 2007 is summarized below (in thousands):





For
      the three months
              ended
      September 30,
            
            
            For
      the nine months
              ended
      September 30,2008
            
            
            2007
            
            
            2008
            
            
            2007Century
      Casino & Hotel (Edmonton, Alberta, Canada)
            
            $
            5,656
            
            
            $
            4,930
            
            
            $
            17,008
            
            
            $
            13,562Womacks
      (Cripple Creek, Colorado)
            
            
            3,086
            
            
            
            5,011
            
            
            
            8,827
            
            
            
            13,510Century
      Casino & Hotel (Central City, Colorado)
            
            
            4,655
            
            
            
            5,954
            
            
            
            13,679
            
            
            
            15,529The
      Caledon Hotel, Spa & Casino (Caledon, South Africa)
            
            
            3,988
            
            
            
            4,526
            
            
            
            12,277
            
            
            
            13,324Century
      Casino & Hotel (Newcastle, South Africa)
            
            
            3,023
            
            
            
            2,885
            
            
            
            8,622
            
            
            
            8,595Casino
      Millennium (Prague, Czech Republic)
            
            
            884
            
            
            
            719
            
            
            
            2,119
            
            
            
            1,862Cruise
      Ships
            
            
            569
            
            
            
            656
            
            
            
            1,852
            
            
            
            2,026Casinos
      Poland (Poland)(1)
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Corporate
            
            
            -
            
            
            
            43
            
            
            
            3
            
            
            
            50Net
      operating revenue
            
            $
            21,861
            
            
            $
            24,724
            
            
            $
            64,387
            
            
            $
            68,458


(1)
            A
      33.3% interest was acquired on March 12, 2007 and is accounted for as an
      equity investment.





Earnings
and (losses) from operations by property for the three and nine months ended
September 30, 2008 and 2007 are summarized below (in thousands):





For
      the three months
              ended
      September 30,
            
            
            For
      the nine months
              ended
      September 30,2008
            
            
            2007
            
            
            2008
            
            
            2007Century
      Casino & Hotel (Edmonton, Alberta, Canada)
            
            $
            1,674
            
            
            $
            1,175
            
            
            $
            5,133
            
            
            $
            2,715Womacks
      (Cripple Creek, Colorado)
            
            
            (7,121
            )
            
            
            1,433
            
            
            
            (7,259
            )
            
            
            3,620Century
      Casino & Hotel (Central City, Colorado)
            
            
            (1,700
            )
            
            
            1,007
            
            
            
            (1,158
            )
            
            
            1,730The
      Caledon Hotel, Spa & Casino (Caledon, South Africa)
            
            
            972
            
            
            
            1,492
            
            
            
            3,214
            
            
            
            4,351Century
      Casino & Hotel (Newcastle, South Africa)
            
            
            806
            
            
            
            586
            
            
            
            2,075
            
            
            
            1,905Casino
      Millennium (Prague, Czech Republic)
            
            
            65
            
            
            
            110
            
            
            
            (101
            )
            
            
            153Cruise
      Ships
            
            
            (3
            )
            
            
            (59
            )
            
            
            119
            
            
            
            (77
            )Casinos
      Poland (Poland)(1)
            
            
            218
            
            
            
            37
            
            
            
            766
            
            
            
            91Corporate
            
            
            (1,990
            )
            
            
            (2,279
            )
            
            
            (6,308
            )
            
            
            (6,024
            )(Loss)
      earnings from operations
            
            $
            (7,079
            )
            
            $
            3,502
            
            
            $
            (3,519
            )
            
            $
            8,464


(1)
            A
      33.3% interest was acquired on March 12, 2007 and is accounted for as an
      equity investment.





--18--


Three
months ended September 30, 2008 vs 2007





Revenue





Net
operating revenue for the three months ended September 30, 2008 and 2007 was as
follows (in thousands):





Three
      months
              ended
      September 30,2008
            
            
            2007
            
            
            Variance
            
            
            Percentage
              VarianceGaming
            
            $
            19,816
            
            
            $
            23,163
            
            
            $
            (3,347
            )
            
            
            (14.4
            %)Hotel,
      food and beverage
            
            
            3,729
            
            
            
            3,479
            
            
            
            250
            
            
            
            7.2
            %Other
            
            
            581
            
            
            
            550
            
            
            
            31
            
            
            
            5.6
            %Gross
      revenue
            
            
            24,126
            
            
            
            27,192
            
            
            
            (3,066
            )
            
            
            (11.3
            %)Less
      promotional allowances
            
            
            2,265
            
            
            
            2,468
            
            
            
            (203
            )
            
            
            (8.2
            %)Net
      operating revenue
            
            $
            21,861
            
            
            $
            24,724
            
            
            $
            (2,863
            )
            
            
            (11.6
            %)





Gaming
revenue





Gaming
revenue decreased by $3.3 million, or 14.4%, from $23.2 million for the three
months ended September 30, 2007 to $19.8 million for the three months ended
September 30, 2008. Declines in gaming revenue at our casinos in Colorado and
Caledon, South Africa were partially offset by increased gaming revenue at our
casino in Edmonton, Alberta, Canada.





Gaming
revenue at the Century Casino & Hotel in Edmonton increased by $0.5 million,
or 13.2%, from $3.8 million for the three months ended September 30, 2007 to
$4.3 million for the three months ended September 30, 2008, primarily due to
increased play at the casino resulting from additional slot machines and
increased traffic from a showroom that is a part of the casino. Gaming revenue
in Canadian dollars increased by CAD 0.5 million, or 12.2%, from CAD 3.9 million
for the three months ended September 30, 2007 to CAD 4.4 million for the three
months ended September 30, 2008. This increase is the result of an increase of
4.6% in slot revenue and 24.0% in table revenue. The Alberta Gaming and Liquor
Commission increased the number of slot machines at the casino from 600 to 650
in September 2007. In addition, we introduced 24-hour poker at the casino during
the fourth quarter of 2007.





Gaming
revenue at Womacks decreased by $2.1 million, or 38.3%, from $5.4 million for
the three months ended September 30, 2007 to $3.3 million for the three months
ended September 30, 2008. Management believes that gaming revenue was negatively
impacted by a 7.0% decline in the Cripple Creek gaming market, which is where
Womacks is located, and can be attributed to a decline in consumer discretionary
income, increased fuel prices and a smoking ban that went into effect on January
1, 2008. The Cripple Creek gaming market experienced a smaller decline than
either the Central City or Black Hawk gaming markets, which posted declines of
20.1% and 13.4%, respectively.  Management believes that a decision by
several casinos in Cripple Creek to claim an exemption to the smoking ban
contributed to the smaller decline in Cripple Creek than either Central City or
Black Hawk. In addition, in late May 2008, a new larger casino opened in Cripple
Creek. Management also believes that we lost a significant amount of our
customer base due to a renovation that we began during the fourth quarter of
2007 and continued through the first quarter of 2008. We believe the renovation
has upgraded the gaming floor and dining area, but may have inconvenienced
customers which led to our decreased revenue. Womacks has continued the effort
to improve the customer experience at Womacks by converting 100% of the total
machines on the floor to Ticket in/Ticket out devices. We are currently
reviewing various strategies to increase gaming revenue at Womacks. Our market
share of the Cripple Creek gaming revenue declined from 12.5% for the third
quarter of 2007 to 8.1% for the third quarter of 2008.





--19--


Gaming
revenue at the Century Casino and Hotel in Central City decreased by $1.3
million, or 20.8%, from $6.3 million for the three months ended September 30,
2007 to $5.0 million for the three months ended September 30, 2008. Similar to
the Cripple Creek market, management believes that gaming revenue was negatively
impacted by a 20.1% decline in the Central City gaming market and can be
attributed to a decline in consumer discretionary income, increased fuel prices
and the smoking ban that went into effect on January 1, 2008. Our market share
of the Central City gaming revenue increased slightly from 28.5% for the third
quarter of 2007 to 28.6% for the third quarter of 2008.





Gaming
revenue at our casino in Caledon, South Africa decreased by $0.7 million, or
17.4% from $3.9 million for the three months ended September 30, 2007 to $3.2
million for the three months ended September 30, 2008, due primarily to lower
customer attendance and a 9.5% decline in the average exchange rate between the
U.S. dollar and South African rand. As Caledon is located approximately 60 miles
from Cape Town, management believes that higher fuel prices throughout 2008 have
led local patrons from Cape Town to gamble in Cape Town as opposed to traveling
to our casino. Gaming revenue in rand decreased by ZAR 2.7 million, or 9.7%,
from ZAR 27.8 million to ZAR 25.1 million for the three months ended September
30, 2008. Our slot machine win per day (in ZAR) declined from ZAR 770 for the
three months ended September 30, 2007 to ZAR 703 for the three months ended
September 30, 2008. Also, to a lesser extent, the addition of two table games in
2008 contributed to a decline in table win per day (in ZAR) of 43.7% for the
three months ended September 30, 2008. Our market share of the Western Cape
gaming revenue declined from 5.1% for the three months ended September 30, 2007
to 4.8% for the three months ended September 30, 2008. Management attributes
this decline to the rising fuel prices. The Western Cape operates with the
maximum permitted number of five casinos.





Gaming
revenue at the Century Casino & Hotel in Newcastle, South Africa increased
$0.1 million, or 4.3%, from $2.5 million for the three months ended September
30, 2007 to $2.6 million for the three months ended September 30,
2008.  A significant increase in gaming revenue reported in local
currency was offset by a 9.5% decline in the average exchange rate between the
U.S. dollar and South African rand. Gaming revenue in rand increased by ZAR 2.5
million, or 14.0%, from ZAR 17.8 million to ZAR 20.3 million for the three
months ended September 30, 2008, which management believes is the result of
increased marketing efforts and new promotions at the casino  Slot
machine win per day (in ZAR) increased 14.4% for the three months ended
September 30, 2008. Our market share of the Kwazulu-Natal gaming revenue
increased from 3.4% for the three months ended September 30, 2007 to 3.6% for
the three months ended September 30, 2008.





Combined
gaming revenue at the Century Casino Millennium (Prague, Czech Republic) and
aboard the cruise ships on which we operated increased by $0.1 million, or 8.5%,
from $1.3 million for the three months ended September 30, 2007 to $1.4 million
for the three months ended September 30, 2008, primarily due to an increase in
gaming revenue at the Century Casino Millennium. Our revenue related to these
operations fluctuates significantly with the quality of the players. Century
Casino Millennium derives the majority of its gaming revenue from live table
games. The quality of the player has more of an impact on the live game results
when compared to the income derived from slot machines.





Hotel,
food and beverage revenue





Hotel,
food and beverage revenue increased by $0.2 million, or 7.2%, from $3.5 million
for the three months ended September 30, 2007 to $3.7 million for the three
months ended September 30, 2008. Hotel, food and beverage revenue increased
primarily due to a special food promotion held at Womacks during the third
quarter of 2008 and increases in the number of players and hotel guests from the
August 2007 conversion of the dinner theater to a live music showroom in
Edmonton.





--20--


Promotional
allowances





Promotional
allowances decreased by $0.2 million, or 8.2%, from $2.5 million for the three
months ended September 30, 2007 to $2.3 million for the three months ended
September 30, 2008. Promotional allowances decreased by $0.1 million at our
casino in Central City and by $0.1 million at our casino in Caledon, South
Africa, the direct result of declines in gaming revenue at each property. The
retail value of accommodations, food and beverage, and other services furnished
to guests without charge (“complimentaries”) is included in gross revenue and
then deducted as promotional allowances. As a result, complimentaries neither
increase nor decrease our overall net operating revenue.





Operating Costs and
Expenses





Operating
costs and expenses for the three months ended September 30, 2008 and 2007 were
as follows (in thousands):





Three
      months
              ended
      September 30,2008
            
            
            2007
            
            
            Variance
            
            
            Percentage
              VarianceGaming
            
            $
            8,289
            
            
            $
            9,222
            
            
            $
            (933
            )
            
            
            (10.1
            %)Hotel,
      food and beverage
            
            
            2,827
            
            
            
            2,802
            
            
            
            25
            
            
            
            0.9
            %General
      and administrative
            
            
            6,316
            
            
            
            7,239
            
            
            
            (923
            )
            
            
            (12.8
            %)Impairments
      and other write-offs, net of recoveries
            
            
            9,357
            
            
            
            9
            
            
            
            9,348
            
            
            
            100.0
            %Depreciation
            
            
            2,369
            
            
            
            1,987
            
            
            
            382
            
            
            
            19.2
            %Total
      operating costs and expenses
            
            $
            29,158
            
            
            $
            21,259
            
            
            $
            7,899
            
            
            
            37.2
            %





Gaming
expenses





Gaming
expenses decreased $0.9 million, or 10.1%, from the three months ended September
30, 2007 to the three months ended September 30, 2008, primarily due to a
decrease in expenses at our Colorado and Caledon, South Africa casino that are
directly related to decreased gaming revenue and a decline in the average
exchange rate between the U.S. dollar and South African rand, partially offset
by increased expenses at our casino in Edmonton.





Gaming
expenses at the Century Casino & Hotel in Edmonton increased $0.3 million,
or 24.0%, from $1.4 million for the three months ended September 30, 2007 to
$1.7 million for the three months ended September 30, 2008. In CAD, gaming
expenses increased CAD 0.4 million, or 25.9%, from CAD 1.4 million for the three
months ended September 30, 2007 to CAD 1.8 million for the three months ended
September 30, 2008, primarily due to an increase in payroll expenses resulting
from the introduction of 24-hour poker in the fourth quarter of
2007.





Gaming
expenses at Womacks decreased $0.6 million, or 34.1%, from $1.7 million for the
three months ended September 30, 2007 to $1.1 million for the three months ended
September 30, 2008. This decrease is primarily the result of a $0.3 million
decrease in gaming taxes resulting from the decrease in gaming revenue, a
decline in royalties of $0.1 million and a decline in payroll expenses of $0.1
million.  As part of a plan to bring expenses back in line with
revenue levels, management has reduced staff levels from 135 full time
equivalents at December 31, 2007 to 91 full time equivalents as of September 30,
2008.  Management continues to evaluate various marketing strategies
to attract customers back to this casino.





--21--


Gaming
expenses at the Century Casino & Hotel in Central City decreased $0.4
million, or 18.4%, from $2.4 million for the three months ended September 30,
2007 to $2.0 million for the three months ended September 30, 2008, primarily
due to a $0.3 million decrease in gaming taxes resulting from the decrease in
gaming revenue and a $0.1 million decrease in payroll expenses. As part of a
plan to bring expenses back in line with revenue levels, management has reduced
staff levels from 122 full time equivalents at December 31, 2007 to 96 full time
equivalents as of September 30, 2008.





Gaming
expenses at our casino in Caledon, South Africa decreased by $0.2 million, or
11.4%, from $1.5 million for the three months ended September 30, 2007 to $1.3
million for the three months ended September 30, 2008. In rand, gaming expense
decreased by ZAR 0.3 million, or 3.1%, from ZAR 10.9 million for the three
months ended September 30, 2007 to ZAR 10.6 million for the three months ended
September 30, 2008, primarily due to a decrease in value added taxes of ZAR 0.4
million, a decrease in gaming taxes of ZAR 0.2 million and a decrease in
advertising charges of ZAR 0.2 million. These decreases were offset by an
increase in payroll expenses of ZAR 0.2 million and an increase in royalties of
ZAR 0.2 million.





Gaming
expenses at the Century Casino & Hotel in Newcastle decreased by $0.1
million, or 5.1%, from $1.1 million for the three months ended September 30,
2007 to $1.0 million for the three months ended September 30, 2008, due to the
decrease in the exchange rate between the U.S. dollar and the South African
rand. In rand, gaming expenses increased by ZAR 0.4 million, or 4.6%, from ZAR
7.6 million for the three months ended September 30, 2007 to ZAR 8.0 million for
the three months ended September 30, 2008, primarily due to an increase of ZAR
0.2 million in gaming taxes resulting from increased gaming revenue and an
increase of ZAR 0.2 million in value added taxes.





Gaming
expenses at the Century Casino Millennium in Prague and aboard the cruise ships
on which we operate remained flat at $1.1 million for the three months ended
September 30, 2008 compared to the three months ended September 30, 2007.
Increased gaming expenses at the Century Casino Millennium were offset by a
decline in ship gaming expenses.





Hotel,
food and beverage expenses





Hotel,
food and beverage expenses remained flat at $2.8 million for the three months
ended September 30, 2008 compared to the three months ended September 30, 2007.
Increased food expenses resulting from a special promotion at Womacks were
offset by decreased food and beverage expenses at our remaining
properties.





General
and administrative expenses





General
and administrative expenses decreased $0.9 million, or 12.8%, from $7.2 million
for the three months ended September 30, 2007 to $6.3 million for the three
months ended September 30, 2008. General and administrative expenses at the
properties include facility maintenance, utilities, property and liability
insurance, property taxes, housekeeping, and all administrative departments,
such as information technology, accounting, human resources and internal
audit.





General
and administrative expenses at the Century Casino & Hotel in Edmonton
remained flat at $1.1 million for the three months ended September 30, 2008
compared to the three months ended September 30, 2007. In CAD, general and
administrative expenses decreased by CAD 0.1 million, or 10.5%, from CAD 1.2
million to CAD 1.1 million for the three months ended September 30, 2008,
primarily due to declines in property tax expenses, payroll expenses and
professional fees.





General
and administrative expenses at Womacks decreased by $0.2 million, or 20.6%, from
$1.0 million for the three months ended September 30, 2007 to $0.8 million for
the three months ended September 30, 2008, primarily due to a decrease in
payroll related to reduced staffing at the casino.





--22--


General
and administrative expenses at the Century Casino & Hotel in Central City
decreased by $0.2 million, or 16.7%, from $1.1 million for the three months
ended September 30, 2007 to $0.9 million for the three months ended September
30, 2008. The decrease is primarily the result of a $0.1 million decline in
payroll expenses and a $0.1 million decline in professional fees.





General
and administrative expenses at the Caledon increased by $0.2 million, or 19.7%,
from $0.6 million for the three months ended September 30, 2008 to $0.8 million
for the three months ended September 30, 2008. In rand, general and
administrative expenses increased by ZAR 1.6 million, or 36.7%, from ZAR 4.3
million for the three months ended September 30, 2007 to ZAR 5.9 million for the
three months ended September 30, 2008. This increase is the result of a ZAR 0.3
million increase in payroll resulting from additional employees at the casino,
ZAR 0.2 million increase in professional fees, ZAR 0.4 million increase in
property taxes resulting from a one-time credit received in 2007, a ZAR 0.1
million increase in uniform expenses and a ZAR 0.5 million increase in corporate
allocations (primarily payroll).





General
and administrative expenses at the Century Casino & Hotel in Newcastle
decreased by $0.3 million, or 28.3%, from $0.9 million for the three months
ended September 30, 2007 to $0.6 million for the three months ended September
30, 2008. In rand, general and administrative expenses decreased by ZAR 0.8
million, or 14.0%, from ZAR 5.8 million for the three months ended September 30,
2007 to ZAR 5.0 million for the three months ended September 30, 2008. The
decrease is primarily due to a decrease in professional fees of ZAR 0.3 million,
decreased maintenance charges of ZAR 0.1 million and a decrease in other taxes
(primarily VAT) of ZAR 0.5 million, partially offset by an increase in payroll
expenses of ZAR 0.1 million.





Combined
general and administrative expenses at the Century Casino Millennium and aboard
the cruise ships remained flat at $0.2 million for the three months ended
September 30, 2008 compared to the three months ended September 30,
2007.





Corporate
expenses decreased by $0.3 million, or 15.4%, from $2.2 million for the three
months ended September 30, 2007 to $1.9 million for the three months ended
September 30, 2008, primarily due to a decrease in payroll expense of $0.2
million and a decline in legal, accounting and other professional fees of $0.1
million.





At
September 30, 2008, we have $2.1 million of total unrecognized compensation
expense related to unvested stock options and unvested restricted stock. Of this
amount, $0.4 million will be recognized over the remainder of 2008, and $1.7
million will be recognized in subsequent years through 2011.





Impairments
and other write-offs, net of recoveries





For the
three months ended September 30, 2008, we recorded $9.4 million in impairments
of goodwill related to Womacks and the Century Casino and Hotel in Central City,
Colorado. During 2008, these operations have experienced a significant decline
in gaming revenue. We deemed this to be an indicator of potential impairment
under the guidance set forth in SFAS No. 142, “Goodwill and Other Intangible
Assets.” As a result, the Company performed interim goodwill impairment analyses
as of September 30, 2008 and determined that there would be no remaining value
attributable to goodwill. Accordingly, we wrote-off the entire goodwill balances
related to these operations.





Depreciation





Depreciation
expense increased by $0.4 million, or 19.2%, from $2.0 million for the three
months ended September 30, 2007 to $2.4 million for the three months ended
September 30, 2008. This increase is primarily due to the completion of a
renovation project at Womacks in the first quarter of 2008 which contributed
$1.8 million of depreciable assets. In addition, based upon a compliance review
of our fixed asset policy in Newcastle, South Africa, we recorded a one-time
reduction of $0.2 million of depreciation expense for the three months ended
September 30, 2007.





--23--


Non-operating income
(expense)





Non-operating
income (expense) for the three months ended September 30, 2008 and 2007 was as
follows (in thousands):





Three
      months
              ended
      September 30,2008
            
            
            2007
            
            
            Variance
            
            
            Percentage
              VarianceInterest
      income
            
            $
            37
            
            
            $
            85
            
            
            $
            (48
            )
            
            
            (56.5
            %)Interest
      expense
            
            
            (1,197
            )
            
            
            (1,649
            )
            
            
            452
            
            
            
            (27.4
            %)Losses
      on foreign currency translation and other
            
            
            (71
            )
            
            
            (73
            )
            
            
            2
            
            
            
            (2.7
            %)Non-operating
      expense
            
            $
            (1,231
            )
            
            $
            (1,637
            )
            
            $
            406
            
            
            
            (24.8
            %)





Interest
income





Interest
income is directly related to the cash reserves we have on hand. Since September
30, 2007, we have reduced our outstanding third party debt related to our
casinos in Colorado from $28.2 million to $21.9 million as of September 30,
2008, utilizing cash on hand. This decrease in available cash, combined with a
decrease in interest rates that we earn on our deposits, contributed to the
overall decline in interest income for the three months ended September 30, 2008
compared to the three months ended September 30, 2007.





Interest
expense





The
decrease in interest expense is primarily due to a decrease in interest rates
and a decrease in our average debt balance from $65.6 million for the three
months ended September 30, 2007 to $52.2 million for the three months ended
September 30, 2008. Our weighted average interest rate, excluding the impact of
the amortization of deferred financing charges, was 9.4% and 8.6% for the three
months ended September 30, 2007 and 2008, respectively.





Losses
on foreign currency transactions and other





We
recognized foreign currency losses of less than $0.1 million for both the three
months ended September 30, 2007 and 2008, resulting from the exchange of
currency. We have outstanding cash denominated in U.S. dollars, Canadian
dollars, Euros and South African rand.





Other
Items





Earnings
from equity investment





We own
33.3% of all shares issued by CPL. Our portion of CPL’s earnings are recorded as
earnings from equity investment.  We recorded less than $0.1 million
of earnings and $0.2 million of earnings from our investment in CPL for the
three months ended September 30, 2007 and 2008, respectively.





Taxes





Our
effective tax rate was 1.4% and (68.7%) for the three months ended September 30,
2007 and 2008, respectively. The mix of domestic losses and foreign earnings
significantly impacts our tax rate. The tax benefit recorded on losses incurred
by our U.S. domestic entities is significantly higher than the tax on income at
our foreign operations, particularly in South Africa and Mauritius. For the
three months ended September 30, 2008, we incurred pre-tax losses for our U.S.
based operations (including corporate losses) of $11.1 million compared to
pre-tax earnings at our remaining operations of $2.8 million. Our taxes are
further adjusted for non-deductible permanent differences. Also, for the three
months ended September 30, 2008, we established a $6.0 million valuation
allowance for our U.S. deferred taxes. If we conclude at a later date that the
realization of these deferred taxes is more likely than not, we will reduce the
valuation allowance as appropriate.





--24--


Minority
interest in subsidiary earnings and losses





For the
three months ended September 30, 2007, we allocated losses of $0.2 million to
various parties who hold a minority interest in our properties. For the three
months ended September 30, 2008, we allocated earnings of $0.1 million to these
parties. For the 2007 period, we allocated approximately $0.2 million in losses
to a former partner in CC Tollgate LLC, which owns our Central City casino. On
December 31, 2007, we purchased this partner’s interest in CC Tollgate LLC. As a
result, we now retain all the earnings and losses for the casino in Central
City.





Preference
dividends issued by subsidiary





Preference
shareholders of our subsidiary, Century Casinos Caledon (Pty) Ltd., are entitled
to per share dividends of 0.009% of the annual gross gaming revenue of the
Caledon Hotel, Spa & Casino after the deduction of gaming taxes and value
added tax. For each of the three months ended September 30, 2007 and 2008, we
issued dividends of less than $0.1 million.





Nine
months ended September 30, 2008 vs 2007





Revenue





Net
operating revenue for the nine months ended September 30, 2008 and 2007 was as
follows (in thousands):





Nine
      months
              ended
      September 30,2008
            
            
            2007
            
            
            Variance
            
            
            Percentage
              VarianceGaming
            
            $
            58,753
            
            
            $
            64,541
            
            
            $
            (5,788
            )
            
            
            (9.0
            %)Hotel,
      food and beverage
            
            
            10,390
            
            
            
            9,325
            
            
            
            1,065
            
            
            
            11.4
            %Other
            
            
            1,659
            
            
            
            1,489
            
            
            
            170
            
            
            
            11.4
            %Gross
      revenue
            
            
            70,802
            
            
            
            75,355
            
            
            
            (4,553
            )
            
            
            (6.0
            %)Less
      promotional allowances
            
            
            6,415
            
            
            
            6,897
            
            
            
            (482
            )
            
            
            (7.0
            %)Net
      operating revenue
            
            $
            64,387
            
            
            $
            68,458
            
            
            $
            (4,071
            )
            
            
            (5.9
            %)





Gaming
revenue





Gaming
revenue decreased by $5.8 million, or 9.0%, from $64.5 million for the nine
months ended September 30, 2007 to $58.7 million for the nine months ended
September 30, 2008. Declines in our Colorado operations and our Caledon, South
Africa operation were partially offset by increased gaming revenue at our casino
in Edmonton.





Gaming
revenue at the Century Casino & Hotel in Edmonton increased by $2.4 million,
or 23.4%, from $10.3 million for the nine months ended September 30, 2007 to
$12.7 million for the nine months ended September 30, 2008, primarily due to
increased play at the casino resulting from additional slot machines and
increased traffic from the showroom, as well as a 7.8% improvement in the
average exchange rate between the U.S. dollar and Canadian dollar. Gaming
revenue in Canadian dollars increased by CAD 1.7 million, or 14.4%, from CAD
11.3 million to CAD 13.0 million for the nine months ended September 30, 2008.
This is the result of an increase of 9.1% in slot revenue and 21.9% in table
revenue. The Alberta Gaming and Liquor Commission increased the number of slot
machines at the casino from 600 to 650 in September 2007. In addition, we
introduced 24-hour poker at the casino during the fourth quarter of
2007.




--25--





Gaming
revenue at Womacks decreased by $4.9 million, or 33.2%, from $14.7 million for
the nine months ended September 30, 2007 to $9.8 million for the nine months
ended September 30, 2008. Management believes that gaming revenue was negatively
impacted by a 9.0% decline in the Cripple Creek gaming market, which is where
Womacks is located, and can be attributed to a decline in consumer discretionary
income, increased fuel prices and a smoking ban that went into effect on January
1, 2008.  The Cripple Creek gaming market experienced a smaller
decline than either the Central City or Black Hawk gaming markets, which posted
declines of 20.3% and 11.5%, respectively.  Management believes that a
decision by several casinos in Cripple Creek to claim an exemption to the
smoking ban contributed to the smaller decline in Cripple Creek than either
Central City or Black Hawk (the last casino permitting smoking stopped allowing
it on October 9, 2008).  In addition, in late May 2008, a new larger
casino opened in Cripple Creek. Management also believes that we lost a
significant amount of our customer base due to a renovation that we began during
the fourth quarter of 2007 and continued through the first quarter of 2008. We
believe the renovation has upgraded the gaming floor and dining area, but may
have inconvenienced customers which ultimately led to our decreased revenue.
Womacks has continued the effort to improve the customer experience at Womacks
by converting 100% of the machines on the floor to Ticket in/Ticket out devices.
We are currently reviewing various strategies to increase gaming revenue at
Womacks. Our market share of the Cripple Creek gaming revenue declined from
12.3% for the first nine months of 2007 to 9.1% for the first nine months of
2008.





Gaming
revenue at the Century Casino and Hotel in Central City decreased by $2.1
million, or 12.6%, from $16.9 million for the nine months ended September 30,
2007 to $14.8 million for the nine months ended September 30, 2008. Similar to
the Cripple Creek market, management believes that gaming revenue was negatively
impacted by a 20.3% decline in the Central City gaming market and can be
attributed to a decline in consumer discretionary income, increased fuel prices
and the smoking ban that went into effect on January 1, 2008. Our market share
of the Central City gaming revenue increased from 27.5% for the first nine
months of 2007 to 28.5% for the first nine months of 2008.





Gaming
revenue at our casino in Caledon, South Africa decreased by $1.2 million, or
10.6% from $11.4 million for the nine months ended September 30, 2007 to $10.2
million for the nine months ended September 30, 2008, due primarily to lower
customer attendance and a 7.7% decline in the average exchange rate between the
U.S. dollar and the South African rand. As Caledon is located approximately 60
miles from Cape Town, management believes that higher fuel prices during 2008
has led local patrons from Cape Town to gamble in Cape Town as opposed to
traveling to our casino. Gaming revenue in rand decreased by ZAR 3.1 million, or
3.9%, from ZAR 81.2 million to ZAR 78.1 million for the nine months ended
September 30, 2008. In May 2007, we increased the number of slot machines on the
floor from 350 to 370. This resulted in a decline in our slot machine win per
day from ZAR 772 for the nine months ended September 30, 2007 to ZAR 734 for the
nine months ended September 30, 2008. Also, to a lesser extent, the addition of
two table games contributed to a decline in table win (in ZAR) per day of 41.0%
for the nine months ended September 30, 2008. Our market share of the Western
Cape gaming revenue declined from 5.0% for the nine months ended September 30,
2007 to 4.7% for the nine months ended September 30, 2008. Management attributes
this decline to the higher fuel prices. The Western Cape operates with the
maximum permitted number of five casinos.





Gaming
revenue at the Century Casino & Hotel in Newcastle, South Africa decreased
by $0.2 million, or 1.8%, from $7.6 million for the nine months ended September
30, 2007 to $7.4 million for the nine months ended September 30, 2008, a result
of a 7.7% decline in the average exchange rate between the U.S. dollar and the
South African rand. Gaming revenue in rand increased by ZAR 3.1 million, or
5.7%, from ZAR 53.9 million to ZAR 57.0 million for the nine months ended
September 30, 2008. For the nine months ended September 30, 2008, our slot
machine win per day increased by 7.4% (in ZAR). Our market share of the
Kwazulu-Natal gaming revenue declined slightly from 3.5% for the nine months
ended September 30, 2007 to 3.4% for the nine months ended September 30,
2008.





--26--


Combined
gaming revenue at the Century Casino Millennium (Prague, Czech Republic) and
aboard the cruise ships on which we operated increased by $0.1 million, or 4.5%,
from $3.7 million for the nine months ended September 30, 2007 to $3.8 million
for the nine months ended September 30, 2008, primarily due to improved
operations at the Century Casino Millennium. Our revenue related to these
operations fluctuates significantly with the quality of players. Century Casino
Millennium derives the majority of its gaming revenue from live table games. The
quality of the player has more of an impact on the live game results when
compared to the income derived from slot machines.





Hotel,
food and beverage revenue





Hotel,
food and beverage revenue increased by $1.1 million, or 11.4%, from $9.3 million
for the nine months ended September 30, 2007 to $10.4 million for the nine
months ended September 30, 2008. The combined effect of opening our hotel in
Edmonton in March 2007 and converting the dinner theater to a live music
showroom in August 2007 increased hotel, food and beverage revenue in Edmonton
by $0.6 million period over period. In addition, hotel, food and beverage
revenue at our South African operations increased by $0.4 million, primarily due
to increased hotel occupancy and conferences.





Promotional
allowances





Promotional
allowances decreased by $0.5 million, or 7.0%, from $6.9 million for the nine
months ended September 30, 2007 to $6.4 million for the nine months ended
September 30, 2008. Promotional allowances at our casino in Central City
decreased by $0.5 million, the direct result of a decline in gaming revenue at
the property.





Operating Costs and
Expenses





Operating
costs and expenses for the nine months ended September 30, 2008 and 2007 were as
follows (in thousands):





Nine
      months
              ended
      September 30,2008
            
            
            2007
            
            
            Variance
            
            
            Percentage
              VarianceGaming
            
            $
            24,618
            
            
            $
            25,790
            
            
            $
            (1,172
            )
            
            
            (4.5
            %)Hotel,
      food and beverage
            
            
            7,864
            
            
            
            7,927
            
            
            
            (63
            )
            
            
            (0.8
            %)General
      and administrative
            
            
            19,888
            
            
            
            20,024
            
            
            
            (136
            )
            
            
            (0.7
            %)Impairments
      and other write-offs, net of recoveries
            
            
            9,357
            
            
            
            34
            
            
            
            9,323
            
            
            
            100.0
            %Depreciation
            
            
            6,945
            
            
            
            6,310
            
            
            
            635
            
            
            
            10.1
            %Total
      operating costs and expenses
            
            $
            68,672
            
            
            $
            60,085
            
            
            $
            8,587
            
            
            
            14.3
            %





Gaming
expenses





Gaming
expenses decreased $1.2 million, or 4.5%, from the nine months ended September
30, 2007 compared to the nine months ended September 30, 2008, primarily due to
a decrease in gaming expenses at our Colorado and South African casinos that are
directly related to decreased gaming revenue and a decline in the average
exchange rate between the U.S. dollar and South African rand, partially offset
by increased expenses at our casino in Edmonton.





Gaming
expenses at the Century Casino & Hotel in Edmonton increased $0.9 million,
or 24.5%, from $3.8 million for the nine months ended September 30, 2007 to $4.7
million for the nine months ended September 30, 2008. This increase is primarily
due to a $0.6 million increase in payroll expenses resulting from the
introduction of 24-hour poker in the fourth quarter of 2007, an increase of $0.2
million in advertising and promotional charges and increased lease expenses of
$0.1 million.





--27--


Gaming
expenses at Womacks decreased $1.0 million, or 21.7%, from $4.6 million for the
nine months ended September 30, 2007 to $3.6 million for the nine months ended
September 30, 2008. This decrease is the result of a $0.6 million decrease in
gaming taxes resulting from the decrease in gaming revenue, a decline in payroll
expenses of $0.2 million and a decline in royalty expense of $0.2
million.  Womacks was not able to offset the decrease in revenue by
decreasing variable expenses for the first nine months of 2008. As part of a
plan to bring expenses back in line with revenue levels, management has reduced
staff levels from 135 full time equivalents at December 31, 2007 to 91 full time
equivalents as of September 30, 2008. Management continues to evaluate various
marketing strategies to attract customers back to this casino.





Gaming
expenses at the Century Casino & Hotel in Central City decreased by $0.6
million, or 9.2%, from $6.5 million for the nine months ended September 30, 2007
to $5.9 million for the nine months ended September 30, 2008. The decrease in
gaming expenses is primarily the result of a $0.4 million decrease in gaming
taxes resulting from the decrease in gaming revenue and a $0.2 million decrease
in payroll expenses. As part of a plan to bring expenses back in line with
revenue levels, management has reduced staff levels from 122 full time
equivalents at December 31, 2007 to 96 full time equivalents as of September 30,
2008.





Gaming
expenses at our casino in Caledon, South Africa decreased by $0.2 million, or
5.0%, from $4.4 million for the nine months ended September 30, 2007 to $4.2
million for the nine months ended September 30, 2008, primarily due to the
decline in the exchange rate between the U.S. dollar and South African rand. In
rand, gaming expense increased by ZAR 0.8 million, or 2.5%, from ZAR 31.6
million for the nine months ended September 30, 2007 to ZAR 32.4 million for the
nine months ended September 30, 2008, primarily due to a ZAR 0.5 million
increase in payroll expenses resulting from additional employees at the casino,
a ZAR 0.7 million increase in royalty expenses and a ZAR 0.5 million increase in
supply expenses. These increases were offset by a decrease of ZAR 0.3 million in
maintenance expenses, ZAR 0.2 million in gaming taxes and ZAR 0.5 million in
value added taxes.





Gaming
expenses at the Century Casino & Hotel in Newcastle decreased by $0.2
million, or 6.0%, from $3.2 million for the nine months ended September 30, 2007
to $3.0 million for the nine months ended September 30, 2008. In rand, gaming
expense increased by ZAR 0.4 million, or 1.7%, from ZAR 22.7 million for the
nine months ended September 30, 2007 to ZAR 23.1 million for the nine months
ended September 30, 2008, primarily due to ZAR 0.3 million increase in slot
conversions and ZAR 0.2 million increase in supply expenses, a ZAR 0.3 million
increase in gaming taxes and a ZAR 0.4 million increase in value added taxes.
These increases were offset by a ZAR 0.4 million decrease in license fees and a
ZAR 0.5 million decrease in marketing/advertising expenses.





Gaming
expenses at the Century Casino Millennium in Prague and aboard the cruise ships
on which we operate decreased by $0.1 million, or 2.8%, from $3.2 million for
the nine months ended September 30, 2007 to $3.1 million for the nine months
ended September 30, 2008 primarily due to decreases in marketing expenditures
and gaming and sales/use taxes.





Hotel,
food and beverage expenses





Hotel,
food and beverage expenses remained flat at $7.9 million for the nine months
ended September 30, 2008 compared to the nine months ended September 30, 2007.
Increased hotel, food and beverage expenses at Womacks and the Caledon were
offset by decreases in hotel, food and beverage expenses at our remaining
properties.





--28--


General
and administrative expenses





General
and administrative expenses decreased by $0.1 million, or 0.7%, from $20.0
million for the nine months ended September 30, 2007 to $19.9 million for the
nine months ended September 30, 2008. General and administrative expenses at the
properties include facility maintenance, utilities, property and liability
insurance, property taxes, housekeeping, and all administrative departments,
such as information technology, accounting, human resources and internal
audit.





General
and administrative expenses at the Century Casino & Hotel in Edmonton
increased by $0.2 million, or 5.4%, from $3.4 million for the nine months ended
September 30, 2007 to $3.6 million for the nine months ended September 30, 2008.
In CAD, general and administrative expenses decreased by CAD 0.2 million, or
4.4%, from CAD 3.8 million for the nine months ended September 30, 2007 to CAD
3.6 million for the nine months ended September 30, 2008. The decrease is
primarily the result of a decrease in payroll expense of CAD 0.1 million and a
decrease in insurance expense of CAD 0.1 million.





General
and administrative expenses at Womacks decreased by $0.3 million, or 11.0%, from
$2.8 million for the nine months ended September 30, 2007 to $2.5 million for
the nine months ended September 30, 2008, primarily due to a $0.3 million
decline in payroll expenses from reduced staffing.





General
and administrative expenses at the Century Casino & Hotel in Central City
decreased by $0.4 million, or 11.3%, from $3.4 million for the nine months ended
September 30, 2007 to $3.0 million for the nine months ended September 30, 2008,
primarily the result of decreases of $0.1 million in our property tax accrual,
$0.1 million of professional fees and $0.1 million of insurance
expenses.





General
and administrative expenses at the Caledon increased by $0.2 million, or 10.3%,
from $2.0 million for the nine months ended September 30, 2007 to $2.2 million
for the nine months ended September 30, 2008. In rand, general and
administrative expenses increased ZAR 2.5 million, or 18.0%, from ZAR 14.4
million for the nine months ended September 30, 2007 to ZAR 16.9 million for the
nine months September 30, 2008. The increase is due to ZAR 1.7 million of
increased corporate overhead allocations (primarily payroll), ZAR 0.7 million of
increased payroll at the casino and a ZAR 0.6 million of increased property
taxes (resulting from a one-time property tax adjustment in 2007, offset by a
ZAR 0.5 million decrease in professional fees.





General
and administrative expenses at the Century Casino & Hotel in Newcastle
decreased by $0.1 million, or 6.0%, from $2.1 million for the nine months ended
September 30, 2007 to $2.0 million for the nine months ended September 30, 2008.
In rand, general and administrative expenses remained flat at ZAR 15.3 million
for the nine months ended September 30, 2008 as compared to the nine months
ended September 30, 2007. Increases in payroll expenses of approximately ZAR 0.4
million and professional fees of approximately ZAR 0.7 million, were offset by
decreased licensing expenses of ZAR 0.2 million, decreased tax expenses of ZAR
0.2 million and decreases in other losses resulting from casino thefts in 2007
of ZAR 0.6 million.





Combined
general and administrative expenses at the Century Casino Millennium and aboard
the cruise ships increased by $0.2 million, or 36.7%, from $0.3 million for the
nine months ended September 30, 2007 to $0.5 million for the nine months ended
September 30, 2008, primarily due to increases in professional fees and payroll
expenses at the Century Casino Millennium.





Corporate
expenses increased by $0.2 million, or 2.9%, from $5.9 million for the nine
months ended September 30, 2007 to $6.1 million for the nine months ended
September 30, 2008. The increase in 2008 is primarily due to a $0.6 million
increase in stock compensation expenses related to the amortization of costs
associated with restricted stock and stock options issued in July 2007, offset
by a $0.1 million decrease in communication expenses and a $0.2 million decrease
in legal, accounting and other professional fees.





--29--


Impairments
and other write-offs, net of recoveries





For the
nine months ended September 30, 2008, we recorded $9.4 million in impairments of
goodwill related to Womacks and the Century Casino and Hotel in Central City,
Colorado. During 2008, these operations have experienced a significant decline
in gaming revenue. We deemed this to be an indicator of potential impairment
under the guidance set forth in SFAS No. 142, “Goodwill and Other Intangible
Assets.” As a result, the Company performed interim goodwill impairment analyses
as of September 30, 2008 and determined that there would be no remaining value
attributable to goodwill. Accordingly, we wrote-off the entire goodwill balances
related to these operations.





Depreciation





Depreciation
expense increased by $0.6 million, or 10.1%, from $6.3 million for the nine
months ended September 30, 2007 to $6.9 million for the nine months ended
September 30, 2008. This increase is primarily due to $1.6 million of gaming
equipment and non-gaming equipment additions during 2007 and the completion of a
renovation project at Womacks in the first quarter 2008 which contributed $1.8
million of depreciable assets.  These assets are depreciated over
periods varying from three to seven years.





Non-operating income
(expense)





Non-operating
income (expense) for the nine months ended September 30, 2008 and 2007 was as
follows (in thousands):





Nine
      months
              ended
      September 30,2008
            
            
            2007
            
            
            Variance
            
            
            Percentage
              VarianceInterest
      income
            
            $
            162
            
            
            $
            802
            
            
            $
            (640
            )
            
            
            (79.8
            %)Interest
      expense
            
            
            (4,106
            )
            
            
            (5,280
            )
            
            
            1,174
            
            
            
            (22.2
            %)Gains
      of foreign currency translation and other
            
            
            108
            
            
            
            714
            
            
            
            (606
            )
            
            
            (84.9
            %)Non-operating
      expense
            
            $
            (3,836
            )
            
            $
            (3,764
            )
            
            $
            (72
            )
            
            
            1.9
            %





Interest
income





Interest
income is directly related to the cash reserves we have on hand. Since September
30, 2007, we have reduced our outstanding third party debt related to our
casinos in Colorado from $28.2 million to $21.9 million as of September 30,
2008, utilizing cash on hand. This decrease in available cash, combined with a
decrease in interest rates that we earn on our deposits, contributed to the
overall decline in interest income for the nine months ended September 30, 2008
compared to the nine months ended September 30, 2007.





Interest
expense





The
decrease in interest expense is primarily due to a decrease in interest rates
and a decrease in our average debt balance from $68.2 million for the nine
months ended September 30, 2007 to $56.4 million for the nine months ended
September 30, 2008. Our weighted average interest rate, excluding the impact of
the amortization of deferred financing charges and one-time charges of $0.3
million for bank waivers of a financial covenant related to our Central City
debt, was 9.0% and 8.3% for the nine months ended September 30, 2007 and 2008,
respectively.





--30--


Gain
on foreign currency transactions and other





We
recognized foreign currency gains of $0.7 million and $0.1 million for the nine
months ended September 30, 2007 and 2008, respectively, resulting from the
exchange of currency. We have outstanding cash denominated in U.S. dollars,
Canadian dollars, Euros and South African rand.





Other
Items





Earnings
from equity investment





On March
12, 2007, we completed the acquisition of G5 Sp. z o.o. (“G5”). G5 owns 33.3% of
all shares issued by CPL. Our portion of CPL’s earnings are recorded as earnings
from equity investment. We began reporting our share of CPL’s earnings in April
2007. We recorded $0.1 million of earnings from our investment in CPL for the
period between March 12, 2007 and August 31, 2007. For the nine months ended
September 30, 2008, we recorded $0.8 million of earnings from our investment in
CPL.





Taxes





Our
effective tax rate was 13.9% and (68.1%) for the nine months ended September 30,
2007 and 2008, respectively. The mix of domestic losses and foreign earnings
significantly impacts our rate. The tax benefit received on losses incurred by
our U.S. domestic entities is significantly higher than the tax on income at our
foreign operations, particularly in South Africa and Mauritius. For the nine
months ended September 30, 2008, we incurred pre-tax losses for our U.S. based
operations (including corporate losses) of $16.5 million compared to pre-tax
earnings at our remaining operations of $9.1 million. Our taxes are further
adjusted for non-deductible permanent differences. Also, for the nine months
ended September 30, 2008, we established a $6.0 million valuation allowance for
our U.S. deferred taxes. If we conclude at a later date that the realization of
these deferred taxes are more likely than not, we will reduce the valuation
allowance as appropriate.





Minority
interest in subsidiary earnings and losses





For the
nine months ended September 30, 2007, we allocated net losses of $0.8 million to
various parties who hold a minority interest in our properties. For the nine
months ended September 30, 2008, we allocated earnings of $0.3 million to these
parties. For the 2007 period, we allocated approximately $1.1 million in losses
to a former partner in CC Tollgate LLC. On December 31, 2007, we purchased this
partner’s interest in CC Tollgate LLC. As a result, we now retain all the
earnings and losses for the casino in CC Tollgate LLC.





Preference
dividends issued by subsidiary





Preference
shareholders of our subsidiary, Century Casinos Caledon (Pty) Ltd., are entitled
to per share dividends of 0.009% of the annual gross gambling revenue of the
Caledon, Hotel, Spa & Casino after the deduction of gaming taxes and value
added tax. Dividends issued by Caledon to preference shareholders decreased by
$0.1 million, or 55.2%, from $0.3 million for the nine months ended September
30, 2007 to $0.2 million for the nine months ended September 30, 2008. The
dividends issued for the nine months ended September 30, 2007 included a one
time dividend payment of $0.2 million to a preference shareholder that exchanged
its original preference shares for a new class of preference
shares.





--31--


LIQUIDITY
AND CAPITAL RESOURCES





Cash
Flows





Cash and
cash equivalents totaled $8.3 million at September 30, 2008, and we had a
working capital (current assets minus current liabilities) deficit of $9.7
million compared to cash and cash equivalents of $17.9 million and a working
capital deficit of $2.8 million at December 31, 2007.





We use
the cash flows that we generate to repay existing third party debt, to fund
reinvestment in existing properties for both refurbishment and expansion
projects and to pursue additional growth via new development opportunities. When
necessary, we supplement the cash flows generated by our operations with either
cash on hand or funds provided by financing activities.





For the
nine months ended September 30, 2008, $5.5 million of net cash was provided by
operating activities. For the nine months ended September 30, 2007, $7.4 million
of net cash was provided by operating activities.  The change from the
2007 period relates primarily to a $3.6 million decrease in pre-tax earnings,
excluding the write-off of goodwill, in Cripple Creek Colorado, offset by a $2.5
million increase in pre-tax earnings in Edmonton Canada. For a description of
the operating activities of the Company, please refer to the condensed
consolidated statements of cash flows and management’s discussion of the results
of operations.





Cash used
in investing activities of $2.6 million for the nine months ended September 30,
2008 consisted of $0.7 million in capital project additions at Womacks; $0.2
million in gaming and non-gaming addition in Central City; $0.4 million of
furniture and non-gaming equipment additions in Edmonton; $0.9 million in
capital project and gaming equipment additions at Caledon; $0.3 million in
gaming equipment and capital project additions at Newcastle; and $0.2 million of
cumulative additions at our other remaining properties. These cash payments were
offset by $0.2 million received from the disposition of assets.





Cash used
in investing activities of $8.9 million for the nine months ended September 30,
2007 consisted of $2.0 million towards the acquisition of G5; $1.2 million in
property and equipment additions at Womacks; $0.7 million towards construction
in Edmonton; $1.6 million in property and gaming equipment additions in Central
City; $0.8 million towards the development of a golf course and other property
improvements at Caledon; $2.4 million towards property improvements and
furniture and fixtures in Newcastle; $0.2 million for additional gaming
equipment on the ships; and $0.2 million of cumulative additions at our other
remaining properties. These cash payments were offset by the release of $0.2
million of restricted cash in Edmonton.





Cash used
in financing activities of $11.3 million for the nine months ended September 30,
2008 consisted of repayments of $1.8 million towards the Central City term loan;
repayments of $1.1 million towards the Edmonton term loan; net repayments of
$6.9 million towards the Womacks revolving credit facility; net repayments of
$2.0 million towards our South African term loans; and payments of $0.2 million
for fees associated with the amendment of debt agreements for the Central City
term loan and Womacks revolving credit facility. These repayments were offset by
$0.7 million of proceeds from stock option exercises.





Cash used
in financing activities of $15.1 million for the nine months ended September 30,
2007 consisted of net repayments of $12.0 million towards the Central City term
loan; net repayments of $1.4 million towards the Womacks revolving credit
facility; repayments of $1.1 million towards our Caledon term loan; repayments
of $1.0 million towards our Newcastle term loan; capital lease repayments of
approximately $0.2 million; and other net repayments of $0.1 million. These
repayments were offset by borrowings of $0.7 million under the loan agreement
for the Edmonton property.





--32--


Common
Stock Repurchase Program





Since
2000, we have had a discretionary program to repurchase up to $5.0 million
of our outstanding common stock.  We did not purchase any shares of
our common stock on the open market during the nine months ended September 30,
2008 and 2007. The total remaining authorization under the repurchase program
was $1.2 million as of September 30, 2008. The repurchase program has no set
expiration or termination date.





Potential
Sources of Liquidity





Following
the receipt of a number of verbal expressions of interest, we are considering
the sale of part or all of our South African casino resorts, which are The
Caledon Hotel, Spa and Casino in the Western Cape province and the Century
Casino and Hotel in Newcastle, KwaZulu-Natal province. While no formal plan or
agreement is yet in place, we have invited several interested parties to submit
their written expressions of interest.





We
believe that our cash at September 30, 2008, together with expected cash flows
from operations, will be sufficient to fund our anticipated operating costs and
capital expenditures at existing properties and to satisfy our current debt
repayment obligations. However, if operations at our properties do not improve,
we may need to raise additional capital or obtain additional debt financing in
order to fund our operations. We may not be able to obtain this funding when we
need it or on favorable terms. In addition, the amount of capital that we are
able to raise often depends on variables that are beyond our control, such as
the share price of our stock and its trading volume. As a result, we may not be
able to secure financing on terms attractive to us, or at all. If we are able to
consummate a financing arrangement, the amount raised may not be sufficient to
meet all of our future needs and may be highly dilutive. If we cannot raise
adequate funds to satisfy our capital requirements, we may have to scale back or
eliminate certain operations.





Prior to
September 30, 2008, we had a $5.0 million revolving line of credit facility for
Womacks. Effective September 30, 2008, this facility converted to a $4.4 million
term loan, repayable in 44 monthly installments. We also had a $2.5 million
revolving line of credit facility for our Central City property, of which there
was no balance outstanding. Effective September 30, 2008, this facility has been
eliminated.





Short-Term
Liquidity and Capital Requirements





We expect
that the primary source of our future operating cash flows will be from gaming
operations. Expected short-term uses of cash include ordinary operations,
foreign income tax payments, and interest and principal payments on outstanding
debt.





We will
continue to evaluate our planned capital expenditures at each of our existing
locations in light of the operating performance of the facilities at such
locations. From time to time we expect to have cash needs for the development of
new properties or expansion of existing properties that exceed our current
borrowing capacity and we may be required to seek additional financing in the
debt or equity markets. We may be unable to obtain additional debt or equity
financing on acceptable terms or at all.  As a result, limitations on
our capital resources could delay or cause us to abandon certain plans for the
development of new properties or expansion and/or renovation of existing
properties.





--33--


Item
3.                      QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





We had no
significant changes in our exposure to market risks from that previously
reported in our Annual Report on Form 10-K for the year ended December 31,
2007.





Item
4.                      CONTROLS
AND PROCEDURES





Evaluation of
Disclosure Controls and Procedures –Our management, with the
participation of our Co Chief Executive Officers, Principal Financial Officer
and Chief Accounting Officer, has evaluated the effectiveness of our disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end
of the period covered by this report. Based on such evaluation, our Co Chief
Executive Officers, Principal Financial Officer and Chief Accounting Officer
have concluded that as of such date, our disclosure controls and procedures were
effective to ensure that information required to be disclosed by us in reports
that we file or submit under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in applicable Securities and
Exchange Commission rules and forms.





Changes in
Internal Control Over Financial Reporting –  There has been no
change in our internal controls over financial reporting (as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the
three months ended September 30, 2008 that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.





--34--


PART
II - OTHER INFORMATION





Item
1A. – Risk Factors





The
information presented below updates and should be read in conjunction with Part
I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended
December 31, 2007. In addition to the other information set forth in the Form
10-K and this report, you should carefully consider the facts discussed in Part
I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended
December 31, 2007, which could materially affect our business, financial
condition or future results. The risks described in our Annual Report on Form
10-K are not the only risks facing our Company.  Additional risks and
uncertainties not currently known to us or that we currently deem to be
immaterial also may materially adversely affect our business, financial
condition or operating results.





A
downturn in general economic and geopolitical conditions may adversely affect
our results of operations. We are and may continue to be adversely affected by
the ongoing world financial crisis.





Our
business operations are subject to changes in international, national and local
economic conditions. The current volatile global economic environment is having
significant negative effects on our business. Our business is fueled by
discretionary income. Recessions or downturns in the general economies in which
we operate could result in fewer customers visiting our properties, which would
adversely affect our results of operations. Our operations in Colorado and in
Caledon, South Africa are located approximately one hour away from the major
markets they serve. Management believes that increased fuel prices and the
introduction of a smoking ban at all casinos in 2008 (in Colorado) have
contributed to a decline in these markets.





Our
indebtedness imposes restrictive covenants on us, which limits our operating
flexibility.





Our
various credit agreements require us, among other obligations, to maintain
specified financial ratios and satisfy certain financial tests, including
leverage ratios, total fixed charge coverages and minimum annualized EBITDA
(earnings before interest, taxes, depreciation and amortization, or a variant
thereof). In addition, these agreements restrict our ability to incur additional
indebtedness, repay indebtedness or amend debt instruments, pay dividends,
create liens on assets, make investments, make acquisitions, engage in mergers
or consolidations, make capital expenditures or engage in certain transactions
with subsidiaries and affiliates. There can be no assurances that we or our
subsidiaries would be able to obtain a waiver to these restrictive covenants if
necessary. If we fail to comply with the restrictions contained in these credit
agreements, the resulting event of default could result in a lender accelerating
the repayment of all outstanding amounts due under these agreements. There can
be no assurances that we would be successful in obtaining alternative sources of
funding to repay these obligations should this event occur. For the nine months
ended September 30, 2008, we paid approximately $0.3 million to obtain waivers
towards a financial covenant on our debt in Central City, Colorado.





We
may be required in the future to record impairment losses related to the
indefinite lived intangible assets and the equity investment we currently carry
on our balance sheet.





We have
$5.4 million of goodwill, $8.9 million of casino licenses and a $13.1 million
equity investment as of September 30, 2008. Accounting rules require that we
make certain estimates and assumptions related to our determinations as to the
future recoverability of these assets. If we were to determine that the
values of the goodwill, the casino licenses or the equity investment
carried on our balance sheet are impaired, we may be required to record an
impairment charge to write down the value of these assets, which would adversely
affect our results during the period in which we recorded the impairment charge.
For instance, in 2008, we recorded goodwill impairments related to our
investments in Cripple Creek, Colorado and Central City, Colorado of
approximately $9.4 million.





--35--


Our
available cash balances have been declining and we may be unable to obtain the
capital necessary to fund our operations.





As of
September 30, 2008, we had $8.0 million in cash available to fund our operations
and had a working capital deficit of $9.2 million. If operations at our
properties do not improve, we may need to raise additional capital or obtain
additional debt financing in order to fund our operations. We may not be able to
obtain this funding when we need it or on favorable terms. In addition, the
amount of capital that we are able to raise often depends on variables that are
beyond our control, such as the share price of our stock and its trading volume.
As a result, we may not be able to secure financing on terms attractive to us,
or at all. If we are able to consummate a financing arrangement, the amount
raised may not be sufficient to meet all of our future needs and may be highly
dilutive. If we cannot raise adequate funds to satisfy our capital requirements,
we may have to scale back or eliminate certain operations.





Item
5. – Other Information





On
November 6, 2008, the Second Amended and Restated Credit Agreement (“Amended
Agreement”) was entered into among WMCK Venture Corp., Century Casinos Cripple
Creek, Inc., WMCK Acquisition Corp. (collectively the “Borrowers”), Century
Casinos, Inc. (the “Guarantor”) and Wells Fargo Bank, National Association, as
Agent.





Among
other items, the terms of the Amended Agreement added or modified the following
(capitalized terms have the meanings ascribed to them in the Amended
Agreement):





1)
            Sets
      an interest rate of Prime + 5.5%;


2)
            Converts
      the existing revolving credit facility to a 44-month term loan facility
      requiring monthly principal repayments of $0.1 million beginning on
      December 1, 2008 through maturity (July 1,
  2012);


3)
            Redefines
      and modifies the covenant requirements for the Adjusted Fixed Charge
      Coverage Ratio and Senior Leverage Ratio;
and


4)
            Requires
      the Guarantor to maintain a Guarantor Total Leverage Ratio of
      4.00:1.00.





This
summary of the terms of the Amended Agreement is qualified in its entirety by
the text of the Amended Agreement, a copy of which is attached to this Form 10-Q
as Exhibit 10.1 and is incorporated herein by reference.





On
November 6, 2008, the Third Amendment to the Credit Agreement dated November 18,
2005 (“Third Amendment”) was entered into among CC Tollgate LLC (the
“Borrower”), Century Casinos, Inc. (“Century”) and Wells Fargo Bank, National
Association, as Agent.





Amongst
other items, the terms of the Third Amendment added or modified the following
(capitalized terms have the meanings ascribed to them in the Third Amendment and
in Section 1.01 of the Existing Credit Agreement):





1)
            Permits
      the Borrower to set the interest rate of the loan to one of the following
      options:


a.
            Prime
      Rate + 6.5%;


b.
            The
      greater of 3.75% or the 30-day LIBOR rate + 6.5%;
  or


c.
            The
      greater of 3.75% or the 90-day LIBOR rate +
  6.5%.


2)
            Permits
      the Borrower to convert the interest rate of the loan on three business
      day notice;


3)
            Revises
      the C/T Loan Reduction Schedule to require monthly principal repayments of
      $0.2 million beginning on October 31, 2008 through
    maturity;


4)
            Redefines
      and modifies the covenant requirements for the Adjusted Fixed Charge
      Coverage Ratio and Maximum Senior Leverage
  Ratio;


5)
            Permits
      Century to make contributions to the Borrower within 45 days after a
      fiscal quarter end to ensure that Borrower is in compliance with the
      financial covenants of the Existing Credit Agreement, as amended;
      and


6)
            Eliminates
      the $2.5 million Senior Secured Revolving Credit
  Facility.




This
summary of the terms of the Third Amendment is qualified in its entirety by the
text of the Third Amendment, a copy of which is attached to this Form 10-Q as
Exhibit 10.2 and is incorporated herein by reference.




--36--


Item
6. – Exhibits





(a)
Exhibits - The following exhibits are filed herewith:





3.1
            Certificate
      of Incorporation of Century Casinos, Inc. is hereby incorporated by
      reference to the Company’s Proxy Statement for the 1994 Annual Meeting of
      Stockholders.3.2
            Amended
      and Restated Bylaws of Century Casinos, Inc. is hereby incorporated by
      reference from Exhibit 11.14 to the Company’s Quarterly Report on Form
      10-Q for the quarterly period ended June 30, 2002.4.1
            Rights
      Agreement, dated as of April 29, 1999, between the Century Casinos, Inc.
      and the American Securities Transfer & Trust, Inc., as Rights Agent,
      is hereby incorporated by reference from Exhibit 1 to the Company’s Form
      8-A dated May 7, 1999.4.2
            First
      Supplement to Rights Agreement dated April 2000, between Century Casinos,
      Inc. and American Securities Transfer & Trust, Inc., as Rights Agent,
      is hereby incorporated by reference from Exhibit A to the Company’s Proxy
      Statement for the 2000 Annual Meeting of Stockholders.4.3
            Second
      Supplement to Rights Agreement dated July 2002, between Century Casinos,
      Inc. and Computershare Investor Services, Inc., as Rights Agent, is hereby
      incorporated by reference from Exhibit 11.13 to the Company’s Quarterly
      Report on Form 10-Q for the quarterly period ended June 30,
      2002.10.1
            Amended
      and Restated Credit Agreement, by and between WMCK Venture Corp., Century
      Casinos Cripple Creek, Inc., WMCK Acquisition Corp., Century Casinos, Inc.
      and Wells Fargo Bank, National Association, dated November 6,
      2008.10.2
            Third
      Amendment to Credit Agreement, dated as of November 6, 2008, by and
      between CC Tollgate LLC, the Lenders, the L/C issuer and Wells Fargo Bank,
      National Association, as Agent Bank.31.1
            Certification
      pursuant to Section 302 of the Sarbanes-Oxley Act of 2002,Co
      Chief Executive Officer.31.2
            Certification
      pursuant to Section 302 of the Sarbanes-Oxley Act of 2002,Co
      Chief Executive Officer and President.31.3
            Certification
      pursuant to Section 302 of the Sarbanes-Oxley Act of 2002,Principal
      Financial Officer.31.4
            Certification
      pursuant to Section 302 of the Sarbanes-Oxley Act of 2002,Chief
      Accounting Officer.32.1
            Certification
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,Co
      Chief Executive Officer.32.2
            Certification
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,Co
      Chief Executive Officer and President.32.3
            Certification
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,Principal
      Financial Officer.32.4
            Certification
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,Chief
      Accounting Officer.





--37--


SIGNATURES:





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





CENTURY
CASINOS, INC.





/s/ Larry
Hannappel


Larry
Hannappel


Senior
Vice President (Principal Financial Officer)


Date:
November 10, 2008








--38--


CENTURY
CASINOS, INC.


INDEX TO
EXHIBITS





Exhibit
      No.
            Document3.1
            Certificate
      of Incorporation of Century Casinos, Inc. is hereby incorporated by
      reference to the Company’s Proxy Statement for the 1994 Annual Meeting of
      Stockholders.3.2
            Amended
      and Restated Bylaws of Century Casinos, Inc. is hereby incorporated by
      reference from Exhibit 11.14 to the Company’s Quarterly Report on Form
      10-Q for the quarterly period ended June 30, 2002.4.1
            Rights
      Agreement, dated as of April 29, 1999, between Century Casinos, Inc. and
      the American Securities Transfer & Trust, Inc., as Rights Agent, is
      hereby incorporated by reference from Exhibit 1 to the Company’s Form 8-A
      dated May 7, 1999.4.2
            First
      Supplement to Rights Agreement dated April 2000, between Century Casinos,
      Inc. and American Securities Transfer & Trust, Inc., as Rights Agent,
      is hereby incorporated by reference from Exhibit A to the Company’s Proxy
      Statement for the 2000 Annual Meeting of Stockholders.4.3
            Second
      Supplement to Rights Agreement dated July 2002, between Century Casinos,
      Inc. and Computershare Investor Services, Inc., as Rights Agent, is hereby
      incorporated by reference from Exhibit 11.13 to the Company’s Quarterly
      Report on Form 10-Q for the quarterly period ended June 30,
      2002.10.1
            Amended
      and Restated Credit Agreement, by and between WMCK Venture Corp., Century
      Casinos Cripple Creek, Inc., WMCK Acquisition Corp., Century Casinos, Inc.
      and Wells Fargo Bank, National Association, dated November 6,
      2008.10.2
            Third
      Amendment to Credit Agreement, dated as of November 6, 2008, by and
      between CC Tollgate LLC, the Lenders, the L/C issuer and Wells Fargo Bank,
      National Association, as Agent Bank.31.1
            Certification
      pursuant to Section 302 of the Sarbanes-Oxley Act of 2002,Co
      Chief Executive Officer.31.2
            Certification
      pursuant to Section 302 of the Sarbanes-Oxley Act of 2002,Co
      Chief Executive Officer and President.31.3
            Certification
      pursuant to Section 302 of the Sarbanes-Oxley Act of 2002,Principal
      Financial Officer.31.4
            Certification
      pursuant to Section 302 of the Sarbanes-Oxley Act of 2002,Chief
      Accounting Officer.32.1
            Certification
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,Co
      Chief Executive Officer.32.2
            Certification
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,Co
      Chief Executive Officer and President.32.3
            Certification
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,Principal
      Financial Officer.32.4
            Certification
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,Chief
      Accounting Officer.









--39--