**UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549**

 

**FORM 10-Q**

 
| **ý**                                                                                                                                                                                 | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR  15(d)  OF THE SECURITIES EXCHANGE ACT OF 1934**  | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------|------------|
| **For  the quarterly period ended September 30, 2004**                                                                                                                                |
| **OR**                                                                                                                                                                                     |
| **o**                                                                                                                                                                                      | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d)  OF THE SECURITIES EXCHANGE ACT OF 1934** | ** ** |
| **For  the transition period from               to              ** |

 

**Commissionfile number 333-114335**

 

| **POSTER FINANCIAL GROUP, INC.**                                                    |
|-------------------------------------------------------------------------------------|
| (Exact name of  registrant as specified in its charter)                             |
|                                                                                |
| **Nevada**                                                                          | ** ** | **56-2370836** |
| (State or other  jurisdiction of incorporation or organization)                     |   | (I.R.S. Employer  Identification No.) |
|                                                                                |
| **129  E. Fremont Street, Las Vegas, Nevada**                                       |
| (Address of  principal executive offices)                                           |
|                                                                                |   |   |
| **89101**                                                                           |
| (Zip Code)                                                                          |
|                                                                                |   |   |
| **(702)  385-7111**                                                                 |
| (Registrant’s  telephone number, including area code)                          |
|                                                                                |
| **N/A**                                                                             |
| (Former name,  former address and former fiscal year, if changed since last report) |

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.

Yes ý    No o

 

Indicate by check markwhether the registrant is an accelerated filer.  Yes o    No ý

 

Indicate the number ofshares outstanding of each of the issuer’s classes of common stock, as of thelatest practicable date.

 

Common Stock, nopar value, 100 outstanding shares as of November 12, 2004

 

 

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**Form 10-Q**

 

**TABLE OFCONTENTS**

 
| **Part I.**  | ** **                                                                                  | **Financial Information**                                                                                                                                                                                                             |
|--------------|---------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|         |                                                                                        |                                                                                                                                                                                                                                  |
| Item 1.      |                                                                                        | Financial Statements                                                                                                                                                                                                                  |
| ** **   | **a.**                                                                                      | **Poster Financial  Group, Inc.**                                                                                                                                                                                                |
| ** **   | ** **                                                                                  | ** **                                                                                                                                                                                                                            |
|         |                                                                                        | Consolidated Balance Sheets  as of December 31, 2003 and September 30, 2004 (unaudited)                                                                                                                                     |
|         |                                                                                        | Consolidated  Statement of Operations for the Three and Nine Months Ended  September 30, 2004 (unaudited)                                                                                                                        |
|         |                                                                                        | Consolidated  Statement of Cash Flows for the Nine Months Ended September 30, 2004  (unaudited)                                                                                                                                  |
|         |                                                                                        | Notes  to Consolidated Financial Statements (unaudited)                                                                                                                                                                               |
|         |                                                                                        |                                                                                                                                                                                                                                  |
|         | **b.**                                                                                      | **Golden Nugget  Group (1)**                                                                                                                                                                                                          |
|         |                                                                                        |                                                                                                                                                                                                                                  |
|         |                                                                                        | Combined  Statements of Operations for the Three and Nine Months Ended  September 30, 2003 and for the Period from January 1, 2004 to January  22, 2004 (Date Immediately Prior to Acquisition by Poster Financial)  (unaudited) |
|         |                                                                                        | Combined Statements of  Cash Flows for the Nine Months Ended September 30, 2003 and for the  Period from January 1, 2004 to January 22, 2004 (Date Immediately Prior to  Acquisition by Poster Financial) (unaudited)            |
|         |                                                                                        | Notes  to Combined Financial Statements (unaudited)                                                                                                                                                                                   |
|         |                                                                                        |                                                                                                                                                                                                                                  |
|              |
|         |                                                                                        | (1)                                                                                                                                                                                                                                   | Poster Financial Group,  Inc. completed the acquisition of the Golden Nugget Group on January 23,  2004. When a registrant acquires a business, it is required under Rule 3-05  of Regulation S-X under the Securities Act to assess the significance of the  acquired business to determine whether the acquired business’ historical  financial statements must be included with any subsequent financial statements  of the acquirer (this requirement relates to both audited annual financial  statements and unaudited interim financial statements). The acquisition of  the Golden Nugget Group was significant. Accordingly, the financial  statements of the Golden Nugget Group are included in this Quarterly Report  on Form 10-Q in order to comply with Rule 3-05 of Regulation S-X. |
|         |                                                                                        |                                                                                                                                                                                                                                  |
| Item  2.     | Management’s  Discussion and Analysis of Financial Condition and Results of Operations |                                                                                                                                                                                                                                  |
|         |                                                                                        |                                                                                                                                                                                                                                  |
| Item  3.     | Quantitative  and Qualitative Disclosure About Market Risk                                  |                                                                                                                                                                                                                                  |
|         |                                                                                        |                                                                                                                                                                                                                                  |
| Item 4.      | Controls and  Procedures                                                                    |                                                                                                                                                                                                                                  |
|         |                                                                                        |                                                                                                                                                                                                                                  |
| **Part II.** | **Other Information**                                                                       |                                                                                                                                                                                                                                  |
|         |                                                                                        |                                                                                                                                                                                                                                  |
| Item 1.      | Legal Proceedings                                                                           |                                                                                                                                                                                                                                  |
|         |                                                                                        |                                                                                                                                                                                                                                  |
| Item 2.      | Unregistered Sales of Equity Securities and Use  of Proceeds                                |                                                                                                                                                                                                                                  |
|         |                                                                                        |                                                                                                                                                                                                                                  |
| Item 3.      | Defaults Upon Senior Securities                                                             |                                                                                                                                                                                                                                  |
|         |                                                                                        |                                                                                                                                                                                                                                  |
| Item 4.      | Submission of Matters to a Vote of Security  Holders                                        |                                                                                                                                                                                                                                  |
|         |                                                                                        |                                                                                                                                                                                                                                  |
| Item 5.      | Other Information                                                                           |                                                                                                                                                                                                                                  |
|         |                                                                                        |                                                                                                                                                                                                                                  |
| Item 6.      | Exhibits                                                                                    |                                                                                                                                                                                                                                  |
|         |                                                                                        |                                                                                                                                                                                                                                  |
| Signature    |                                                                                        |
|              |                                                                                             |                                                                                                                                                                                                                                       |  |  |  |

 

2

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**Part I****.****              FinancialInformation**

 

**Item 1.****           Financial Statements**

 

**a.Poster Financial Group, Inc.**

 

**Poster Fi****nancial Group, Inc.**

**(AWholly Owned Subsidiary of PB Gaming, Inc.)**

** **

**ConsolidatedBalance Sheets**

**(Thousandsof dollars)**

 
| ** **                                                                                | ** ** | **December 31, 2003** | ** ** | **September 30, 2004** | ** ** |
|-------------------------------------------------------------------------------------------|------------|-----------------------|------------|------------------------|------------|
| ** **                                                                                | ** ** | ** **            | ** ** | **(unaudited)**        | ** ** |
|                                                                                      |       |                  |       |                   |       |
| **Assets**                                                                                |       |                  |       |                   |       |
| Current Assets                                                                            |       |                  |       |                   |       |
| Cash and cash  equivalents                                                                |       | $                     | —     |                   | $          | 21,082 |   |
| Restricted cash  in escrow                                                                |       | 159,548               |       | —                 |       |
| Accounts  receivable, net                                                                 |       | —                |       | 12,867                 |       |
| Inventories                                                                               |       | —                |       | 3,534                  |       |
| Prepaid expenses  and other                                                               |       | 122                   |       | 7,440                  |       |
|                                                                                      |       |                  |       |                   |       |
| Total current  assets                                                                     |       | 159,670               |       | 44,923                 |       |
|                                                                                      |       |                  |       |                   |       |
| Property and  equipment, net                                                              |       | —                |       | 184,319                |       |
| Investment in  joint venture                                                              |       | —                |       | 5,192                  |       |
| Deposits and  other assets, net                                                           |       | 13,884                |       | 36,855                 |       |
|                                                                                      |       |                  |       |                   |       |
| Total assets                                                                              |       | $                     | 173,554    |                   | $          | 271,289 |   |
|                                                                                      |       |                  |       |                   |       |
| **Liabilities  and Stockholder’s Equity**                                            |       |                  |       |                   |       |
| Current  Liabilities                                                                      |       |                  |       |                   |       |
| Accounts payable                                                                          |       | $                     | 7,696      |                   | $          | 13,431 |   |
| Current portion  of long-term debt                                                        |       | —                |       | 2,919                  |       |
| Other accrued  liabilities                                                                |       | 1,078                 |       | 36,507                 |       |
| Amounts due to  affiliates                                                                |       | 376                   |       | —                 |       |
|                                                                                      |       |                  |       |                   |       |
| Total current  liabilities                                                                |       | 9,150                 |       | 52,857                 |       |
|                                                                                      |       |                  |       |                   |       |
| Long-term debt, net of  current portion                                                   |       | 155,000               |       | 177,883                |       |
|                                                                                      |       |                  |       |                   |       |
| Total liabilities                                                                         |       | 164,150               |       | 230,740                |       |
|                                                                                      |       |                  |       |                   |       |
| **Stockholder’s  equity**                                                            |       |                  |       |                   |       |
| Common stock (no  par value; 10,000 shares authorized; 100 shares issued and outstanding) |       | —                |       | —                 |       |
| Paid-in capital  in excess of par value                                                   |       | 10,883                |       | 50,000                 |       |
| Retained  earnings (deficit)                                                              |       | (1,479                | )          | (9,451                 | )          |
|                                                                                      |       |                  |       |                   |       |
| Total  stockholder’s equity                                                          |       | 9,404                 |       | 40,549                 |       |
| Total  liabilities and stockholder’s equity                                          |       | $                     | 173,554    |                   | $          | 271,289 |   |

 

The accompanyingnotes are an integral part of these financial statements.

 

3

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**Poster Financial Group, Inc.(A Wholly Owned Subsidiary of PB Gaming, Inc.)**

 

**ConsolidatedStatement of Operations**

**(Thousands of dollars)**

**(Unaudited)**

 
| ** **                       | ** ** | **Three Months Ended** | ** ** | **Period from Inception  (June 2, 2003) to  September 30, 2003** | ** ** | **Nine Months Ended  September 30, 2004** | ** ** |
|----------------------------------|------------|------------------------|------------|------------------------------------------------------------------|------------|-------------------------------------------|------------|
| ** **                       | ** ** | **September 30, 2003** | ** ** | **September 30, 2004**                                           | ** ** | ** **                                | ** ** |
| **Revenues**                     |       |                   |       |                                                             |       |                                      |       |   |   |
| Casino                           |       | $                      | —     |                                                             | $          | 41,280                                    |       | $ | — |   | $ | 123,327 |   |
| Rooms                            |       | —                 |       | 11,861                                                           |       | —                                    |       | 34,599 |   |
| Food and  beverage               |       | —                 |       | 14,205                                                           |       | —                                    |       | 38,756 |   |
| Entertainment,  retail and other |       | —                 |       | 3,430                                                            |       | —                                    |       | 9,487 |   |
|                             |       |                   |       |                                                             |       |                                      |       |   |   |
| Gross revenues                   |       | —                 |       | 70,776                                                           |       | —                                    |       | 206,169 |   |
| Promotional  allowances          |       | —                 |       | (9,882                                                           | )          | —                                    |       | (25,732 | ) |
|                             |       |                   |       |                                                             |       |                                      |       |   |   |
| Net revenues                     |       | —                 |       | 60,894                                                           |       | —                                    |       | 180,437 |   |
| **Cost  and expenses**           |       |                   |       |                                                             |       |                                      |       |   |   |
| Casino                           |       | —                 |       | 28,314                                                           |       | —                                    |       | 75,036 |   |
| Rooms                            |       | —                 |       | 5,555                                                            |       | —                                    |       | 14,649 |   |
| Food and  beverage               |       | —                 |       | 8,266                                                            |       | —                                    |       | 23,634 |   |
| Entertainment,  retail and other |       | —                 |       | 2,528                                                            |       | —                                    |       | 7,343 |   |
| Provision for  doubtful accounts |       | —                 |       | 935                                                              |       | —                                    |       | 2,010 |   |
| General and  administrative      |       | —                 |       | 15,510                                                           |       | —                                    |       | 39,338 |   |
| (Gain) loss on  sale of assets   |       | —                 |       | (70                                                              | )          | —                                    |       | (70 | ) |
| Depreciation and  amortization   |       | —                 |       | 4,204                                                            |       | —                                    |       | 11,285 |   |
|                             |       |                   |       |                                                             |       |                                      |       |   |   |
| Total cost and  expenses         |       | —                 |       | 65,242                                                           |       | —                                    |       | 173,225 |   |
|                             |       |                   |       |                                                             |       |                                      |       |   |   |
| **Operating  income**            |       | —                 |       | (4,348                                                           | )          | —                                    |       | 7,212 |   |
|                             |       |                   |       |                                                             |       |                                      |       |   |   |
| **Other  income (expense)**      |       |                   |       |                                                             |       |                                      |       |   |   |
| Equity in loss  of joint venture |       | —                 |       | (126                                                             | )          | —                                    |       | (382 | ) |
| Interest income                  |       | —                 |       | 17                                                               |       | —                                    |       | 106 |   |
| Interest expense                 |       | —                 |       | (4,234                                                           | )          | —                                    |       | (12,391 | ) |
|                             |       |                   |       |                                                             |       |                                      |       |   |   |
| Total other  income (expense)    |       | —                 |       | (4,343                                                           | )          | —                                    |       | (12,667 | ) |
|                             |       |                   |       |                                                             |       |                                      |       |   |   |
| **Net  income (loss)**           |       | $                      | —     |                                                             | $          | (8,691                                    | )          | $ | — |   | $ | (5,455 | ) |

 

The accompanying notes are an integral part of thesefinancial statements.

 

4

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**Poster Financial Group, Inc.**

**(AWholly Owned Subsidiary of PB Gaming, Inc.)**

 

**ConsolidatedStatement of Cash Flows**

**(Thousandsof dollars)**

 
| ** **                                                                                                          | ** ** | **Period from Inception  (June 2, 2003)  to September 30, 2003** | ** ** | **Nine Months Ended  September 30, 2004** | ** ** |
|---------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                                                                                          | ** ** | ** **                                                       | ** ** | ** **                                | ** ** |
| **Cash  flows from operating activities:**                                                                          |       |                                                             |       |                                      |       |
| Net income  (loss)                                                                                                  |       | $                                                                | —     |                                      | $          | (5,455 | ) |
| Adjustments to  reconcile net income (loss) to net cash provided by operating activities                            |       |                                                             |       |                                      |       |
| Depreciation and  amortization                                                                                      |       | —                                                           |       | 11,285                                    |       |
| Provision for  doubtful accounts                                                                                    |       | —                                                           |       | 2,010                                     |       |
| Gain on sale of  assets                                                                                             |       | —                                                           |       | (70                                       | )          |
| Equity in loss  of joint venture                                                                                    |       | —                                                           |       | 382                                       |       |
| Changes in  operating assets and liabilities, net of amounts resulting from acquisition  of the Golden Nugget Group |       |                                                             |       |                                      |       |
| Decrease  (increase) in accounts receivable                                                                         |       | —                                                           |       | (10,658                                   | )          |
| Decrease  (increase) in inventories                                                                                 |       | —                                                           |       | 384                                       |       |
| Decrease  (increase) in prepaid expenses and other assets                                                           |       | —                                                           |       | (2,672                                    | )          |
| (Decrease)  increase in deposits and other                                                                          |       | —                                                           |       | (432                                      | )          |
| (Decrease)  increase in accounts payable                                                                            |       | —                                                           |       | 2,465                                     |       |
| (Decrease)  increase in other accrued payables                                                                      |       | —                                                           |       | 15,235                                    |       |
| Net cash  provided by operating activities                                                                          |       | —                                                           |       | 12,474                                    |       |
|                                                                                                                |       |                                                             |       |                                      |       |
| **Cash  flows from investing activities:**                                                                          |       |                                                             |       |                                      |       |
| Acquisition of  property, equipment and improvements                                                                |       | —                                                           |       | (11,458                                   | )          |
| Acquisition of  Golden Nugget Group, net of cash acquired of $11,942                                                |       | —                                                           |       | (201,781                                  | )          |
| Contributions to  joint venture                                                                                     |       | —                                                           |       | (469                                      | )          |
| Decrease in  restricted cash                                                                                        |       | —                                                           |       | 159,548                                   |       |
| Proceeds from  sale of equipment                                                                                    |       | —                                                           |       | 70                                        |       |
| Net cash used in  investing activities                                                                              |       | —                                                           |       | (54,090                                   | )          |
|                                                                                                                |       |                                                             |       |                                      |       |
| **Cash  flows from financing activities:**                                                                          |       |                                                             |       |                                      |       |
| Proceeds from  the issuance of term loan                                                                            |       | —                                                           |       | 20,000                                    |       |
| Net borrowings  under revolving credit facility                                                                     |       | —                                                           |       | 5,302                                     |       |
| Change in bank  overdraft included in accounts payable                                                              |       | —                                                           |       | 796                                       |       |
| Distributions of  equity to principal stockholders                                                                  |       | —                                                           |       | (2,517                                    | )          |
| Additional  contributions of equity from principal stockholders                                                     |       | —                                                           |       | 39,117                                    |       |
| Net cash  provided by financing activities                                                                          |       | —                                                           |       | 62,698                                    |       |
|                                                                                                                |       |                                                             |       |                                      |       |
| Net increase  (decrease) in cash and cash equivalents                                                               |       | —                                                           |       | 21,082                                    |       |
| Cash and cash  equivalents, beginning of period                                                                     |       | —                                                           |       | —                                    |       |
|                                                                                                                |       |                                                             |       |                                      |       |
| Cash and cash  equivalents, end of period                                                                           |       | $                                                                | —     |                                      | $          | 21,082 |   |

 

The accompanying notes are an integral part of thesefinancial statements.

 

5

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**PosterFinancial Group, Inc.**

**(AWholly Owned Subsidiary of PB Gaming, Inc.)**

 

**CondensedNotes to Consolidated Financial Statements (Unaudited)**

 

**1.  Organization**

 

Poster FinancialGroup, Inc. (“Poster Financial” or the “Company”) is a Nevada corporation,formed on June 2, 2003 as a holding corporation for the purpose ofcompleting the acquisition (the “Acquisition”) of the Golden Nugget Group (asdefined below), as more fully described in Note 4. The Company is a whollyowned subsidiary of PB Gaming, Inc. (“PB Gaming” or the “Parent”).

 

After completion of theAcquisition, the Company owns and operates the following properties, which arecollectively referred to as the “Golden Nugget Group”:

 

•                                          GoldenNugget—Las Vegas, a hotel-casino and entertainment resort located in downtownLas Vegas, Nevada and operated by GNLV, CORP., a Nevada corporation whollyowned by the Company (“GNLV”); and

 

•                                          GoldenNugget—Laughlin, a hotel-casino resort located in Laughlin, Nevada and operatedby GNL, CORP., a Nevada corporation wholly owned by the Company (“GNL”).  On November 8, 2004, the Company entered intoan agreement to sell GNL to an unrelated third party.  See Note 4.

 

GNLV also has a whollyowned subsidiary, Golden Nugget Experience, LLC (“GNE”), a Nevada limitedliability company. GNE is a holding company that has an investment in TheFremont Street Experience Limited Liability Company, a Nevada limited liabilitycompany (the “Fremont Street Experience”), organized to enhance tourism indowntown Las Vegas, Nevada. The Fremont Street Experience is owned by a groupof unrelated casino operators in downtown Las Vegas, and operates retail malls,parking garages, entertainment venues and a pedestrian mall that encloses acity street (Fremont Street), located adjacent to the Golden Nugget—Las Vegas.GNE holds 17.65% of the voting units and 50.0% of the non-voting units of theFremont Street Experience, and accounts for its investment utilizing the equitymethod of accounting.  See Note 5.

 

**2.  Significant Accounting Policies and Basis ofPresentation**

 

The consolidatedfinancial statements of the Company as of September 30, 2004 and for thenine month period then ended have been prepared by the Company, without audit,pursuant to the rules and regulations of the Securities and Exchange Commission(the “SEC”). Certain information and footnote disclosures normally included infinancial statements prepared in accordance with generally accepted accountingprinciples have been condensed or omitted pursuant to such rules andregulations. The preparation of the consolidated financial statements requiresmanagement to make estimates and assumptions that affect the reported amountsof assets and liabilities and disclosure of contingent liabilities at the dateof the financial statements and the reported amounts of revenue and expensesduring the reporting period. Actual results could differ from those estimates.In the opinion of management, all adjustments, consisting of normal recurringitems and estimates necessary for a fair presentation of the results forinterim periods, have been made. These consolidated financial statements shouldbe read in conjunction with the financial statements and notes thereto for theCompany as of December 31, 2003 and for the period from June 2, 2003(inception) through December 31, 2003.

 

**Principlesof Consolidation**

 

All inter-companyaccounts and transactions between the Company and GNLV and GNL are eliminatedin consolidation. All inter-company accounts and transactions between GNLV andGNE are eliminated in consolidation.

 

6

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**Concentrationof Credit Risk**

 

Financial instrumentsthat potentially subject the Company to concentrations of credit risk consistprincipally of casino accounts receivable. The Company extends credit toapproved casino customers following background checks and investigations ofcreditworthiness.

 

Trade receivables,including casino and hotel receivables, are typically noninterest bearing andare initially recorded at cost. Accounts are written off when management deemsthe account to be uncollectible. Recoveries of accounts previously written offare recorded when received. An estimated allowance for doubtful accounts is maintainedto reduce the Company’s receivables to their carrying amount, whichapproximates fair value. The allowance is estimated based on specific review ofcustomer accounts as well as historical collection experience and currenteconomic and business conditions. Management believes that as ofSeptember 30, 2004, no significant concentrations of credit risk existedfor which an allowance had not already been recorded.

 

**Inventories**

 

Inventories consistingprincipally of food and beverage and operating supplies are stated at the lowerof cost or market value. Cost is determined by the first-in, first-out method.

 

**Propertyand Equipment**

 

Property and equipmentare stated at cost. Depreciation expense is computed utilizing thestraight-line method over the estimated useful lives of the depreciable assets,as follows:

 
| Buildings  and improvements                                |   | 15-40 years |   |
|------------------------------------------------------------|--------|------------------|--------|
| Land  improvements                                         |   | 15-40 years |   |
| Equipment,  furniture, fixtures and leasehold improvements |   | 3-20 years  |   |

 

Certain equipment heldunder capital leases are classified as property and equipment and amortizedusing the straight-line method over the lease term and the related obligationsare recorded as liabilities. Costs of major improvements are capitalized; costsof normal repairs and maintenance are charged to expense as incurred. Gains orlosses on dispositions of property and equipment are recognized in theconsolidated statements of operations when incurred.

 

**RevenueRecognition and Promotional Allowances**

 

Casino revenue is theaggregate net difference between gaming wins and losses, with liabilitiesrecognized for funds deposited by customers before gaming play occurs (“casinofront money”) and for chips in the customer’s possession (“outstanding chipliability”). Casino revenues are recognized net of certain sales incentives inaccordance with the Emerging Issues Task Force (“EITF”) consensus on Issue01-9, “*Accounting for Consideration Given bya Vendor to a Customer (Including a Reseller of the Vendor’s Products)*.”Under the guidance of the EITF, the Company recognizes sales incentives as areduction of revenue. In addition, accruals for the cost of cash-back points inpoint-loyalty programs, such as points earned in slot players clubs, arerecorded as a reduction of revenue.

 

Hotel, food and beverage,entertainment and other operating revenues are recognized as services areperformed. Advance deposits on rooms and advance ticket sales are recorded asaccrued liabilities until services are provided to the customer. The retailvalue of accommodations, food and beverage, and other services furnished tohotel-casino guests without charge is included in gross revenue and thendeducted as promotional allowances.

 

The estimated cost ofproviding such promotional allowances is primarily included in casino expenses asfollows:

 
| ** **         | ** ** | ** **                     | ** ** | ** **             | ** ** | **Period from Inception** | ** ** | ** **             | ** ** |
|--------------------|------------|--------------------------------|------------|------------------------|------------|---------------------------|------------|------------------------|------------|
| ** **         | ** ** | **Three Months Ended**         | ** ** | **(June 2, 2003) to**  | ** ** | **Nine Months Ended**     | ** ** |
| ** **         | ** ** | **September 30, 2003**         | ** ** | **September 30, 2004** | ** ** | **September 30, 2003**    | ** ** | **September 30, 2004** | ** ** |
| * *           | * *   | **(in  thousands of dollars)** | * *   |
| Rooms              |       | $                              | —     |                   | $          | 1,867                     |       | $                      | —     |   | $ | 5,137 |   |
| Food and  beverage |       | —                         |       | 7,191                  |       | —                    |       | 18,293                 |       |
| Other              |       | —                         |       | 767                    |       | —                    |       | 1,750                  |       |
|               |       | $                              | —     |                   | $          | 9,825                     |       | $                      | —     |   | $ | 25,180 |   |

 

The estimated retail value of such promotional allowances is includedin operating revenues as follows:

 
| ** **         | ** ** | ** **                     | ** ** | ** **             | ** ** | **Period from Inception** | ** ** | ** **             | ** ** |
|--------------------|------------|--------------------------------|------------|------------------------|------------|---------------------------|------------|------------------------|------------|
| ** **         | ** ** | **Three Months Ended**         | ** ** | **(June 2, 2003) to**  | ** ** | **Nine Months Ended**     | ** ** |
| ** **         | ** ** | **September 30, 2003**         | ** ** | **September 30, 2004** | ** ** | **September 30, 2003**    | ** ** | **September 30, 2004** | ** ** |
| * *           | * *   | **(in  thousands of dollars)** | * *   |
| Rooms              |       | $                              | —     |                   | $          | 3,153                     |       | $                      | —     |   | $ | 8,677 |   |
| Food and  beverage |       | —                         |       | 6,091                  |       | —                    |       | 15,479                 |       |
| Other              |       | —                         |       | 639                    |       | —                    |       | 1,576                  |       |
|               |       | $                              | —     |                   | $          | 9,883                     |       | $                      | —     |   | $ | 25,732 |   |

 

**3.  Supplemental Cash Flows Information**

 

The following informationpresents supplemental cash flow information of assets acquired and liabilitiesassumed in connection with the Acquisition (amounts in thousands) (see Note 4):

 

7

----

 
| ** **                                  | ** ** | **Nine Months  Ended  September 30, 2004** | ** ** |
|---------------------------------------------|------------|------------------------------------------------------|------------|
| Accounts  receivable                        |       | $                                                    | 4,219      |   |
| Inventories                                 |       | 3,918                                                |       |
| Prepaid  expenses and other                 |       | 4,646                                                |       |
| Property  and equipment                     |       | 183,710                                              |       |
| Tradename  and other intangibles            |       | 18,009                                               |       |
| Investment  in joint venture                |       | 5,105                                                |       |
| Deposits  and other assets                  |       | 4,966                                                |       |
| Accounts  payable                           |       | (2,098                                               | )          |
| Other  accrued liabilities                  |       | (20,194                                              | )          |
| Notes  payable                              |       | (500                                                 | )          |
|                                        |       | $                                                    | 201,781    |   |
| Plus,  cash acquired                        |       | 11,943                                               |       |
| Total  purchase price and acquisition costs |       | $                                                    | 213,724    |   |

 

**4.  Acquisitions and Dispositions**

** **

**GoldenNugget Acquisition**

 

On January 23, 2004,the Company completed the Acquisition of the Golden Nugget Group from MGMMIRAGE. The purchase price for the Acquisition was approximately$213.7 million, reflecting a base purchase price of $215.0 millionless an adjustment for working capital at the date of the closing ofapproximately $4.8 million plus acquisition related expenses ofapproximately $3.5 million. There are no contingent payments.

 

The transaction has beenaccounted for as a purchase and, accordingly, the purchase price has beenallocated to the underlying assets acquired and liabilities assumed based upontheir estimated fair values at the date of the Acquisition. Results ofoperations for the acquired companies have been reflected in the Company’sfinancial statements from the day the Acquisition closed.

 

The following tablesummarizes the estimated fair values of the assets acquired and liabilitiesassumed at the date of the Acquisition. The allocation of the purchase price tothe fair value of net assets acquired has been based on appraisals of theassets acquired (amounts in thousands):

 
| ** **                                | ** ** | **At  January 23, 2004** | ** ** | **Revision  in Estimate** | ** ** | **Adjusted Purchase  Price Allocation** | ** ** |
|-------------------------------------------|------------|-------------------------------|------------|---------------------------|------------|-----------------------------------------|------------|
| ** **                                | ** ** | ** **                    | ** ** | ** **                | ** ** | ** **                              | ** ** |
| **Working Capital Items**                 |       |                          |       |                      |       |                                    |       |
| Cash  and cash equivalents                |       | $                             | 11,943     |                      | $          | —                                  |       | $ | 11,943 |   |
| Accounts  receivable, net                 |       | 4,219                         |       | —                    |       | 4,219                                   |       |
| Inventories                               |       | 3,918                         |       | —                    |       | 3,918                                   |       |
| Prepaid  expenses and other               |       | 4,646                         |       | —                    |       | 4,646                                   |       |
| Deposits  and other assets                |       | 2,357                         |       | —                    |       | 2,357                                   |       |
| Accounts  payable and accrued liabilities |       | (22,292                       | )          | —                    |       | (22,292                                 | )          |
| Notes  payable                            |       | (500                          | )          | —                    |       | (500                                    | )          |
| Subtotal—Working  Capital Items      |       | 4,291                         |       | —                    |       | 4,291                                   |       |
|                                      |       |                          |       |                      |       |                                    |       |
| **Long-lived Assets:**                    |       |                          |       |                      |       |                                    |       |
| Property  & Equipment                 |       |                          |       |                      |       |                                    |       |
| Land                                      |       | 19,992                        |       | 1,071                     |       | 21,063                                  |       |
| Buildings                                 |       | 132,620                       |       | (4,699                    | )          | 127,921                                 |       |
| Construction  in Progress                 |       | 2,686                         |       | 162                       |       | 2,848                                   |       |
| FFE  and Equipment                        |       | 29,900                        |       | 1,978                     |       | 31,878                                  |       |
| Intangibles                               |       |                          |       |                      |       |                                    |       |
| Tradename                                 |       | 12,458                        |       | 666                       |       | 13,124                                  |       |
| Player  Club                              |       | 4,585                         |       | 300                       |       | 4,885                                   |       |
| Artwork  and Display Nugget               |       | 2,432                         |       | 177                       |       | 2,609                                   |       |
| Investment  in Joint Venture              |       | 4,760                         |       | 345                       |       | 5,105                                   |       |
| Subtotal—long-lived  assets          |       | 209,433                       |       | —                    |       | 209,433                                 |       |
| Total  purchase price allocated           |       | $                             | 213,724    |                      | $          | —                                  |       | $ | 213,724 |   |

 

In the quarterended September 30, 2004 the Company adjusted its initial purchase priceallocation to reflect the results of a detailed cost segregation stock of theGNLV buildings.  The study resulted in areduction in the net allocated cost to the building of approximately $4.7million, offset by pro-rata adjustments to other long-lived assets, and isreflected in the amounts presented above. There was no goodwill resulting from the Acquisition.

 

8

----

 

Approximately $13.1 millionwas assigned to the trademarks used by GNLV and GNL, and approximately$2.6 million was assigned to unique artwork and a gold nugget on displayin the hotel lobby of the Golden Nugget—Las Vegas. Such assets are consideredto have an indefinite life, and are not subject to amortization. In accordancewith accounting principals generally accepted in the United States of America,they will be subject to analysis for impairment from time to time, at least onan annual basis. Approximately $4.9 million was assigned to the GoldenNugget Group’s slot player club, which has been determined to have a usefullife of seven years, based on the Golden Nugget Group’s historical experienceand the composition of players in the Club.

 

Had the Acquisition takenplace on January 1, 2003, results of operations would have reflected thefollowing pro forma amounts for the nine months ended September 30, 2004and the comparable period in 2003 (amounts in thousands):

 
| ** **        | ** ** | **Nine Months Ended  September 30,** | ** ** |
|-------------------|------------|-------------------------------------------|------------|
| ** **        | ** ** | **2003**                                  | ** ** | **2004** | ** ** |
| Net  revenues     |       | $                                         | 173,822    |   | $ | 195,242 |   |
| Operating  income |       | $                                         | 15,807     |   | $ | 10,686 |   |
| Net  income       |       | $                                         | 3,127      |   | $ | (2,151 | ) |

 

The principal differencesbetween reported amounts and the pro forma amounts result from the addition ofhistorical operating results for the Golden Nugget Group, elimination of theMGM MIRAGE management fee, changes in depreciation and amortization resultingfrom the new basis in assets acquired, and elimination of the provision forincome taxes due to the election of PB Gaming to have each of its subsidiariestreated as a qualified Subchapter S corporation subsidiary for income taxpurposes. In addition, signing bonuses paid to key executives upon completionof the Acquisition of approximately $1.6 million are included in theactual results for the nine months ended September 30, 2004 but has beenexcluded from the pro forma results presented above because such bonuses arenon-recurring in nature, are directly related to the Acquisition, and are notreflective of the results of operations on a pro forma basis.

 

**Golden Nugget**-**Laughlin Disposition**

 

On November 8,2004 the Company entered into a stock purchase agreement to sell GNL for atotal sales price of approximately $31.0 million plus an adjustment for networking capital at the closing date (approximately $4.0 million at September30, 2004).  The transaction is subject tocustomary closing conditions, including a finding of suitability of the buyerby the Nevada regulatory authorities.  Undercertain specified circumstances, including if the buyer elects not to proceedwith the transaction, the Company will be entitled to receive $1.0 million,which amount has been placed in escrow by the buyer.

 

The netconsideration for the GNL sale and the estimated market value of the hotelexceed the carrying value of the related assets at September 30, 2004.  Accordingly, no impairment is indicated andno adjustments have been reflected in the accompanying financialstatements.  For periods after November8, 2004 the Company will reflect the GNL assets as held for sale in the balancesheet and will report financial results as a component of discontinuedoperations.  GNL has previously operatedas a business segment of the Company; see Note 6 for additional informationabout the segment’s financial position and results of operations.

 

**5.  Fremont Street Experience**

 

In connection with theAcquisition, the Company now also indirectly owns 17.65% of the voting unitsand 50.0% of the non-voting units of the Fremont Street Experience. Thisinvestment is accounted for under the equity method of accounting. Under theequity method, the carrying value of the investment is adjusted by theCompany’s share of earnings, losses, capital contributions and distributions.Activity relating to the Company’s investment in the Fremont Street Experiencefor the period January 23, 2004 to September 30, 2004 is as follows(amounts in thousands):

 
| Acquisition  of investment        |   | $    | 5,105  |   |
|-----------------------------------|--------|------|--------|--------|
| Contributions  to joint venture   |   | 469  |   |
| Equity  in loss of joint venture  |   | (382 | )      |
| Investment  Balance-end of period |   | $    | 5,192  |   |

 

The investment balancereflects the Company’s member’s equity in Fremont Street Experience, comprisedof cumulative contributions, adjusted for the Golden Nugget Group’sproportional interest in profits or losses ($3.3 million atSeptember 30, 2004), as well as an additional $1.8 millioncontribution made by the Golden Nugget Group in 1995 on a voluntary basis, andused by the Fremont Street Experience to acquire additional fixed assets usedin its operations.

 

The $5.2 millionmember’s equity carried by the Company is approximately $0.9 million lessthan the proportional amount of members’ capital reported by the Fremont StreetExperience due to values assigned in the allocation of purchase price resultingfrom the Acquisition.

 

9

----

 

The additionalcontribution of $1.8 million represents a non-voting interest which hasbeen treated as a redeemable preferred member contribution of the FremontStreet Experience. The redeemable preferred member contribution does not haveany profit distribution and must be repaid before any distributions are made onvoting interests.

 

Summarized financialinformation of the Fremont Street Experience is as follows (amounts inthousands):

 
| ** **                                   | ** ** | **As of  September 30, 2004** | ** ** |
|----------------------------------------------|------------|------------------------------------|------------|
|                                         |       |                               |       |
| Current assets                               |       | $                                  | 1,764      |   |
| Non-current assets                           |       | 43,346                             |       |
| Total assets                                 |       | $                                  | 45,110     |   |
|                                         |       |                               |       |
| Current liabilities                          |       | $                                  | 294        |   |
| Non-current liabilities                      |       | 17,329                             |       |
| Preferred  member contribution               |       | 3,040                              |       |
| Members’  capital                       |       | 24,447                             |       |
| Total  liabilities and members’ capital |       | $                                  | 45,110     |   |

 
| ** **          | ** ** | **Three Months Ended  September  30, 2004** | ** ** | **January 23, 2004 to  September 30, 2004** | ** ** |
|---------------------|------------|--------------------------------------------------|------------|-------------------------------------------------------|------------|
|                |       |                                             |       |                                                  |       |
| Total  revenues     |       | $                                                | 1,474      |                                                  | $          | 3,618 |   |
| Costs  and expenses |       | 2,190                                            |       | 5,784                                                 |       |
| Net  loss           |       | $                                                | (716       | )                                                     | $          | (2,166 | ) |

 

**6.  Segment Information**

 

The Company owns andoperates two properties as follows: a casino-hotel resort located in downtownLas Vegas, Nevada which is operated by GNLV, and a casino and nearby hotellocated in Laughlin, Nevada which is operated by GNL. The properties market ineach of their segments primarily to middle-income guests. The major productsoffered in each segment are as follows: casino entertainment, hotel rooms, andfood and beverage. The accounting policies of each business segment are thesame as those described in the summary of significant accounting policies. Thereare minimal inter-segment sales.  As morefully explained in Note 4, the Company recently entered into an agreement tosell GNL.

 

A summary of operationsby business segment for the period from the date of the Acquisition(January 23, 2004) through September 30, 2004, and a summary of thesegment assets as of September 30, 2004 is presented below (amounts inthousands):

 
| ** **                                                                     | ** ** | **Three Months Ended  September 30, 2004** | ** ** | **For the Period Jan 23,  2004 (Acquistion)  Through September 30,  2004** | ** ** |
|--------------------------------------------------------------------------------|------------|--------------------------------------------|------------|----------------------------------------------------------------------------|------------|
| Net  revenues                                                                  |       |                                       |       |                                                                       |       |
| GNLV                                                                           |       | $                                          | 49,598     |                                                                       | $          | 147,497 |   |
| GNL                                                                            |       | 11,296                                     |       | 32,940                                                                     |       |
| Total                                                                          |       | $                                          | 60,894     |                                                                       | $          | 180,437 |   |
| Income (loss)  from operations                                                 |       |                                       |       |                                                                       |       |
| GNLV                                                                           |       | $                                          | (4,489     | )                                                                          | $          | 5,434 |   |
| GNL                                                                            |       | 295                                        |       | 2,415                                                                      |       |
| Poster Financial  (corporate)                                                  |       | (154                                       | )          | (637                                                                       | )          |
| Total                                                                          |       | $                                          | (4,348     | )                                                                          | $          | 7,212 |   |
| Segment depreciation  and amortization                                         |       |                                       |       |                                                                       |       |
| GNLV                                                                           |       | $                                          | 3,890      |                                                                       | $          | 10,378 |   |
| GNL                                                                            |       | 314                                        |       | 907                                                                        |       |
| Total                                                                          |       | $                                          | 4,204      |                                                                       | $          | 11,285 |   |
| Expenditures for  additions to long-lived assets, exclusive of the Acquisition |       |                                       |       |                                                                       |       |
| GNLV                                                                           |       | $                                          | 1,361      |                                                                       | $          | 10,226 |   |
| GNL                                                                            |       | 330                                        |       | 1,232                                                                      |       |
| Total                                                                          |       | $                                          | 1,691      |                                                                       | $          | 11,458 |   |

 

10

----

 
| ** **                    | ** ** | **As of  September 30, 2004** | ** ** |
|-------------------------------|------------|------------------------------------|------------|
|                          |       |                               |       |
| Segment  assets               |       |                               |       |
| GNLV                          |       | $                                  | 217,204    |   |
| GNL                           |       | 43,475                             |       |
| Poster  Financial (Corporate) |       | 10,610                             |       |
| Total                         |       | $                                  | 271,289    |   |

 

**7.  Licensing Contingency**

* *

*Licensing Contingency*- The Company conducts licensed gaming operations in Nevada. The Nevada gamingauthorities control approval of ownership interests in gaming operations.  

 

On January 22, 2004, the Nevada Gaming Commissionfound the principal shareholders (the “Shareholders”) of PB Gaming (who arealso the Chief Executive Officer and Chief Operating Officer of PosterFinancial) suitable as officers, directors and shareholders of PB Gaming and asofficers and directors of Poster Financial, and issued licenses to them asofficers and directors of GNLV and GNL. The findings of suitability andlicenses issued to the Shareholders expire in January 2008. Following theone-year anniversary of such issuances, the Shareholders may apply for newunlimited findings of suitability and licenses. No assurance can be given thatsuch applications would be granted without further limitation or at all. If theShareholders were found unsuitable, they would be required to be removed fromtheir positions as officers and directors of the Company, PB Gaming, GNLV andGNL and PB Gaming could be required to redeem the stock in PB Gaming held bythem at a price equal to fair market value. Such an event could have a materialadverse effect on the Company’s business, financial condition and results ofoperations.

 

*Land Purchase Commitment*– The Company is currently in the process of obtaining land and developingplans for the expansion of the Golden Nugget - Las Vegas property.  The design, budget and schedule of theexpansion are at an early stage, and the ultimate timing, cost and scope of theproject is subject to risks attendant to large-scale projects.

 

In addition to the land purchase identified in Note 8to these financial statements, on October 5, 2004, GNLV entered into a Purchaseand Sales Agreement with 1st Rainbow LLC, a Nevada limited liabilitycompany, to purchase 0.17-acre parcel of land and improvements thereon for thepurchase price of $1.6 million, of which $250,000 was put on deposit. Thisparcel is adjacent to the parcel mentioned above.

 

**8.Transactions with Affiliates**

** **

On June 29, 2004, GNLV made a non-interest bearingloan to Lopo, LLC, a Nevada limited liability company (“Lopo”), the member’s interests of which are held by the solestockholders of the Company’s parent corporation, in the aggregate principalamount of $1.6 Million (the “Loan”),the funds of such Loan to be used by Lopo for the express and sole purpose offacilitating the acquisition of certain real property located near the GoldenNugget-Las Vegas by Lopo, upon Lopo’s agreement to convey the property to GNLVas repayment for the Loan within 90 days of the effective date of theLoan.  During the third fiscal quarter of2004, the land was conveyed to the Company at the amount paid by Lopo, and theloan was cancelled.

 

Effective July 1,2004, the Company entered into lease agreements with its sole stockholders tolease their interests in certain aircraft to be used primarily in thefurtherance of the Company’s business, such as transporting executives tobusiness meetings and customer transportation to and from our gamingproperties. The lease payments are based on the estimated fair market value ofthe interests owned and the Company believes equates to the cost for suchservices. Annual lease payments are approximately $365,000, paid in monthlyinstallments.

 

**9. Long-term debt**

** **

# **Notes**

** **

On December 3, 2003, the Company issued $155 millionaggregate principal amount of 8 3/4% Senior Secured Notes due 2011 (the“Notes”) to finance a portion of the purchase price of the Acquisition.  All payments with respect to the Notes arefully, unconditionally and irrevocably guaranteed, jointly and severally, byall the Company’s current and future restricted subsidiaries on a senior securedbasis. The Company’s “restricted subsidiaries,” which are subject to many ofthe restrictive covenants in the indenture governing the Notes, currently areGNLV and GNL the Company’s wholly owned subsidiaries, and GNE, a wholly ownedsubsidiary of GNLV.  The Notes and theguarantees are secured by a pledge of capital stock of the Company’s restrictedsubsidiaries and a security interest in substantially all of the Company’s andthe guarantors’ current and future assets. Such security interest is junior to the security interest granted to thelenders under the Company’s Credit Facility (as defined below).  Interest on the Notes is payable on June 1and December 1 of each year.  

 

# **Credit Facility**

** **

                On January 23,2004, the Company entered into a $35 million senior secured credit facility(the “Credit Facility”), which was established pursuant to a Loan and SecurityAgreement with Wells Fargo Foothill, Inc. as administrative agent.  The Credit Facility consists of a $20 millionamortizing term loan and a $15 million revolver.  

 

The Credit Facility contains covenants, including,among other things, financial covenants, limitations on the Company fromdisposing of assets, entering into mergers and certain acquisitions, incurringliens or indebtedness, and entering into transactions with affiliates.  The Company’s obligations under the CreditFacility are fully, unconditionally and irrevocably guaranteed, jointly andseverally, by all the Company’s subsidiaries. The Company’s obligations under the Credit Facility are also secured bya pledge of capital stock of the Company’s restricted subsidiaries and theCompany’s interest in the Fremont Street Experience, as well as a firstpriority lien on substantially all of the Company’s and the guarantors’ currentand future assets. Interest on the Credit Facility accrues on all individualborrowings at an interest rate determined at the option of the Company, ateither the LIBOR Index plus a 4% margin, or the Base Rate, defined as thebank’s prime rate plus a 3% margin.

 

At September 30, 2004, the Company failed to satisfytwo of the three financial covenants under the Loan and SecurityAgreement.  The lenders under the CreditFacility waived compliance with the Fixed Charge Coverage Ratio and the SeniorDebt to EBITDA Ratio for the quarter ended September 30, 2004.  The Company is currently negotiatingamendments to the financial covenants to reflect the Company’s expectedfinancial results as well as the proposed sale of GNL.

 

**10.  Summarized Financial Information**

 

Separate financialstatements and other disclosures concerning each of the subsidiary guarantorsare not presented below because management believes they are not material toinvestors. The following information represents the summarized financialinformation of the Company and the subsidiary guarantors on a consolidatingbasis as of September 30, 2004 and for the nine month period endedSeptember 30, 2004, reflecting the Acquisition completed inJanuary 2004.

 

11

----

 

**CONDENSED CONSOLIDATING BALANCESHEETS**

**September 30, 2004**

**(Thousands of dollars)**

**(Unaudited)**

 
| ** **                                       | ** ** | **Poster  Financial** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Consolidating/  Eliminating  Entries** | ** ** | **Total** | ** ** |
|--------------------------------------------------|------------|-----------------------|------------|-----------------------------|------------|------------------------------------------|------------|-----------|------------|
| **Assets**                                       |       |                  |       |                        |       |                                     |       |      |       |
| Current Assets                                   |       |                  |       |                        |       |                                     |       |      |       |
| Cash and cash  equivalents                       |       | $                     | —     |                        | $          | 21,082                                   |       | $         | —     |   | $ | 21,082 |   |
| Accounts  receivable, net                        |       | —                |       | 12,867                      |       | —                                   |       | 12,867    |       |
| Inventories                                      |       | —                |       | 3,534                       |       | —                                   |       | 3,534     |       |
| Prepaid expenses  and other                      |       | —                |       | 7,440                       |       | —                                   |       | 7,440     |       |
| Intercompany  receivables                        |       | —                |       | 5,818                       |       | (5,818                                   | )(a)       | —    |       |
|                                             |       |                  |       |                        |       |                                     |       |      |       |
| Total current  assets                            |       | —                |       | 50,741                      |       | (5,818                                   | )          | 44,923    |       |
|                                             |       |                  |       |                        |       |                                     |       |      |       |
| Property and  equipment, net                     |       | —                |       | 184,319                     |       | —                                   |       | 184,319   |       |
| Investment in  subsidiaries                      |       | 221,215               |       | —                      |       | (221,215                                 | )(b)       | —    |       |
| Investment in  joint venture                     |       | —                |       | 5,192                       |       | —                                   |       | 5,192     |       |
| Deposits and  other assets, net                  |       | 10,610                |       | 36,288                      |       | (10,043                                  | )(c)       | 36,855    |       |
|                                             |       |                  |       |                        |       |                                     |       |      |       |
| Total assets                                     |       | $                     | 231,825    |                        | $          | 276,540                                  |       | $         | (237,076   | ) | $ | 271,289 |   |
|                                             |       |                  |       |                        |       |                                     |       |      |       |
| Liabilities and  Stockholder’s Equity       |       |                  |       |                        |       |                                     |       |      |       |
| Current  Liabilities                             |       |                  |       |                        |       |                                     |       |      |       |
| Accounts payable                                 |       | $                     | 158        |                        | $          | 13,273                                   |       | $         | —     |   | $ | 13,431 |   |
| Current portion  of long-term debt               |       | 2,800                 |       | 2,919                       |       | (2,800                                   | )(c)       | 2,919     |       |
| Other accrued  liabilities                       |       | 4,889                 |       | 31,618                      |       | —                                   |       | 36,507    |       |
| Amounts due to  affiliates                       |       | 5,818                 |       | —                      |       | (5,818                                   | )(a)       | —    |       |
|                                             |       |                  |       |                        |       |                                     |       |      |       |
| Total current  liabilities                       |       | 13,665                |       | 47,810                      |       | (8,618                                   | )          | 58,967    |       |
|                                             |       |                  |       |                        |       |                                     |       |      |       |
| Long-term debt,  net of current portion          |       | 177,611               |       | 171,883                     |       | (177,611                                 | )(c)       | 177,883   |       |
|                                             |       |                  |       |                        |       |                                     |       |      |       |
| Total  liabilities                               |       | 191,276               |       | 225,693                     |       | (186,229                                 | )          | 230,740   |       |
|                                             |       |                  |       |                        |       |                                     |       |      |       |
| Stockholder’s  equity                       |       | 40,549                |       | 50,847                      |       | (50,847                                  | )          | 40,549    |       |
| Total liabilities  and stockholder’s equity |       | $                     | 231,825    |                        | $          | 276,540                                  |       | $         | (237,076   | ) | $ | 271,289 |   |

 

----

(a)   Toeliminate intercompany receivables and payables in consolidation.

 

(b)   Toeliminate investment in subsidiaries in consolidation.

 

(c)   Toeliminate notes payable and related debt issuance costs pushed down to theguarantor subsidiaries to reflect the impact of the Acquisition, in accordancewith the requirements of Staff Accounting Bulletin Topic 5(J) of the SEC.

 

12

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**CONDENSED CONSOLIDATING STATEMENT OFOPERATIONS**

**For the nine months ended September30, 2004**

**(Thousands of dollars)**

**(Unaudited)**

 
| ** **                               | ** ** | **Poster  Financial** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Consolidating/  Eliminating  Entries** | ** ** | **Total** | ** ** |
|------------------------------------------|------------|-----------------------|------------|-----------------------------|------------|------------------------------------------|------------|-----------|------------|
|                                     |       |                  |       |                        |       |                                     |       |      |       |
| **Net  revenues**                        |       | $                     | —     |                        | $          | 180,437                                  |       | $         | —     |   | $ | 180,437 |   |
|                                     |       |                  |       |                        |       |                                     |       |      |       |
| **Cost  and expenses**                   |       |                  |       |                        |       |                                     |       |      |       |
| Casino-hotel  operations                 |       | —                |       | 122,672                     |       | —                                   |       | 122,672   |       |
| General and  administrative              |       | 637                   |       | 38,631                      |       | —                                   |       | 39,268    |       |
| Depreciation and  amortization           |       | —                |       | 11,285                      |       | —                                   |       | 11,285    |       |
|                                     |       |                  |       |                        |       |                                     |       |      |       |
| Total cost and  expenses                 |       | 637                   |       | 172,588                     |       | —                                   |       | 173,225   |       |
|                                     |       |                  |       |                        |       |                                     |       |      |       |
| **Operating  income**                    |       | (637                  | )          | 7,849                       |       | —                                   |       | 7,212     |       |
|                                     |       |                  |       |                        |       |                                     |       |      |       |
| **Other  income (expense)**              |       |                  |       |                        |       |                                     |       |      |       |
| Equity in loss  of joint venture         |       | —                |       | (382                        | )          | —                                   |       | (382      | )          |
| Equity in income  (loss) of subsidiaries |       | (4,869                | )          | —                      |       | (4,869                                   | )(a)       | —    |       |
| Interest income                          |       | 51                    |       | 55                          |       | —                                   |       | 106       |       |
| Interest expense                         |       | (12,360               | )          | (12,391                     | )          | 12,360                                   | (b)        | (12,391   | )          |
|                                     |       |                  |       |                        |       |                                     |       |      |       |
| Total other  income (expense)            |       | (17,178               | )          | (12,718                     | )          | 17,229                                   |       | (12,667   | )          |
|                                     |       |                  |       |                        |       |                                     |       |      |       |
| **Net  income (loss)**                   |       | $                     | (17,815    | )                           | $          | (4,869                                   | )          | $         | 17,229     |   | $ | (5,455 | ) |

 

----

(a)   Toeliminate equity in income of subsidiaries in consolidation.

 

(b)   Toeliminate interest expense on the Notes and term loan pushed down to theguarantor subsidiaries to reflect the impact of the Acquisition, in accordancewith Staff Accounting Bulletin Topic 5(J) of the SEC.

 

13

----

 

**CONDENSED CONSOLIDATING STATEMENT OFCASH FLOWS**

**For the nine months ended September30, 2004**

**(Thousands of dollars)**

**(Unaudited)**

 
| ** **                                                           | ** ** | **Poster  Financial** | ** ** | **Consolidating/  Guarantor  Subsidiaries** | ** ** | **Eliminating  Entries** | ** ** | **Total** | ** ** |
|----------------------------------------------------------------------|------------|-----------------------|------------|---------------------------------------------|------------|--------------------------|------------|-----------|------------|
|                                                                 |       |                  |       |                                        |       |                     |       |      |       |
| **Cash  flows from operating activities:**                           |       | $                     | 331        |                                        | $          | 12,143                   |       | $         | —     |   | $ | 12,474 |   |
|                                                                 |       |                  |       |                                        |       |                     |       |      |       |
| **Cash  flows from investing activities:**                           |       |                  |       |                                        |       |                     |       |      |       |
| Acquisition of  property, equipment and improvements                 |       |                  |       | (11,458                                     | )          |                     |       | (11,458   | )          |
| Acquisition of  Golden Nugget Group, net of cash acquired of $11,942 |       | (201,781              | )          |                                        |       |                     |       | (201,781  | )          |
| Contributions to  joint venture                                      |       |                  |       | (469                                        | )          |                     |       | (469      | )          |
| Decrease in  restricted cash                                         |       | 159,548               |       |                                        |       |                     |       | 159,548   |       |
| Proceeds from  sale of equipment                                     |       |                  |       | 70                                          |       |                     |       | 70        |       |
| Net cash used in  investing activities                               |       | (42,233               | )          | (11,857                                     | )          | —                   |       | (54,090   | )          |
|                                                                 |       |                  |       |                                        |       |                     |       |      |       |
| **Cash  flows from financing activities:**                           |       |                  |       |                                        |       |                     |       |      |       |
| Proceeds from  the issuance of term loan                             |       | 20,000                |       |                                        |       |                     |       | 20,000    |       |
| Net borrowings  under revolving credit facility                      |       | 5,302                 |       |                                        |       |                     |       | 5,302     |       |
| Change in bank  overdraft                                            |       |                  |       | 796                                         |       |                     |       | 796       |       |
| Contributions to  subsidiaries using funds drawn under term loan     |       | (20,000               | )          | 20,000                                      |       |                     |       | —    |       |
| Distributions of  equity to parent                                   |       | (2,517                | )          |                                        |       |                     |       | (2,517    | )          |
| Additional  contributions of equity from parent                      |       | 39,117                |       |                                        |       |                     |       | 39,117    |       |
| Net cash provide  by financing activities                            |       | 41,902                |       | 20,796                                      |       | —                   |       | 62,698    |       |
|                                                                 |       |                  |       |                                        |       |                     |       |      |       |
| Net increase in  cash and cash equivalents                           |       | —                |       | 21,082                                      |       | —                   |       | 21,082    |       |
| Cash and cash  equivalents, beginning of period                      |       | —                |       | —                                      |       |                     |       | —    |       |
| Cash and cash  equivalents, end of period                            |       | $                     | —     |                                        | $          | 21,082                   |       | $         | —     |   | $ | 21,082 |   |

 

14

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**b.Golden Nugget Group**

 

**Golden Nugget Gro****up**

**(Previously a division of MGM MIRAGE)**

 

**Combined Statements ofOperations and Changes in Division Equity**

**(Thousands of dollars)**

 
| ** **                               | ** ** | **Three Months Ended  September 30, 2003** | ** ** | **Nine Months Ended  September 30, 2003** | ** ** | **Period from January 1,  2004 to January 22,  2004 (Date Immediately  Prior to Acquisition by  Poster Financial)** | ** ** |
|------------------------------------------|------------|--------------------------------------------|------------|-------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------|------------|
| ** **                               | ** ** | **(unaudited)**                            | ** ** | **(unaudited)**                           | ** ** | **(unaudited)**                                                                                                     | ** ** |
| **Revenues:**                            |       |                                       |       |                                      |       |                                                                                                                |       |
| Casino                                   |       | $                                          | 38,910     |                                      | $          | 116,806                                                                                                             |       | $ | 10,121 |   |
| Rooms                                    |       | 10,586                                     |       | 33,653                                    |       | 2,795                                                                                                               |       |
| Food and  beverage                       |       | 11,965                                     |       | 36,554                                    |       | 3,034                                                                                                               |       |
| Entertainment retail  and other          |       | 3,813                                      |       | 10,728                                    |       | 817                                                                                                                 |       |
| Gross revenues                           |       | 65,274                                     |       | 197,741                                   |       | 16,767                                                                                                              |       |
| Promotional  allowances                  |       | (8,302                                     | )          | (23,919                                   | )          | (1,962                                                                                                              | )          |
| Net revenues                             |       | 56,972                                     |       | 173,822                                   |       | 14,805                                                                                                              |       |
|                                     |       |                                       |       |                                      |       |                                                                                                                |       |
| **Cost  and expenses:**                  |       |                                       |       |                                      |       |                                                                                                                |       |
| Casino                                   |       | 22,235                                     |       | 65,124                                    |       | 5,441                                                                                                               |       |
| Rooms                                    |       | 5,272                                      |       | 15,511                                    |       | 1,304                                                                                                               |       |
| Food and  beverage                       |       | 7,844                                      |       | 23,686                                    |       | 2,003                                                                                                               |       |
| Entertainment  retail and other          |       | 2,459                                      |       | 7,874                                     |       | 568                                                                                                                 |       |
| Provision for  doubtful accounts         |       | 113                                        |       | 603                                       |       | 107                                                                                                                 |       |
| General and  administrative              |       | 11,618                                     |       | 32,979                                    |       | 2,524                                                                                                               |       |
| (Gain)/loss on  disposal of fixed assets |       | (3                                         | )          | (43                                       | )          | —                                                                                                              |       |
| MGM/MIRAGE  management fee               |       | 3,271                                      |       | 9,891                                     |       | 844                                                                                                                 |       |
| Depreciation and  amortization           |       | 3,382                                      |       | 10,301                                    |       | 806                                                                                                                 |       |
| Total cost and  expenses                 |       | 56,191                                     |       | 165,926                                   |       | 13,597                                                                                                              |       |
|                                     |       |                                       |       |                                      |       |                                                                                                                |       |
| Operating income                         |       | 781                                        |       | 7,896                                     |       | 1,208                                                                                                               |       |
|                                     |       |                                       |       |                                      |       |                                                                                                                |       |
| **Other  income (expense):**             |       |                                       |       |                                      |       |                                                                                                                |       |
| Equity in loss  of joint venture         |       | (225                                       | )          | (611                                      | )          | (26                                                                                                                 | )          |
| Interest income                          |       | 8                                          |       | 27                                        |       | 2                                                                                                                   |       |
| Interest expense                         |       | (800                                       | )          | (2,554                                    | )          | (3                                                                                                                  | )          |
| Intercompany  interest expense           |       | (13                                        | )          | (40                                       | )          | (206                                                                                                                | )          |
| Total other  income (expense)            |       | (1,030                                     | )          | (3,178                                    | )          | (233                                                                                                                | )          |
|                                     |       |                                       |       |                                      |       |                                                                                                                |       |
| Income before  income taxes              |       | (249                                       | )          | 4,718                                     |       | 975                                                                                                                 |       |
| Income tax  provision                    |       | 39                                         |       | (1,521                                    | )          | (307                                                                                                                | )          |
| Net income  (loss)                       |       | $                                          | (210       | )                                         | $          | 3,197                                                                                                               |       | $ | 668 |   |

 

Theaccompanying notes are an integral part of these financial statements.

 

15

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**Golden Nugget Group**

**(Previouslya division of MGM MIRAGE)**

 

**Combined Statement of Cash Flows**

**(Thousands of dollars)**

 
| ** **                                                                               | ** ** | **Nine Months Ended  September 30, 2003** | ** ** | **Period from January 1,  2004 to January 22,  2004 (Date Immediately  Prior to Acquisition by  Poster Financial)** | ** ** |
|------------------------------------------------------------------------------------------|------------|-------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------|------------|
| ** **                                                                               | ** ** | **(Unaudited)**                           | ** ** | **(Unaudited)**                                                                                                     | ** ** |
|                                                                                     |       |                                      |       |                                                                                                                |       |
| **Cash  flows from operating activities:**                                               |       |                                      |       |                                                                                                                |       |
| Net income  (loss)                                                                       |       | $                                         | 3,197      |                                                                                                                | $          | 668 |   |
| Adjustments to  reconcile net income (loss) to net cash provided by operating activities |       |                                      |       |                                                                                                                |       |
| Depreciation                                                                             |       | 10,301                                    |       | 806                                                                                                                 |       |
| Provision for  doubtful accounts                                                         |       | 603                                       |       | 107                                                                                                                 |       |
| Equity in loss  of joint venture                                                         |       | 611                                       |       | 26                                                                                                                  |       |
| Changes in  operating assets and liabilities                                             |       |                                      |       |                                                                                                                |       |
| Decrease  (Increase) in accounts receivable                                              |       | 1,288                                     |       | 923                                                                                                                 |       |
| Decrease  (increase) in due from Poster Financial                                        |       |                                      |       | 376                                                                                                                 |       |
| Decrease  (increase) in inventories                                                      |       | 1,919                                     |       | 95                                                                                                                  |       |
| Decrease  (Increase) in prepaid expenses and other assets                                |       | (721                                      | )          | 633                                                                                                                 |       |
| (Decrease)  increase in deposits and other                                               |       | (1,348                                    | )          | 22                                                                                                                  |       |
| (Decrease)  increase in accounts payable                                                 |       | 13,830                                    |       | (380                                                                                                                | )          |
| (Decrease)  increase in other accrued payables                                           |       | (1,129                                    | )          | 1,736                                                                                                               |       |
|                                                                                     |       |                                      |       |                                                                                                                |       |
| Net cash  provided by operating activities                                               |       | 28,551                                    |       | 5,012                                                                                                               |       |
|                                                                                     |       |                                      |       |                                                                                                                |       |
| **Cash  flows from investing activities:**                                               |       |                                      |       |                                                                                                                |       |
| Acquisition of  property, equipment and improvements                                     |       | (5,590                                    | )          | (4,436                                                                                                              | )          |
| Contributions to  joint venture                                                          |       | (753                                      | )          | (235                                                                                                                | )          |
|                                                                                     |       |                                      |       |                                                                                                                |       |
| Net cash used in  investing activities                                                   |       | (6,343                                    | )          | (4,671                                                                                                              | )          |
|                                                                                     |       |                                      |       |                                                                                                                |       |
| **Cash  flows from financing activities:**                                               |       |                                      |       |                                                                                                                |       |
| Repayment of  other debt                                                                 |       | (100                                      | )          | —                                                                                                              |       |
| Change in bank  overdraft                                                                |       | (6,548                                    | )          | (4,996                                                                                                              | )          |
| Change in  amounts payable to MGM MIRAGE an affiliates, net                              |       | (13,324                                   | )          | (3,456                                                                                                              | )          |
|                                                                                     |       |                                      |       |                                                                                                                |       |
| Net cash used in  financing activities                                                   |       | (19,972                                   | )          | (8,452                                                                                                              | )          |
|                                                                                     |       |                                      |       |                                                                                                                |       |
| Net increase  (decrease) in cash and cash equivalents                                    |       | 2,236                                     |       | (8,111                                                                                                              | )          |
| Cash and cash  equivalents, beginning of period                                          |       | 17,340                                    |       | 23,904                                                                                                              |       |
|                                                                                     |       |                                      |       |                                                                                                                |       |
| Cash and cash  equivalents, end of period                                                |       | $                                         | 19,576     |                                                                                                                | $          | 15,793 |   |

 

The accompanying notesare an integral part of these financial statements.

 

16

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**GoldenNugget Group**

**(****Previously****adivision of MGM MIRAGE)**

 

**CondensedNotes to Combined Financial Statements (Unaudited)**

 

**1.  Organization**

 

Prior to January 23,2004, the Golden Nugget Group (the “Group”) was an operating division of MGMMIRAGE (“MGM MIRAGE” or “Parent”), a publicly held Delaware corporation. TheGroup is comprised of the following entities:

 

•                                          GNLV,CORP., a Nevada corporation formerly wholly owned by MGM MIRAGE (“GNLV”), whichowns and operated the Golden Nugget—Las Vegas, a hotel-casino entertainmentresort located in downtown Las Vegas, Nevada; and

 

•                                          GNL,CORP., a Nevada corporation formerly wholly owned by MGM MIRAGE (“GNL”), whichowns and operated the Golden Nugget—Laughlin Las Vegas, a hotel-casino resortin Laughlin, Nevada.

 

GNLV also has a whollyowned subsidiary, Golden Nugget Experience, LLC (“GNE”), a Nevada limitedliability company. GNE is a holding company that has an investment in TheFremont Street Experience Limited Liability Company, a Nevada limited liabilitycompany (the “Fremont Street Experience”), organized to enhance tourism indowntown Las Vegas, Nevada. The Fremont Street Experience is owned by a groupof unrelated casino operators in downtown Las Vegas, and operates retail malls,parking garages, entertainment venues and a pedestrian mall that encloses acity street (Fremont Street), located adjacent to the Golden Nugget—Las Vegas.GNE holds 17.65% of the voting units and 50.0% of the non-voting units of theFremont Street Experience, and accounts for its investment utilizing the equitymethod of accounting.

 

The management of MGMMIRAGE has made all significant operational and financial decisions of theGroup during the periods presented.

 

On January 23, 2004,Poster Financial Group, Inc. (“Poster Financial”), a party unrelated toMGM MIRAGE, completed the acquisition of the Group from MGM MIRAGE (the“Acquisition”). The purchase price for the Acquisition was approximately$213.7 million, reflecting a base purchase price of $215.0 million lessan adjustment for working capital at the date of the closing of approximately$4.8 million plus acquisition related expenses of approximately$3.5 million.

 

**2.  Significant Accounting Policies and Basis ofPresentation**

 

The combined financialstatements of the Group for the period January 1, 2004 throughJanuary 22, 2004 and for the three and nine months endedSeptember 30, 2003, have been prepared by the Group, without audit,pursuant to the rules and regulations of the Securities and Exchange Commission(the “SEC”). Certain information and footnote disclosures normally included infinancial statements prepared in accordance with generally accepted accountingprinciples have been condensed or omitted pursuant to such rules andregulations. The preparation of the combined financial statements requiresmanagement to make estimates and assumptions that affect the reported amountsof assets and liabilities and disclosure of contingent liabilities at the dateof the financial statements and the reported amounts of revenue and expensesduring the reporting period. Actual results could differ from those estimates.In the opinion of management, all adjustments, consisting of normal recurringitems and estimates necessary for a fair presentation of the results forinterim periods, have been made. These combined financial statements should beread in conjunction with the financial statements and notes thereto for theGroup as of December 31, 2003 and for the year then ended.

 

17

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**Principlesof Presentation**

 

All inter-companyaccounts and transactions between GNLV and GNE are eliminated in consolidation.All inter-company accounts and transactions between GNLV and GNL are eliminatedin combination to arrive at the financial statements of the Group. The Group isnot a separate reporting entity and has not previously presented financialstatements on a stand-alone basis. Certain estimates, including allocationsfrom the Parent, have been made to provide financial information forstand-alone reporting purposes. Management of the Group believes that thepresentations and disclosures herein are adequate to make the information notmisleading. In the opinion of management, all adjustments necessary to fairlystate the financial statements have been reflected.

 

**StockBased Compensation**

 

Prior to the Acquisition,certain employees were eligible to participate in the stock option plans of MGMMIRAGE. The Group does not have a stock option plan. The Group accounts forstock-based compensation, including employee stock option plans, in accordancewith Accounting Principles Board Opinion No. 25, “Accounting for StockIssued to Employees” and the Financial Accounting Standards Board’sInterpretation No. 44, “Accounting for Certain Transactions involvingStock Compensation, an interpretation of APB Opinion No. 25”, anddiscloses supplemental information in accordance with Statement of FinancialAccounting Standards No. 123, “Accounting for Stock-Based Compensation”(“SFAS 123”), as amended by Statement of Financial Accounting StandardsNo. 148, “Accounting for Stock-Based Compensation-Transition andDisclosure” (“SFAS 148”). The Group does not incur compensation expensefor employee stock options when the exercise price is at least 100% of themarket value of the Group’s common stock on the date of grant. For disclosurepurposes, employee stock options are measured at fair value, compensation isassumed to be amortized over the vesting periods of the options, and pro formaresults are disclosed as if the Group had applied SFAS 123.

 

Had the Group accountedfor these plans under the fair value method allowed by SFAS 123, theGroup’s net income would have been reduced to recognize the fair value ofemployee stock options. The following are required disclosures underSFAS 123 and SFAS 148 (amounts in thousands):

 
| ** **                               | ** ** | **Three Months  Ended  September 30, 2003** | ** ** | **Nine Months  Ended  September 30, 2003** | ** ** | **Period from  Jan 1, 2004  through  Jan 22, 2004** | ** ** |
|------------------------------------------|------------|--------------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------------|------------|
| Net  income (loss) as reported           |       | $                                                | (210       | )                                               | $          | 3,197                                               |       | $ | 668 |   |
| Stock  based compensation under SFAS 123 |       | (334                                             | )          | (1,002                                          | )          | (56                                                 | )          |
| Pro  Forma                               |       | $                                                | (544       | )                                               | $          | 2,195                                               |       | $ | 612 |   |

 

The stock-basedcompensation included in the table above represents the after-tax amount of proforma compensation related to stock option plans.

 

**3.  Golden Nugget Acquisition**

 

On January 23, 2004,Poster Financial, a party unrelated to MGM MIRAGE, completed the Acquisition ofthe Group from MGM MIRAGE. The purchase price for the acquisition wasapproximately $213.7 million, reflecting a base purchase price of$215.0 million less an adjustment for estimated working capital at thedate of closing of approximately $4.8 million plus acquisition relatedexpenses of approximately $3.5 million.

 

18

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The transaction wasaccounted for as a purchase and, accordingly, the purchase price was allocatedto the underlying assets acquired and liabilities assumed based upon theirestimated fair values at the date of the Acquisition. Results of operations ofthe acquired companies were reflected in the acquirer’s financial statementsfrom the day of the Acquisition.

 

**4.  Fremont Street Experience**

 

Through its wholly-ownedsubsidiary, GNE, the Group indirectly owns 17.65% of the voting units and 50.0%of the non-voting units of the Fremont Street Experience. This investment isaccounted for under the equity method of accounting.

 

Summarized financialinformation of the Fremont Street Experience for the three and nine monthsended September 30, 2003 and for the period from January 1, 2004through January 22, 2004 is as follows (amounts in thousands):

 
| ** **                | ** ** | **Three Months  Ended  September 30, 2003** | ** ** | **Nine Months  Ended  September 30, 2003** | ** ** | **Period from  Jan 1, 2004  through  Jan 22, 2004** | ** ** |
|---------------------------|------------|--------------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------------|------------|
| Total  revenues           |       | $                                                | 509        |                                            | $          | 3,214                                               |       | $ | 274 |   |
| Total  costs and expenses |       | 1,508                                            |       | 6,400                                           |       | 423                                                 |       |
| Net  loss                 |       | $                                                | (999       | )                                               | $          | (3,186                                              | )          | $ | (149 | ) |

 

**5.  Segment Information**

 

The Group owns andoperates two properties as follows: a casino-hotel resort located in downtownLas Vegas, Nevada; and a casino and nearby hotel located in Laughlin, Nevada.The properties market in each of their segments primarily to middle-incomeguests. The major products offered in each segment are as follows: casinoentertainment, hotel rooms, and food and beverage. The accounting policies ofeach business segment are the same as those described in the summary ofsignificant accounting policies. There are minimal inter-segment sales.

 

19

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A summary of operationsby business segment for the three and nine months ended September 30, 2003and for the period from January 1, 2004 through January 22, 2004 (thedate immediately prior to Acquisition) is presented below (amounts inthousands):

 
| ** **                                       | ** ** | **Three Months Ended  September 30, 2003** | ** ** | **Nine Months Ended  September 30, 2003** | ** ** | **For the Period Jan 1,  2004 through Jan 22,  2004** | ** ** |
|--------------------------------------------------|------------|--------------------------------------------|------------|-------------------------------------------|------------|-------------------------------------------------------|------------|
| Net revenues                                     |       |                                       |       |                                      |       |                                                  |       |
| GNLV                                             |       | $                                          | 46,681     |                                      | $          | 142,171                                               |       | $ | 12,167 |   |
| GNL                                              |       | 10,291                                     |       | 31,651                                    |       | 2,638                                                 |       |
| Total                                            |       | $                                          | 56,972     |                                      | $          | 173,822                                               |       | $ | 14,805 |   |
| Income (loss)  from operations                   |       |                                       |       |                                      |       |                                                  |       |
| GNLV                                             |       | $                                          | 1,082      |                                      | $          | 8,169                                                 |       | $ | 1,052 |   |
| GNL                                              |       | (301                                       | )          | (273                                      | )          | 156                                                   |       |
| Total                                            |       | $                                          | 781        |                                      | $          | 7,896                                                 |       | $ | 1,208 |   |
| Segment  depreciation and amortization           |       |                                       |       |                                      |       |                                                  |       |
| GNLV                                             |       | $                                          | 3,155      |                                      | $          | 9,611                                                 |       | $ | 782 |   |
| GNL                                              |       | 227                                        |       | 690                                       |       | 24                                                    |       |
| Total                                            |       | $                                          | 3,382      |                                      | $          | 10,301                                                |       | $ | 806 |   |
| Expenditures for  additions to long-lived assets |       |                                       |       |                                      |       |                                                  |       |
| GNLV                                             |       | $                                          | 934        |                                      | $          | 4,566                                                 |       | $ | 3,772 |   |
| GNL                                              |       | 186                                        |       | 1,024                                     |       | 664                                                   |       |
| Total                                            |       | $                                          | 1,120      |                                      | $          | 5,590                                                 |       | $ | 4,436 |   |

 

20

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**Item 2.  Management’sDiscussion and Analysis of Financial Condition and Results of Operations**

 

In this report, unlessthe context requires otherwise, the terms the “Company,” “we,” “us,” and “our”refer to Poster Financial Group, Inc. and its subsidiaries and the term“Poster Financial” refers only to Poster Financial Group, Inc. and not itssubsidiaries. In this report, our parent company, PB Gaming, Inc., is referredto as “PB Gaming.”

 

This report on Form 10-Qcontains certain forward-looking statements regarding our future results ofoperations and performance. Important factors that could cause differences inresults of operations include, but are not limited to, general economicconditions in the markets in which the Company operates, competition from othergaming operations, leverage, the inherent uncertainty and costs associated withlitigation and governmental and regulatory investigations, and licensing andother regulatory risks.  See “—CautionaryStatement Regarding Forward-Looking Statements.”

 

**OVERVIEW**

 

**TheCompany**

 

We own and operate theGolden Nugget hotel-casinos in Las Vegas and Laughlin, Nevada, which arereferred to in this report as the “Golden Nugget-Las Vegas” and the“Golden Nugget-Laughlin,” respectively. The following table sets forthinformation about each of the Golden Nugget properties as of September 30,2004: 

 
| **Property**                  | ** ** | **Slot  Machines** | ** ** | **Table  Games** | ** ** | **Casino  Space  (square feet)** | ** ** | **Hotel Rooms** | ** ** |
|-------------------------------|------------|--------------------|------------|------------------|------------|----------------------------------|------------|-----------------|------------|
| Golden  Nugget-Las Vegas |       | 1,208              |       | 68               |       | 35,000                           |       | 1,907           |       |
| Golden  Nugget-Laughlin       |       | 945                |       | 21               |       | 32,000                           |       | 300             |       |
| **Total**                     |       | 2,153              |       | 89               |       | 67,000                           |       | 2,207           |       |

 

We believe that the GoldenNugget brand name is one of the most recognized in the gaming industry and weexpect to continue to capitalize on the strong name recognition and high levelof quality and value associated with it. We target out-of-town customers atboth of our properties while also catering to the local customer base. Webelieve that the Golden Nugget-Las Vegas is the leading downtowndestination for out-of-town customers. The property offers the same complementof services as our Las Vegas Strip competitors, but we believe that ourcustomers prefer the boutique experience we offer and the downtown environment.We emphasize the property’s wide selection of amenities and provide a luxuryroom product and personalized services at an attractive value. At the GoldenNugget-Laughlin, we focus on providing a high level of customer service, aquality dining experience at an appealing value, a slot product with highlycompetitive pay tables and a superior player rewards program.  As further discussed under the heading “—Recent Developments,” November 8, 2004 we entered into an agreement to sell theGolden Nugget-Laughlin.

 

We also have aninvestment in The Fremont Street Experience Limited Liability Company (“TheFremont Street Experience LLC”), the entity which owns and operates The FremontStreet Experience. The Fremont Street Experience is a unique entertainmentattraction located in the center of downtown Las Vegas on Fremont Street,where the Golden Nugget-Las Vegas is located. 

 

**TheAcquisition and Poster Financial**

 

Poster Financial is aholding company that was incorporated in June 2003 for the purpose ofacquiring the entities that own and operate the Golden Nugget hotel-casinos inLas Vegas and Laughlin, Nevada. On June 24, 2003, Poster Financialentered into a stock purchase agreement with MGM MIRAGE, as parent, MirageResorts, Incorporated, as seller, GNLV, CORP. (“GNLV”), GNL, CORP. (“GNL”), andGolden Nugget Experience, LLC (“Golden Nugget Experience”), a wholly ownedsubsidiary of GNLV, in which Poster Financial agreed to purchase all the issuedand outstanding shares of capital stock of GNLV and GNL from Mirage Resorts,Incorporated (the “Acquisition”). GNLV and GNL, respectively, own and operatethe Golden Nugget-Las Vegas and the Golden Nugget-Laughlin. GNLV and itssubsidiaries and GNL are collectively referred to in this report as the “GoldenNugget Group.” On January 23, 2004, Poster Financial completed theAcquisition and acquired all the issued and outstanding shares of capital stockof GNLV and GNL and, as a result, indirect ownership of the GoldenNugget-Las Vegas and the Golden Nugget-Laughlin.

 

Certain financialstatements for Poster Financial are included in this report, but suchhistorical operating results will not be indicative of future operating results.Our future operating results are subject to significant business, economic,regulatory and competitive uncertainties and contingencies, many of which arebeyond our control.

 

PB Gaming has elected tobe taxed as a Subchapter S corporation and has elected to have each of PosterFinancial, GNLV and GNL treated as a qualified Subchapter S corporationsubsidiary for U.S. federal income tax purposes.

 

**TheGolden Nugget Group**

 

The operations of theGolden Nugget Group consist of two hotel-casinos located in Las Vegas andLaughlin, Nevada, referred to in this report as the Golden Nugget-Las Vegas andthe Golden Nugget-Laughlin, respectively. Our business strategy is to createthe best possible gaming and entertainment experience for our customers byproviding a combination of comfortable and attractive surroundings withattentive service from friendly and experienced employees. In addition, theGolden Nugget properties offer a wide selection of high-quality amenities tocomplement their guests’ gaming experience.

 

Key gaming volumeindicators are table game “drop” and slot machine “handle”. Table game drop andslot machine handle are casino industry specific terms that are used toidentify the amount wagered by patrons at a casino table game or slot machine,respectively. The revenues of the Golden Nugget properties can also be affectedby the percentage of gaming volume retained by them, indicated by “win” or“hold” percentages, which we cannot fully control. Hold is calculated bydividing the amount won by the casino by the amount wagered by patrons. Holdpercentages vary based on the mix of games on the floor. In addition, whilehold percentage is reasonably predictable over periods greater than twelvemonths, it can fluctuate significantly over shorter periods of time, such as afiscal quarter, which can affect comparability between periods.

 

In the hotel operationsof the Golden Nugget properties, key measures are occupancy rates (a volumeindicator) and average daily room rate (“ADR,” a price indicator). Revenues ofthe Golden Nugget Group can also be affected by economic and other factors.Domestic leisure travel is dependent on the national economy and the level ofconsumers’ disposable income.

 

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**RESULTS OF OPERATIONS**

## *** ***

***Three Months EndedSeptember 30, 2004 Compared to Three Months Ended September 30, 2003***

 

Combinednet revenues for the three months ended September 30, 2004 amounted to $ 60.9million, an increase of $3.9 million, or 6.8%, over the three months endedSeptember 30, 2003. Net revenues at the Golden Nugget–Las Vegas for the threemonths ended September 30, 2004 accounted for $49.6 million, or 81.4% ofcombined net revenues, an increase of $2.9 million compared to the three monthsended September 30, 2003. The increase of 6.2% in net revenues at the GoldenNugget–Las Vegas was attributable to an increase in table game drop, slotmachine handle, and room occupancy and ADR for the three months ended September30, 2004 compared to the three months ended September 30, 2003. Net revenues atthe Golden Nugget–Laughlin for the three months ended September 30, 2004accounted for $11.3 million, or 18.6% of combined net revenues, an increase of$1.0 million as compared to the three months ended September 30, 2003. Theincrease of 9.8% in net revenues at the Golden Nugget–Laughlin was primarilyattributable to an increase in table game drop and hold percentage and slotmachine handle for the three months ended September 30, 2004 compared to thethree months ended September 30, 2003.

 

The following table presents detail of our net revenues:

 
| ** **                       | ** ** | **Golden  Nugget-Las Vegas**          | ** ** | **Golden  Nugget-Laughlin**           | ** ** |
|----------------------------------|------------|---------------------------------------|------------|---------------------------------------|------------|
| ** **                       | ** ** | **Three  Months Ended September 30,** | ** ** | **Three  Months Ended September 30,** | ** ** |
| ** **                       | ** ** | ** **                            | ** ** | ** **                            | ** ** | **Percentage** | ** ** | ** ** | ** ** | ** ** | ** ** | **Percentage** | ** ** |
| ** **                       | ** ** | **2003**                              | ** ** | **2004**                              | ** ** | **Change** | ** ** | **2003** | ** ** | **2004** | ** ** | **Change** | ** ** |
| ** **                       | ** ** | **(In  thousands)**                   | ** ** | **(In  thousands)**                   | ** ** |
| Casino revenue,  net:            |       |                                  |       |                                  |       |   |   |   |   |   |   |   |   |
| Table games                      |       | $                                     | 8,912      |                                  | $          | 10,373 |   | 16.4 | % | $ | 573 |   | $ | 998 |   | 74.2 | % |
| Slots                            |       | 21,070                                |       | 21,608                                |       | 2.6 | % | 7,352 |   | 7,962 |   | 8.2 | % |
| Other                            |       | 806                                   |       | 110                                   |       | -86.4 | % | 196 |   | 230 |   | 21.4 | % |
|                             |       |                                  |       |                                  |       |   |   |   |   |   |   |   |   |
| Casino revenue,  net             |       | 30,788                                |       | 32,091                                |       | 4.2 | % | 8,121 |   | 9,190 |   | 13.2 | % |
|                             |       |                                  |       |                                  |       |   |   |   |   |   |   |   |   |
| Non-casino  revenue:             |       |                                  |       |                                  |       |   |   |   |   |   |   |   |   |
| Rooms                            |       | 9,633                                 |       | 10,871                                |       | 12.9 | % | 954 |   | 991 |   | 3.9 | % |
| Food and beverage                |       | 9,436                                 |       | 11,501                                |       | 21.9 | % | 2,529 |   | 2,704 |   | 6.9 | % |
| Entertainment,  retail and other |       | 3,364                                 |       | 3,199                                 |       | -4.9 | % | 449 |   | 231 |   | -48.6 | % |
|                             |       |                                  |       |                                  |       |   |   |   |   |   |   |   |   |
| Non-casino  revenue              |       | 22,433                                |       | 25,571                                |       | 14.0 | % | 3,932 |   | 3,926 |   | -0.2 | % |
|                             |       |                                  |       |                                  |       |   |   |   |   |   |   |   |   |
|                             |       | 53,221                                |       | 57,662                                |       | 8.3 | % | 12,053 |   | 13,116 |   | 8.8 | % |
| Less: Promotional  allowances    |       | (6,540                                | )          | (8,064                                | )          | 23.3 | % | (1,762 | ) | (1,820 | ) | 3.3 | % |
|                             |       |                                  |       |                                  |       |   |   |   |   |   |   |   |   |
|                             |       | $                                     | 46,681     |                                  | $          | 49,598 |   | 6.2 | % | $ | 10,291 |   | $ | 11,296 |   | 9.8 | % |

 

*Casino Revenues*

 

Combined casino revenues during the three months endedSeptember 30, 2004 totaled $41.3 million, an increase of $2.4 million over thethree months ended September 30, 2003. Slot machine revenues accounted for$29.6 million, or 71.7% of combined casino revenues, and table games revenuesaccounted for $11.4 million, or 27.6% of the combined casino revenues for thethree months ended September 30, 2004.

 

Average win per slot machine per day at the GoldenNugget–Las Vegas for the three months ended September 30, 2004 increased by5.7%, as compared to the three months ended September 30, 2003. Slot machinehandle increased 5.4%, and table game drop increased 78.7%, as compared to thethree months ended September 30, 2003. Win per table game increased 24.9% overthe prior period. These increases reflect the success of the casino’s promotionalevents, additional casino marketing staff and changes to table limits and odds.Increases can also be attributed to the opening of the High Limit Pit with ninetable games added to the casino floor in early June.

 

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At the Golden Nugget-Laughlin table game dropincreased 32.4% for the three months ended September 30, 2004 over the sameperiod in 2003. This increase is due to changes in table game limits and oddsand additional games to the floor at the end of the second quarter. Slotmachine handle increased 7.2% for the three month period ended September 30,2004 over the three month period ended September 30, 2003. This increase wasattainable with our new slot system implemented at the beginning of 2004,allowing us to have multi-denominational games, penny games, and the ability tosystematically change our rewards programs.

 

*Non-Casino Revenues*

 

Combined room revenues totaled $11.9 million, or 19.5%of combined net revenues, for the three months ended September 30, 2004compared to $10.6 million, or 18.6% of combined net revenues, for the threemonths ended September 30, 2003. Golden Nugget–Las Vegas hotel occupancy duringthe period was 96.5%, compared to 96.8% for the three months ended September 30,2003. Overall ADR increased 13.6% for the three months ended September 30,2004, as compared to the three months ended September 30, 2003. Hotel occupancyat the Golden Nugget-Laughlin for the three months ended September 30, 2004 was93.5% compared to 82.9% for the three months ended September 30, 2003. OverallADR decreased 8.1% for the three months ended September 30, 2004 over the threemonths ended September 30, 2003.

 

Combined food and beverage revenues for the threemonths ended September 30, 2004 totaled $14.2 million, or 23.3% of combined netrevenues, compared to $12.0 million, or 21.0% of combined net revenues, for thethree months ended September 30, 2003. At the Golden Nugget –Las Vegas foodcovers increased 6.3% during the period and the average revenue per coverincreased 11.9% compared to the three months ended September 30, 2003. At theLaughlin property, food covers increase 5.9%, and the average revenue per coverdecreased 2.3% compared to the three months ended September 30, 2003.

 

Combined entertainment, retail and other revenuesdecreased $0.4 million to $3.4 million for the three months ended September 30,2004. Retail revenues at the Golden Nugget–Las Vegas decreased $0.2 million to$3.2 million for the three months ended September 30, 2004. This decrease isattributable to the closure of our Gift Boutique in early April to renovate thespace and convert it to casino floor. Combined entertainment, retail and otherrevenues at the Golden Nugget–Laughlin decreased  $0.2 million, to $0.2 million for the threemonth periods ended September 30, 2004 over the same period in 2003.

 

*Promotional Allowances*

 

Promotional allowances provided to gaming patrons on acombined basis for the three months ended September 30, 2004 and 2003, totaled$9.9 million and $8.3 million, respectively, and are characterized in thefinancial statements of the Golden Nugget Group as a reduction of combinedgross revenues.

 

Promotional allowances at the Golden Nugget–Las Vegaswere $8.1 million, or 14.0% of its gross revenues, for the three months endedSeptember 30, 2004, an increase of 24.6% from $6.5 million, or 12.3% of itsgross revenues, for the three months ended September 30, 2003. This increase isconsistent with the increase in table game drop and slot handle as compared tothe three months ended September 30, 2003. Promotional allowances at the GoldenNugget–Laughlin totaled $1.8 million, or 13.9% of its gross revenues, for themthree months ended September 30, 2004, and $1.8 million, or 14.6% of its gross revenues,for the three months ended September 30, 2003.

 

*Operating Expenses*

 

Combined casino operating expenses for the threemonths ended September 30, 2004 totaled $28.3 million, or 68.5% of combinedcasino revenues, compared to $22.2 million, or 57.1% of combined casinorevenues, for the three months ended September 30, 2003. Combined casinooperating expenses were primarily comprised of salaries, benefits, gamingtaxes, and other operating expenses of the casinos.

 

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Casino operating expenses at the Golden Nugget–LasVegas were $22.8 million, or 71.0% of its casino revenues, for the three monthsended September 30, 2004 compared to $17.2 million, or 55.8% of its casinorevenues, for the three months ended September 30, 2003. The increase of $5.6million, or 32.6%, in casino operating expenses at the Golden Nugget–Las Vegasis due primarily to increases in payroll associated with additional marketingstaff and promotional expenses related to increased marketing events. Casinooperating expenses at the Golden Nugget–Laughlin were $5.5 million, or 59.8% ofits casino revenues, for the three months ended September 30, 2004 compared to$5.1 million, or 63.0% of its casino revenues, for the three months ended September30, 2003.

 

Combined general and administrative expenses for thethree months ended September 30, 2004 were $15.3 million, or 25.2% of combinednet revenues, compared to $11.6 million, or 20.4% of combined net revenues, forthe three months ended September 30, 2003. General and administrative expensesat the Golden Nugget–Las Vegas accounted for $12.2 million, or 24.7% of its netrevenues, for the three months ended September 30, 2004 and $8.9 million, or19.0% of its net revenues, for the three months ended September 30, 2003. Theincrease of 37.1% in expenses is primarily related to transitional costs of theInformation Technology department, and advertising costs. General andadministrative expenses at the Golden Nugget–Laughlin accounted for $3.1 million,or 27.6% of its net revenues, for the three months ended September 30, 2004 and$2.7 million, or 26.5% of its net revenues, for the three months endedSeptember 30, 2003.

 

*Income from Operations*

 

Combined operating loss for the three months ended September30, 2004 was $4.3 million, or (7.0)% of combined net revenues, compared tooperating income of $0.8 million, or 1.4% of net revenues, for the three monthsended September 30, 2003. Operating loss at the Golden Nugget–Las Vegas for thethree months ended September 30, 2004 was $4.5 million, or (9.1)% of its netrevenues, compared to $1.1 million, or 2.4% of its net revenues, for the threemonths ended September 30, 2003. The decrease in operating income is primarilydue to a decrease in casino hold percentage and increased expenses associatedwith marketing, advertising and casino promotions for the three months endedSeptember 30, 2004. The Golden Nugget–Laughlin recorded operating income of$.03 million, or 2.7% of its net revenues, for the three months ended September30, 2004, compared to an operating loss of $0.3 million, or (2.9)% of its netrevenues, for the three months ended September 30, 2003.

 

*Other Income and Expense*

 

The Golden Nugget Group accounts for its investment inThe Fremont Street Experience LLC as a joint venture, using the equity methodof accounting. The Golden Nugget Group added to its investment throughcontributions of approximately $0.2 million for the three months endedSeptember 30, 2004 and no contributions were made in the quarter endedSeptember 30, 2003, and its equity in the loss of The Fremont Street ExperienceLLC was approximately $0.1 million for the three months ended September 30,2004 and September 30, 2003, which losses were consistent with ourexpectations. The joint venture is primarily designed to increase visitation todowntown Las Vegas and it is expected to continue to incur losses each year.GNLV has a 17.65% interest in the loss of The Fremont Street Experience LLC,which ownership and participation rate was consistent throughout 2003 and 2004.

 

To finance a portion of the purchase price of theAcquisition, on December 3, 2003, Poster Financial issued in a private offering$155,000,000 aggregate principal amount of 8 3⁄4% Senior Secured Notes due 2011(the “Notes”). The Company also entered into a $35 million senior secured creditfacility (the “Credit Facility”), consisting of a $20 million term loan and a$15 million revolving loan (the “Revolving Facility”), and made a drawing forthe full amount of the term loan to finance a portion of the purchase price ofthe Acquisition. Interest expense, for the three months ended September 30,2004 amounted to $4.2 million for Poster Financial for the Notes and the drawof the term loan under the Credit Facility, including amortization of deferredfinancing costs. For the three months ended September 30, 2003 interest expensefor the Golden Nugget Group was $0.8 million on a note payable to MGM Mirage.In connection with the closing of the Acquisition the Golden Nugget Group wasrelieved of its obligation to repay the $80.0 million note payable to the MGMMirage.

 

***Nine Months Ended September 30, 2004 Compared to Nine Months EndedSeptember 30, 2003***

 

Combined net revenues for the nine months endedSeptember 30, 2004 amounted to $195.2 million, an increase of $21.4 million, or12.3%, over the nine months ended September 30, 2003. Net revenues at theGolden Nugget–Las Vegas for the nine months ended September 30, 2004 accountedfor $159.7 million, or 81.8% of combined net revenues, an increase of $17.5million compared to the nine months ended September 30, 2003. The significantincrease of 12.3% in net revenues at the Golden Nugget–Las Vegas wasattributable to an increase in table game drop and hold percentage, slot machinehandle, and room occupancy and ADR for the nine months ended September 30, 2004compared to the nine months ended September 30, 2003. Net revenues at theGolden Nugget–Laughlin for the nine months ended September 30, 2004 accountedfor $35.6 million, or 18.2% of combined net revenues, an increase of $3.9million as compared to the nine months ended September 30, 2003. The increaseof 12.3% in net revenues at the Golden Nugget–Laughlin was primarilyattributable to increases in volume for both table games and slots, as well as,increases in hold percentages for both gaming areas – the hold percentages forboth periods were within a normal range.

 

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The following table presents detail of our net revenues:

 
| ** **                       | ** ** | **Golden  Nugget-Las Vegas**         | ** ** | **Golden  Nugget-Laughlin**          | ** ** |
|----------------------------------|------------|--------------------------------------|------------|--------------------------------------|------------|
| ** **                       | ** ** | **Nine  Months Ended September 30,** | ** ** | **Nine  Months Ended September 30,** | ** ** |
| ** **                       | ** ** | ** **                           | ** ** | ** **                           | ** ** | **Percentage** | ** ** | ** ** | ** ** | ** ** | ** ** | **Percentage** | ** ** |
| ** **                       | ** ** | **2003**                             | ** ** | **2004**                             | ** ** | **Change** | ** ** | **2003** | ** ** | **2004** | ** ** | **Change** | ** ** |
| ** **                       | ** ** | **(In  thousands)**                  | ** ** | **(In  thousands)**                  | ** ** |
| Casino revenue,  net:            |       |                                 |       |                                 |       |   |   |   |   |   |   |   |   |
| Table games                      |       | $                                    | 29,077     |                                 | $          | 38,408 |   | 32.1 | % | $ | 1,647 |   | $ | 2,425 |   | 47.2 | % |
| Slots                            |       | 60,015                               |       | 63,981                               |       | 6.6 | % | 23,202 |   | 25,937 |   | 11.8 | % |
| Other                            |       | 2,320                                |       | 1,926                                |       | -17.0 | % | 545 |   | 771 |   | 41.5 | % |
|                             |       |                                 |       |                                 |       |   |   |   |   |   |   |   |   |
| Casino revenue,  net             |       | 91,412                               |       | 104,315                              |       | 14.1 | % | 25,394 |   | 29,133 |   | 14.7 | % |
|                             |       |                                 |       |                                 |       |   |   |   |   |   |   |   |   |
| Non-casino  revenue:             |       |                                 |       |                                 |       |   |   |   |   |   |   |   |   |
| Rooms                            |       | 30,759                               |       | 34,404                               |       | 11.9 | % | 2,894 |   | 2,991 |   | 3.4 | % |
| Food and beverage                |       | 28,800                               |       | 33,677                               |       | 16.9 | % | 7,762 |   | 8,112 |   | 4.5 | % |
| Entertainment,  retail and other |       | 9,388                                |       | 9,272                                |       | -1.2 | % | 1,332 |   | 1,033 |   | -22.4 | % |
|                             |       |                                 |       |                                 |       |   |   |   |   |   |   |   |   |
| Non-casino  revenue              |       | 68,947                               |       | 77,353                               |       | 12.2 | % | 11,988 |   | 12,136 |   | 1.2 | % |
|                             |       |                                 |       |                                 |       |   |   |   |   |   |   |   |   |
|                             |       | 160,359                              |       | 181,668                              |       | 13.3 | % | 37,382 |   | 41,269 |   | 10.4 | % |
| Less: Promotional  allowances    |       | (18,188                              | )          | (22,004                              | )          | 21.0 | % | (5,731 | ) | (5,691 | ) | -0.7 | % |
|                             |       |                                 |       |                                 |       |   |   |   |   |   |   |   |   |
|                             |       | $                                    | 142,171    |                                 | $          | 159,664 |   | 12.3 | % | $ | 31,651 |   | $ | 35,578 |   | 12.4 | % |

 

*Casino Revenues*

 

Combined casino revenues during the nine months endedSeptember 30, 2004 totaled $133.4 million, an increase of $16.6 million overthe nine months ended September 30, 2003. Slot machine revenues accounted for$89.9 million, or 67.4% of combined casino revenues, and table games revenuesaccounted for $40.8 million, or 30.6% of the combined casino revenues for thenine months ended September 30, 2004.

 

Average win per slot machine per day at the GoldenNugget–Las Vegas for the nine months ended September 30, 2004 increased by7.9%, as compared to the nine months ended September 30, 2003. Slot machinehandle increased 8.0%, and table game drop increased 52.7%, as compared to thenine months ended September 30, 2003. Win per table game increased 38.6% overthe prior period. These increases reflect the success of the casino’spromotional events, additional casino marketing staff and changes to tablelimits and odds.

 

*Non-Casino Revenues*

 

Combined room revenues totaled $37.4 million, or 19.2%of combined net revenues, for the nine months ended September 30, 2004 comparedto $33.7 million, or 19.4% of combined net revenues, for the nine months endedSeptember 30, 2003. Golden Nugget–Las Vegas hotel occupancy during the periodwas 96.7%, compared to 95.4% for the nine months ended September 30, 2003.Overall ADR increased 10.5% for the nine months ended September 30, 2004, ascompared to the nine months ended September 30, 2003. Hotel occupancy at theGolden Nugget-Laughlin for the nine months ended September 30, 2004 was 92.8%compared to 86.8% for the nine months ended September 30, 2003. Overall ADRdecreased 4.6% for the nine months ended September 30, 2004 over the ninemonths ended September 30, 2003.

 

Combined food and beverage revenues for the ninemonths ended September 30, 2004 totaled $41.8 million, or 21.4% of combined netrevenues, compared to $36.6 million, or 21.0% of combined net revenues, for thenine months ended September 30, 2003. At the Golden Nugget-Las Vegas foodcovers increased 6.6% during the period and the average revenue per coverincreased 9.4% compared to the nine months ended September 30, 2003. At our Laughlinproperty, food covers increased 3.0%, and the average revenue per coverremained relatively flat compared to the nine months ended September 30, 2003.

 

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Combined entertainment, retail and other revenuesexperienced a slight decrease from $10.7 million for the nine months endedSeptember 30, 2003 to $10.3 million for the nine months ended September 30,2004.

 

*Promotional Allowances*

 

Promotional allowances provided to gaming patrons on acombined basis for the nine months ended September 30, 2004 and 2003, totaled$27.7 million and $23.9 million, respectively, and are characterized in thefinancial statements of the Golden Nugget Group as a reduction of combinedgross revenues.

 

Promotional allowances at the Golden Nugget–Las Vegaswere $22.0 million, or 12.1% of its gross revenues, for the nine months endedSeptember 30, 2004, an increase of 20.9% from $18.2 million, or 11.3% of itsgross revenues, for the nine months ended September 30, 2003. This increase isconsistent with the increase in gaming volumes and customer base as compared tothe nine months ended September 30, 2003. Promotional allowances at the GoldenNugget–Laughlin totaled $5.7 million, or 13.8% of its gross revenues, for thenine months ended September 30, 2004, and $5.7 million, or 15.3% of its gross revenues, for the nine months endedSeptember 30, 2003.

 

*Operating Expenses*

 

Combined casino operating expenses for the nine monthsended September 30, 2004 totaled $80.5 million, or 60.3% of combined casinorevenues, compared to $65.1 million, or 55.7% of combined casino revenues, forthe nine months ended September 30, 2003. Combined casino operating expenseswere primarily comprised of salaries, benefits, gaming taxes, and otheroperating expenses of the casinos.

 

Casino operating expenses at the Golden Nugget–LasVegas were $63.1 million, or 60.5% of its casino revenues, for the nine monthsended September 30, 2004 compared to $49.4 million, or 54.0% of its casinorevenues, for the nine months ended September 30, 2003. The increase of $13.7million, or 27.7%, in casino operating expenses at the Golden Nugget–Las Vegasis due primarily to increases in marketing, payroll and event expenses, andgaming taxes associated with the increase in casino revenues. Casino operatingexpenses at the Golden Nugget–Laughlin were $17.4 million, or 59.8% of itscasino revenues, for the nine months ended September 30, 2004 compared to $15.7million, or 61.8% of its casino revenues, for the nine months ended September30, 2003.

 

Combined general and administrative expenses for thenine months ended September 30, 2004 were $41.2 million, or 21.1% of combinednet revenues, compared to $33.0 million, or 19.0% of combined net revenues, forthe nine months ended September 30, 2003. General and administrative expensesat the Golden Nugget–Las Vegas accounted for $32.4 million, or 20.3% of its netrevenues, for the nine months ended September 30, 2004 and $25.1 million, or17.7% of its net revenues, for the nine months ended September 30, 2003.General and administrative expenses at the Golden Nugget–Laughlin accounted for$8.8 million, or 24.8% of its net revenues, for the nine months ended September30, 2004 and $7.9 million, or 24.9% of its net revenues, for the nine monthsended September 30, 2003. The increases in general and administrative expensesare attributed to costs for additional payroll and services as we transitionfrom the MGM Mirage corporate services, as well as for signing bonuses paidupon Acquisition of the properties by Poster Financial Group, Inc.

 

*Income from Operations*

### ** **

Combined operating income for the nine months endedSeptember 30, 2004 was $8.4 million, or 4.3% of combined net revenues, comparedto $7.9 million, or 4.5% of net revenues, for the nine months ended September30, 2003. Operating income at the Golden Nugget–Las Vegas for the nine monthsended September 30, 2004 was $6.5 million, or 4.1% of its net revenues,compared to $8.2 million, or 5.8% of its net revenues, for the nine months endedSeptember 30, 2003. The increase in operating income is primarily due toincreases in casino, hotel and food and beverage revenues for the nine monthsended September 30, 2004. Operating income at the Golden Nugget–Laughlin was$2.6 million, or 7.3% of its net revenues, for the nine months ended September30, 2004, compared to operating loss of $0.3 thousand, or (0.1)% of its netrevenues, for the nine months ended September 30, 2003. Improved performance isdue to a strengthening of the Laughlin market and improved casino revenues duein part to upgrades to player tracking software and increased limits in tablegames.

 

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*Other Income and Expense*

### ** **

Other income and expense consists principally ofinterest expense on the note payable to MGM MIRAGE and of equity in the loss ofThe Fremont Street Experience LLC. Interest expense for the nine months endedSeptember 30, 2004 was calculated for the period January 1, 2004 throughJanuary 22, 2004 and amounted to $12.4 million compared to $2.6 million for thefull nine months ended September 30, 2003. The principal balance of the notewas $80.0 million in both 2003 and 2004. In connection with the closing of theAcquisition, the Golden Nugget Group was relieved of its obligations to repaythe note payable to the MGM MIRAGE.

 

The Golden Nugget Group accounts for its investment inThe Fremont Street Experience LLC as a joint venture, using the equity methodof accounting. The Golden Nugget Group added to its investment throughcontributions of approximately $0.5 million for the nine months ended September30, 2004 and $0.8 million for the nine months ended September 30, 2003, and itsequity in the loss of The Fremont Street Experience LLC was approximately $0.4million for the nine months ended September 30, 2004 and approximately $0.6million for the nine months ended September 30, 2003, which losses wereconsistent with our expectations. The joint venture is primarily designed toincrease visitation to downtown Las Vegas and it is expected to continue toincur losses each year. GNLV has a 17.65% interest in the loss of The FremontStreet Experience LLC, which ownership and participation rate was consistentthroughout 2003 and 2004.

 

**Liquidity and Capital Resources**

 

At September 30,2004, Poster Financial had cash and cash equivalents of $21.1 million. Weexpect to fund our operating and capital needs, as currently contemplated, withoperating cash flows and, if necessary, additional borrowings under the Credit Facility.We currently anticipate capital expenditures for 2004 to be approximately $15.0million and 2005 to be approximately $10.5 million. The majority of thebudgeted expenditures for 2004 and 2005 are expected to be spent on purchasingnew gaming equipment and information services equipment. We spent approximately$11.5 million on capital expenditures in the first nine months of 2004 sincethe closing of the Acquisition.

 

For the nine months endedSeptember 30, 2004 (which includes the Golden Nugget Group for 252 daysof operation), net cash provided by operating activities totaled approximately$12.5 million and cash used for investing activities totaled$54.1 million primarily related to the Acquisition of the Golden NuggetGroup.

 

Cash flows provided byfinancing activities were $62.7 million in the first nine months of 2004.  As of September 30, 2004, we had a totalof $6.1 million outstanding under the Revolving Facility.  We have met our capital requirements to datethrough net cash from operating activities and borrowings under the Credit Facility.

 

At September 30, 2004, wefailed to satisfy two of the three financial covenants under the Loan andSecurity Agreement relating to the Credit Facility.  The lenders under the Credit Facility waivedcompliance with the Fixed Charge Coverage Ratio and the Senior Debt to EBITDARatio for the quarter ended September 30, 2004. We are currently negotiating amendments to the financial covenants toreflect our expected financial results as well as the proposed sale of GNL.

 

**OffBalance Sheet Arrangements**

 

Our off balance sheetarrangements consist solely of our investment in an unconsolidated affiliate,which currently consists of our investment in Fremont Street Experience. Wehave not entered into any transactions with special purpose entities, nor havewe engaged in any derivative transactions or joint ventures.

 

At September 30,2004, we had outstanding letters of credit totaling $4.7 million.

 

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**ContractualObligations**

 

The following tablesummarizes the contractual obligations and commitments of Poster Financial (orthe Golden Nugget Group prior to the Acquisition) to make future payments undercertain contracts, including long-term debt obligations, and operating leasesat September 30, 2004. We have significant obligations under the notes andour senior credit facility.

 
| ** **                                    | ** ** | **Payments Due By Period** | ** ** |
|-----------------------------------------------|------------|----------------------------|------------|
| **Contractual  Obligations and  Commitments** | ** ** | **Less than  1 year** | ** ** | **1-3 years** | ** ** | **4-5 years** | ** ** | **After  5 years** | ** ** | **Total** | ** ** |
| ** **                                    | ** ** | **(dollars in thousands)** | ** ** |
| 83/4%  Senior Secured Notes due 2011          |       | $                          | —     |   | $ | — |   | $ | — |   | $ | 155,000 |   | $ | 155,000 |   |
| Senior  credit facility                       |       | 2,800                      |       | 5,600 |   | 17,011 |   | — |   | 25,411 |   |
| Other  long-term debt                         |       | 119                        |       | 272 |   | — |   | — |   | 391 |   |
| Operating  leases                             |       | 1,614                      |       | 3,083 |   | 3,044 |   | 25,946 |   | 33,687 |   |
| Total  cash obligations                       |       | $                          | 4,533      |   | $ | 8,955 |   | $ | 20,055 |   | $ | 180,946 |   | $ | 214,489 |   |

 

**Critical Accounting Policies**

 

The consolidatedfinancial statements of the Company are prepared in accordance with accountingprinciples generally accepted in the United States, which requires managementto make estimates and assumptions about the effects of matters that areinherently uncertain. We have summarized the significant accounting policies ofthe Golden Nugget Group in Note 2 to the combined financial statements ofthe Golden Nugget Group. Of the accounting policies, we believe the followingmay involve a higher degree of judgment and complexity.

 

*RevenueRecognition.*  Casinorevenues represent the net win from gaming activities, which is the differencebetween gaming wins and losses. Hotel and other revenues are recognized at thetime the related service is performed.

 

*Propertyand Equipment.*  AtSeptember 30, 2004, the Company had approximately $184.3 million of netproperty and equipment recorded on its balance sheet. The Company depreciatesits assets on a straight-line basis over their estimated useful lives. Theestimate of the useful lives is based on the nature of the asset as well as ourcurrent operating strategy. Future events, such as property expansions, newcompetition and new regulations, could result in a change in the manner inwhich we use certain assets, which could require a change in the estimateduseful lives of such assets. In assessing the recoverability of the carryingvalue of property and equipment, we must make assumptions regarding estimatedfuture cash flows and other factors. If these estimates or the relatedassumptions change in the future, we may be required to record impairmentcharges for these assets.

 

*SlotClub Liability.*  The GoldenNugget casinos offer a program whereby participants can accumulate points forcasino wagering that can currently be redeemed for cash, lodging, food andbeverages and merchandise. A liability is recorded for the estimate ofunredeemed points based upon redemption history at the Golden Nugget casinos.Changes in the program, increases in membership and changes in the redemptionpatterns of the participants can impact this liability.

 

*Self-Insurance.*  The Company maintains accruals for itsself-insured health program, which are classified in other accrued liabilitiesin the combined balance sheet. Management determines the estimates of theseaccruals by periodically evaluating the historical expenses and projectedtrends related to these accruals. Actual results may differ from thoseestimates.

 

*Litigation,Claims and Assessments.* The Company also utilizes estimates for litigation, claims andassessments. These estimates are based upon management’s knowledge andexperience about past and current events and also upon reasonable futureevents. Actual results may differ from those estimates.

 

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**RecentlyIssued Accounting Pronouncements**

 

In August 2001, theFinancial Accounting Standards Board issued Statement 143 (“SFAS 143”), *Accounting for Obligations Associated with theRetirement of Long-Lived Assets*. Under SFAS 143, the fair valueof a liability for an asset retirement obligation is required to be recognizedin the period in which it is incurred if a reasonable estimate of fair valuecan be made. The associated asset retirement costs are capitalized as part ofthe carrying amount of the long-lived asset. The Golden Nugget Group adoptedSFAS 143 on January 1, 2003 and Poster Financial adopted it uponinception. Adoption of SFAS No. 143 did not have a material impact onPoster Financial’s or the Golden Nugget Group’s financial condition, results ofoperations or cash flows.

 

In April 2002, theFinancial Accounting Standards Board issued SFAS 145. Among other matters,SFAS 145 addresses the presentation for gains and losses on earlyretirements of debt in the statement of operations. SFAS 145 is effectivefor fiscal years beginning after May 15, 2002. Adoption of SFAS 145did not have a material impact on Poster Financial’s or the Golden NuggetGroup’s financial condition, results of operations or cash flows.

 

In June 2002, theFinancial Accounting Standard Board issued Statement No. 146(“SFAS 146”) *Accounting for CostsAssociated with Exit or Disposal Activities*. The provisions ofSFAS 146 became effective for exit or disposal activities commencedsubsequent to December 31, 2002. The adoption of SFAS 146 did nothave any impact on Poster Finanical’s or the Golden Nugget Group’s financialcondition, results of operations or cash flows.

 

In May 2003, theFASB issued SFAS No. 150, *Accountingfor Certain Financial Instruments with Characteristics of Both Liabilities andEquity.* SFAS No. 150 establishes standards for how an issuerclarifies and measures certain financial instruments with characteristics ofboth liabilities and equity. The statement requires an issuer to classifyfinancial instruments issued in the form of shares that are mandatorilyredeemable—that embodies an unconditional obligation requiring the issuer toredeem it by transferring its assets as a specified or determinable date (ordates) or upon an event that is certain to occur—as liabilities. Nonpublicentities are subject to the provisions of SFAS No. 150 for the firstfiscal period beginning after December 15, 2003. We adopted the statementon January 1, 2004, and it did not have any material effect on PosterFinancial’s or the Golden Nugget Group’s financial position, results ofoperations or cash flows.

 

In November 2002,the Financial Accounting Standards Board issued FASB Interpretation No. 45(“FIN 45”), *Guarantor’s Accounting andDisclosure Requirements for Guarantees, Including Indirect Guarantees ofIndebtedness of Others*. This interpretation elaborates on thedisclosures to be made by a guarantor in its interim and an annual financialstatement about its obligations under certain guarantees that it has issued. Italso clarifies (for guarantees issued after January 1, 2003) that aguarantor is required to recognize, at the inception of a guarantee, aliability for the fair value of the obligations undertaken in issuing theguarantee. At September 30, 2004 Poster Financial was not a guarantor ofany third party indebtedness and the Golden Nugget Group was only a guarantorof indebtedness within the Poster Financial consolidated group. Prior to theAcquisition, the Golden Nugget Group was a guarantor of certain indebtedness ofMGM MIRAGE and affiliates. A subsidiary’s guarantee of debt owed to a thirdparty by either its parent or another subsidiary of its parent is specificallyexcluded from the provisions of FIN 45 that require financial statementrecognition and measurement. Accordingly, the adoption of FIN 45 did not havean impact on the Company’s financial position, results of operations or cashflows.

 

In January 2003, theFinancial Accounting Standards Board issued FASB Interpretation No. 46(“FIN 46”), *Consolidation of VariableInterest Entities* (“VIEs”). The interpretation was also revised toDecember, 2003 (“FIN 46R”). This interpretation outlines requirements forbusiness enterprises to combined related entities in which they are determinedto be the primary economic beneficiary as a result of their variable economicinterests. The interpretation is intended to provide guidance in judgingmultiple economic interests in an entity and in determining the primarybeneficiary. The interpretation outlines disclosure requirements for VIEs inexistence prior to January 31, 2003, and outlines combined requirementsfor VIEs created after January 31, 2003. The Golden Nugget Group hasreviewed its major relationships and its overall economic interests with othercompanies consisting of related parties, companies in which it has an equityposition and other suppliers to determine the extent of its variable economicinterest in these parties. The adoption of FIN 46 did not have a materialimpact on Poster Financial’s or the Golden Nugget Group’s financial condition,results of operations or cash flows. The Company believes it has appropriatelyreported the economic impact and its share of risks of its commercialrelationships through its equity accounting along with appropriate disclosureof its other commitments.

 

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In November 2003,the FASB Emerging Issues Task Force issued EITF Issue 03-16 (“Issue 03-16”).Issue 03-16 addresses whether a limited liability corporation (“LLC”) should beviewed as a corporation or partnership for purposes of determining whether anon-controlling investment in an LLC should be accounted for using the costmethod or the equity method of accounting. Issue 03-16 is effectivefor reporting periods beginning after June 15, 2004. Our non-controllinginvestment in The Fremont Street Experience LLC and subsidiaries is subject tothe provisions of this Issue. The Company currently accounts for its investmentin the Fremont Street Experience on the equity method of accounting andbelieves that such accounting will continue to be appropriate following theadoption of Issue 03-16 because the Company’s influence on The Fremont StreetExperience LLC is more than minor (as a result of its 17.65% voting interest),as that term is used in the related accounting literature. Accordingly, theCompany does not expect that the adoption of Issue 03-16 will have a materialimpact on its financial position, results of operations or cash flows.

 

**Recent Developments**

 

As previously disclosedin our current report on Form 8-K filed September 9, 2004, on September 3, 2004GNLV entered into a lease agreement with Mr. Abraham Schiff.  Under the terms of the lease agreement, uponapproval by the City of Las Vegas, Mr. Schiff has agreed to provide GNLV forits commercial use, a portion of a “right-of-way” comprising 3,375 square feetof real property.  The real property islocated at 25 Fremont Street, Las Vegas, Nevada, 89101, located within 50 feetof the Golden Nugget-Las Vegas.

 

The term of the leaseagreement is 35 years, with four renewal options of 16 years each.  Under the terms of the lease agreement, GNLVhas the right of first refusal to purchase the real property.  The effectiveness of the lease agreement issubject to certain closing conditions and we do not expect the lease agreementto become effective prior to the end of fiscal 2004.  The lease agreement is attached hereto asExhibit No. 10.1.

 

As previously disclosedin our current report on Form 8-K filed November 12, 2004, on November 8, 2004we entered into a stock purchase agreement to sell the Golden Nugget-Laughlinto Las Vegas-based gaming and real estate company, Barrick Gaming Corporationfor $31 million, plus working capital at the closing of the transaction.  The transaction includes a 24-month licenseagreement for the limited use of the Golden Nugget-Laughlin name and brand.

 

The transaction issubject to customary closing conditions contained in the stock purchaseagreement, including receipt of all necessary regulatory and governmentalapprovals.  We anticipate the transactionto be completed during the first quarter of 2005.  The full text of the stock purchase agreementis attached as Exhibit No. 2.1 to the current report on Form 8-K filed onNovember 12, 2004.

 

**Cautionary Statement RegardingForward-Looking Statements**

 

This report on Form 10-Qcontains “forward-looking statements,” within the meaning of the PrivateSecurities Litigation Reform Act of 1995, which involve known and unknownrisks. Such forward-looking statements include statements as to the Company’santicipated financial performance; the impact of competition and currenteconomic uncertainty; the sufficiency of funds to satisfy our cash requirementsthrough the remainder of fiscal 2004; and other statements containing wordssuch as “believes,” “anticipates,” “estimates,” “expects,” “may,” “intends” andwords of similar import or statements of management’s opinion. Theseforward-looking statements and assumptions involve known and unknown risks,uncertainties and other factors that may cause our actual results, marketperformance or achievements to differ materially from any future results,performance or achievements expressed or implied by such forward-lookingstatements. Important factors that could cause differences in our results ofoperations include, but are not limited to, general economic conditions in themarkets in which we operate, competition from other gaming operations,leverage, the inherent uncertainty and costs associated with litigation andgovernmental and regulatory investigations, licensing and other regulatoryrisks and other risks disclosed in our filings with the Securities and ExchangeCommission.  All forward-lookingstatements attributable the Company or persons acting on behalf of the Companyapply only as of the date of this report and are expressly qualified in theirentirety by the cautionary statements included in this report. We undertake noobligation to update or revise forward-looking statements to reflect events orcircumstances that may arise after the date of this report.

 

###### **Item 3.**           Quantitative and Qualitative Disclosureabout Market Risk

 

Market risk is the riskof loss arising from adverse changes in market rates and prices, such asinterest rates, foreign currency exchange rates and commodity prices. Ourprimary exposure to market risk is interest rate risk associated with our long-termdebt. We do not invest in derivative financial instruments, interest rate swapsor other investments that alter interest rate exposure.

 

The table below providesinformation about our financial instruments that are sensitive to changes ininterest rates. For debt obligations, the table presents notional amounts andweighted average interest rates by contractual maturity dates for the remainderof 2004 and, for later years, for the twelve-month periods endedDecember 31:

 

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| ** **                                                                                                                                                                                           | ** ** | **2004** | ** ** | **2005** | ** ** | **2006** | ** ** | **2007** | ** ** | **2008** | ** ** | **Thereafter** | ** ** | **Total** | ** ** | **Fair  Value(1)** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------------|------------|-----------|------------|--------------------|------------|
| **Variable Rate Debt**                                                                                                                                                                               |       |     |       |     |       |     |       |     |       |     |       |           |       |      |       |               |       |
| Poster Financial—Amounts outstanding under the  senior credit facility, payable at one-month LIBOR plus a margin of 4.0%                                                                        |       | $        | 1,400      |     | $          | 2,800    |       | $        | 2,800      |     | $          | 2,800          |       | $         | 15,611     |               | $          | — |   | $ | 25,411 |   | $ | 25,411 |   |
| Average interest rate (2)                                                                                                                                                                            |       | —   |       | —   |       | —   |       | —   |       | —   |       | 5.09           | %          | 5.09      | %          |               |       |
|                                                                                                                                                                                                 |       |     |       |     |       |     |       |     |       |     |       |           |       |      |       |               |       |
| **Fixed Rate Debt**                                                                                                                                                                                  |       |     |       |     |       |     |       |     |       |     |       |           |       |      |       |               |       |
| Poster Financial—$155.0 principal amount of 8 3/4 % Senior  Secured Notes due 2011                                                                                                              |       | —   |       | —   |       | —   |       | —   |       | —   |       | 155,000        |       | 155,000   |       | 155,000            |       |
| Average interest rate (2)                                                                                                                                                                            |       | —   |       | —   |       | —   |       | —   |       | —   |       | 8.75           | %          | 8.75      | %          |               |       |
| Golden Nugget Group-Non-interest bearing slot  jackpot payable over time and carried as a note payable (unamortized discount  of $72 at September 30, 2004 not reflected in scheduled payments) |       | —   |       | 154      |       | 154      |       | 154      |       |     |       | —         |       | 462       |       | 390                |       |
|                                                                                                                                                                                                 |       | $        | 1,400      |     | $          | 2,954    |       | $        | 2,954      |     | $          | 2,954          |       | $         | 15,611     |               | $          | 155,000 |   | $ | 180,873 |   | $ | 180,801 |   |

 

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(1)                                  Thefair values for debt with no public market are based on the borrowing ratescurrently available for debt instruments with similar terms and maturities, andfor publicly traded debts are based on market quotes.

 

(2)                                  Basedon contractual interest rates for fixed rate indebtedness or current LIBORrates for variable rate indebtedness.

 

(3)                                  Market risk is the risk of loss arising fromadverse changes in market rates and prices, such as interest rates, foreigncurrency exchange rates and commodity prices. Our primary exposure to marketrisk is interest rate risk associated with our long-term debt. We attempt tolimit our exposure to interest rate risk by managing the mix of our long-termfixed-rate borrowings and short-term borrowings under the Revolving Facility.Borrowings under the Revolving Facility bear interest at a margin above theAlternate Base Rate or the Eurodollar Rate (each, as defined in the agreementgoverning the Revolving Facility) as selected by us. However, the amount ofoutstanding borrowings is expected to fluctuate and may be reduced from time totime. The Revolving Facility matures in January 2009.

 

**Item 4.****          ****Controls and Procedures**

 

**Evaluationof Disclosure Controls and Procedures**

 

Our management, with theparticipation of our Chief Executive Officer and Chief Financial Officer, hasevaluated the effectiveness of our disclosure controls and procedures (as suchterm is defined in Rules 13a-15(e) and 15d-15(e) under the Securities ExchangeAct of 1934, as amended (the “Exchange Act”)) as of the end of the periodcovered by this report. Based on that evaluation, our Chief Executive Officerand Chief Financial Officer have concluded that, as of the end of such period,our disclosure controls and procedures are effective.

 

**Changesin Internal Controls Over Financial Reporting**

 

There have not been anychanges in our internal control over financial reporting (as such term isdefined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during thefiscal quarter to which this report relates that have materially affected, orare reasonably likely to materially affect, our internal control over financialreporting.

 

**Part II - OTHER INFORMATION**

 

**Item 1****.****          ****Legal Proceedings**

 

Poster Financial is notinvolved in any litigation. GNLV and GNL are each defendants in variouslawsuits, most of which relate to routine matters incidental to the Company’sbusiness.  We do not believe that theoutcome of this pending litigation, considered in the aggregate, will have amaterial adverse effect on our business, financial condition, results ofoperations or liquidity.

 

**Item 2****.****           Unregistered Sales ofEquity Securities and Use of Proceeds**– None.

 

**Item 3****.****           Defaults Upon SeniorSecurities –**None.

 

**Item 4****.****           Submission of Mattersto a Vote of Security Holders –**None.

 

**Item 5****.****           Other Information –**None.

 

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###### **Item 6.**           Exhibits

 

No. 10.1* - Lease Agreement, dated September 3, 2004

 

No. 31.1 - Certificationpursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

No. 31.2 - Certificationpursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

No. 32.1 - Certificationpursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

No. 32.2 - Certificationpursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

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* Confidential treatmenthas been requested as to certain portions. The term “[CONFIDENTIAL]” as used inthis exhibit means that material has been omitted and separately filed with theSecurities and Exchange Commission.

 

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**SIGNATURE**

 

Pursuant to the requirementsof the Securities Exchange Act of 1934, the registrant has duly caused thisreport to be signed on its behalf by the undersigned thereunto duly authorized.

 
|                               | Poster Financial Group,  Inc.                                       |
|------------------------------------|---------------------------------------------------------------------|
|                               |                                                                |
|                               |                                                                |
|                               | /s/ Timothy N. Poster                                               |   |
|                               | Timothy N. Poster                                                   |
|                               | Chairman of the Board  and  Chief Executive Officer                 |
|                               |                                                                |
|                               |                                                                |
| DATE:  November 15, 2004 | /s/ Dawn M. Prendes                                                 |   |
|                               | Dawn M. Prendes  Senior Vice President and  Chief Financial Officer |
|                                    |                                                                     |  |  |

 

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