**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, DC 20549**

 

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**FORM10-Q**

 

**ý**** QUARTERLY REPORT PURSUANTTO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For thequarterly period ended September 30, 2004**

 

**o**** TRANSITIONREPORT****PURSUANTTO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For thetransition period from        to       **

 

**Commissionfile number  333-114339**

 

**PREMIERENTERTAINMENT BILOXI LLCandPREMIER FINANCE BILOXI CORP.**

(Exact Name of Registrant as specified in Its Charter)

 

| **Delaware**                                                           |               | **20-0495680 / 20-0495563**                       |
|------------------------------------------------------------------------|--------------------|---------------------------------------------------|
|  (State or Other Jurisdiction of   Incorporation or Organization) |               |  (I.R.S Employer Identification No.)

  |
|                                                                   |               |                                              |
| **111 Lameuse Street, Suite 104 **

**Biloxi, MS 39530**          |
| (Address,  including zip code, of Principal Executive Offices)         |
|                                                                   |               |                                              |
|                                                                   | **(228) 374-7625** |                                              |
| (Registrant’s  Telephone Number, Including Area Code)             |

 

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 the preceding12 months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days. YES  ý   NO  o

 

Indicate by check markwhether the registrant is an accelerated filer (as defined in Rule 12b-2 of theExchange Act). YES  o   NO  ý

 

On September 30, 2004, theregistrant had no shares of common stock outstanding.

 

 

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**Premier Entertainment Biloxi LLC**

**(*A Development Stage Company*)**

**Index**

 
| **Part I.**                    | **Financial Information**                                                                                                                                                                                                  |   |
|--------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                           |                                                                                                                                                                                                                       |   |
| **Item 1.**                    | Financial Statements                                                                                                                                                                                                       |   |
|                           | Condensed  Consolidated Balance Sheets as of September 30, 2004 (unaudited) and December  31, 2003                                                                                                                         | 1      |
|                           | Condensed  Consolidated Statements of Operations for the Three and Nine Months ended  September 30, 2004 and 2003 and the period from commencement of operations on  March 27, 2003 through September 30, 2004 (unaudited) | 2      |
|                           | Condensed  Consolidated Statement of Cash Flows for the Nine Months ended September 30,  2004 and 2003 and the period from commencement of operations on March 27,  2003 through September 30, 2004 (unaudited)            | 3      |
|                           | Notes  to Condensed Consolidated Financial Statements (unaudited)                                                                                                                                                          | 4      |
|                           |                                                                                                                                                                                                                       |   |
| **Item 2.**                    | Management’s Discussion and Analysis of  Financial Condition and Results of Operations                                                                                                                                | 7      |
|                           |                                                                                                                                                                                                                       |   |
| **Item 3.**                    | Quantitative and Qualitative Disclosures About  Market Risk                                                                                                                                                                | 10     |
|                           |                                                                                                                                                                                                                       |   |
| **Item 4.**                    | Controls and Procedures                                                                                                                                                                                                    | 11     |
|                           |                                                                                                                                                                                                                       |   |
| **Part II. Other Information** |                                                                                                                                                                                                                       |
|                           |                                                                                                                                                                                                                       |   |
| **Item 6.**                    | Exhibits                                                                                                                                                                                                                   | 12     |
|                           |                                                                                                                                                                                                                       |   |
| **Signatures**                 | 13                                                                                                                                                                                                                         |
|                           |                                                                                                                                                                                                                       |   |
| **Exhibits**                   | 14                                                                                                                                                                                                                         |

 

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**PART I -FINANCIAL INFORMATION**

 

**Item 1.****                                   FINANCIALSTATEMENTS**

 

**PREMIER ENTERTAINMENT BILOXI LLC**

**(*A DEVELOPMENT STAGE COMPANY*)**

 

**CONDENSED CONSOLIDATED BALANCE SHEETS**

 
| ** **                                            | ** ** | **September 30,  2004** | ** **  | **December 31,  2003** | ** ** |
|-------------------------------------------------------|------------|-------------------------|-------------|------------------------|------------|
| ** **                                            | ** ** | **(Unaudited)**         | ** **  | ** **             | ** ** |
|                                                  |       |                    |        |                   |       |
| **ASSETS**                                            |       |                    |        |                   |       |
| Current assets:                                       |       |                    |        |                   |       |
| Cash                                                  |       | $                       | 14,322      |                   | $          | 16,908 |   |
| Restricted cash                                       |       | 113,815,252             |        | —                 |       |
| Government securities - restricted                    |       | 25,265,550              |        | —                 |       |
| Prepaid expenses and other current assets             |       | 146,701                 |        | 274,625                |       |
| Total current assets                                  |       | 139,241,825             |        | 291,533                |       |
|                                                  |       |                    |        |                   |       |
| Property, plant and equipment, net                    |       | 69,125,712              |        | 36,151,817             |       |
|                                                  |       |                    |        |                   |       |
| Other assets, net                                     |       | 7,972,568               |        | 2,088,961              |       |
|                                                  |       |                    |        |                   |       |
| Total assets                                          |       | $                       | 216,340,105 |                   | $          | 38,532,311 |   |
|                                                  |       |                    |        |                   |       |
| **LIABILITIES AND MEMBERS’ EQUITY (DEFICIT)**    |       |                    |        |                   |       |
|                                                  |       |                    |        |                   |       |
| Current liabilities:                                  |       |                    |        |                   |       |
| Accounts payable                                      |       | $                       | 3,093,715   |                   | $          | 2,384,758 |   |
| Accrued interest                                      |       | 3,875,786               |        | 2,521,016              |       |
| Other accrued liabilities                             |       | 35,610                  |        | 90,834                 |       |
| Term loan                                             |       | —                  |        | 34,602,544             |       |
| Total current liabilities                             |       | 7,005,111               |        | 39,599,152             |       |
|                                                  |       |                    |        |                   |       |
| Long-term debt                                        |       | 168,015,449             |        | —                 |       |
|                                                  |       |                    |        |                   |       |
| Members’ capital                                 |       | 52,775,216              |        | —                 |       |
| Deficit accumulated during development  stage         |       | (11,455,671             | )           | (1,066,841             | )          |
| Total members’ equity (deficit)                  |       | 41,319,545              |        | (1,066,841             | )          |
|                                                  |       |                    |        |                   |       |
| Total liabilities and members’ equity  (deficit) |       | $                       | 216,340,105 |                   | $          | 38,532,311 |   |

 

Seethe accompanying notes to the unaudited condensed consolidated financialstatements

 

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**PREMIER ENTERTAINMENT BILOXI LLC**

**(*A DEVELOPMENT STAGE COMPANY*)**

 

**CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS**

**(Unaudited)**

 
| ** **                   | ** ** | **Quarter  ended  September 30,** | ** ** | **Nine months  ended  September 30,** | ** ** | **Period from  commencement of  operations on March 27,  2003, through September 30,** | ** ** |
|------------------------------|------------|-----------------------------------|------------|---------------------------------------|------------|----------------------------------------------------------------------------------------|------------|
| ** **                   | ** ** | **2004**                          | ** ** | **2003**                              | ** ** | **2004**                                                                               | ** ** | **2003** | ** ** | **2004** | ** ** |
| **Operating expenses:**      |       |                              |       |                                  |       |                                                                                   |       |   |   |   |   |
| Preopening expenses          |       | $                                 | 498,940    |                                  | $          | 360,032                                                                                |       | $ | 1,280,772 |   | $ | 568,113 |   | $ | 2,145,220 |   |
|                         |       |                              |       |                                  |       |                                                                                   |       |   |   |   |   |
| Loss from operations         |       | (498,940                          | )          | (360,032                              | )          | (1,280,772                                                                             | )          | (568,113 | ) | (2,145,220 | ) |
|                         |       |                              |       |                                  |       |                                                                                   |       |   |   |   |   |
| **Other income (expense):**  |       |                              |       |                                  |       |                                                                                   |       |   |   |   |   |
| Interest expense             |       | (3,820,296                        | )          | (77,198                               | )          | (10,234,737                                                                            | )          | (114,707 | ) | (10,437,537 | ) |
| Interest income              |       | 459,847                           |       | 103                                   |       | 1,126,679                                                                              |       | 115 |   | 1,127,086 |   |
|                         |       |                              |       |                                  |       |                                                                                   |       |   |   |   |   |
| Total other income (expense) |       | (3,360,449                        | )          | (77,095                               | )          | (9,108,058                                                                             | )          | (114,592 | ) | (9,310,451 | ) |
|                         |       |                              |       |                                  |       |                                                                                   |       |   |   |   |   |
| **Net loss**                 |       | $                                 | (3,859,389 | )                                     | $          | (437,127                                                                               | )          | $ | (10,388,830 | ) | $ | (682,705 | ) | $ | (11,455,671 | ) |

 

Seethe accompanying notes to the unaudited condensed consolidated financialstatements

 

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**PREMIER ENTERTAINMENT BILOXI LLC**

**(*A DEVELOPMENT STAGE COMPANY*)**

 

**CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS**

**(Unaudited)**

 
| ** **                                                                                                                                                                                                                                                                                                      | ** ** | **Nine months  ended September 30,** | ** **  | **Period from  commencement of  operations on March  27, 2003 through  September 30,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------|-------------|----------------------------------------------------------------------------------------|------------|
| ** **                                                                                                                                                                                                                                                                                                      | ** ** | **2004**                             | ** **  | **2003**                                                                               | ** ** | **2004** | ** ** |
| ** **                                                                                                                                                                                                                                                                                                      | ** ** | ** **                           | ** **  | ** **                                                                             | ** ** | ** ** | ** ** |
| **Operating Activities**                                                                                                                                                                                                                                                                                        |       |                                 |        |                                                                                   |       |   |   |
| Net loss                                                                                                                                                                                                                                                                                                        |       | $                                    | (10,388,830 | )                                                                                      | $          | (682,705 | ) | $ | (11,455,671 | ) |
| Depreciation and amortization                                                                                                                                                                                                                                                                                   |       | 42,771                               |        | —                                                                                 |       | 42,771 |   |
| Amortization of deferred financing costs,  discount and repayment premium                                                                                                                                                                                                                                       |       | 1,002,375                            |        | 109,874                                                                                |       | 1,185,500 |   |
| Changes in operating assets and liabilities                                                                                                                                                                                                                                                                     |       | 775,426                              |        | (123,285                                                                               | )          | 3,252,443 |   |
|                                                                                                                                                                                                                                                                                                            |       |                                 |        |                                                                                   |       |   |   |
| Net cash used in operating activities                                                                                                                                                                                                                                                                           |       | (8,568,258                           | )           | (696,116                                                                               | )          | (6,974,957 | ) |
|                                                                                                                                                                                                                                                                                                            |       |                                 |        |                                                                                   |       |   |   |
| **Investing Activities**                                                                                                                                                                                                                                                                                        |       |                                 |        |                                                                                   |       |   |   |
| Purchases of property, plant and equipment                                                                                                                                                                                                                                                                      |       | (29,095,715                          | )           | (31,510,131                                                                            | )          | (62,746,191 | ) |
| Purchase of government securities                                                                                                                                                                                                                                                                               |       | (32,946,442                          | )           | —                                                                                 |       | (32,946,442 | ) |
| Acquisition of intangibles                                                                                                                                                                                                                                                                                      |       | (443,777                             | )           | (500,000                                                                               | )          | (1,040,560 | ) |
| Sale of government securities                                                                                                                                                                                                                                                                                   |       | 8,074,529                            |        | —                                                                                 |       | 8,074,529 |   |
| Increase in restricted cash                                                                                                                                                                                                                                                                                     |       | (113,170,714                         | )           | —                                                                                 |       | (113,170,714 | ) |
|                                                                                                                                                                                                                                                                                                            |       |                                 |        |                                                                                   |       |   |   |
| Net cash used in investing activities                                                                                                                                                                                                                                                                           |       | (167,582,119                         | )           | (32,010,131                                                                            | )          | (201,829,378 | ) |
|                                                                                                                                                                                                                                                                                                            |       |                                 |        |                                                                                   |       |   |   |
| **Financing Activities**                                                                                                                                                                                                                                                                                        |       |                                 |        |                                                                                   |       |   |   |
| Increase in deferred financing costs                                                                                                                                                                                                                                                                            |       | (6,105,890                           | )           | (439,500                                                                               | )          | (8,037,568 | ) |
| Proceeds from long-term debt                                                                                                                                                                                                                                                                                    |       | 168,111,046                          |        | 33,148,967                                                                             |       | 202,713,590 |   |
| Capital contribution                                                                                                                                                                                                                                                                                            |       | 15,180,810                           |        | —                                                                                 |       | 15,180,810 |   |
| Increase in restricted cash                                                                                                                                                                                                                                                                                     |       | (1,038,175                           | )           | —                                                                                 |       | (1,038,175 | ) |
|                                                                                                                                                                                                                                                                                                            |       |                                 |        |                                                                                   |       |   |   |
| Net cash provided by financing activities                                                                                                                                                                                                                                                                       |       | 176,147,791                          |        | 32,709,467                                                                             |       | 208,818,657 |   |
|                                                                                                                                                                                                                                                                                                            |       |                                 |        |                                                                                   |       |   |   |
| Net increase (decrease) in cash                                                                                                                                                                                                                                                                                 |       | (2,586                               | )      | 3,220                                                                                  |       | 14,322 |   |
|                                                                                                                                                                                                                                                                                                            |       |                                 |        |                                                                                   |       |   |   |
| Cash at beginning of period                                                                                                                                                                                                                                                                                     |       | 16,908                               |        | —                                                                                 |       | — |   |
|                                                                                                                                                                                                                                                                                                            |       |                                 |        |                                                                                   |       |   |   |
| Cash at end of period                                                                                                                                                                                                                                                                                           |       | $                                    | 14,322      |                                                                                   | $          | 3,220 |   | $ | 14,322 |   |
|                                                                                                                                                                                                                                                                                                            |       |                                 |        |                                                                                   |       |   |   |
| **Supplemental disclosure of cash flow  information:**                                                                                                                                                                                                                                                          |       |                                 |        |                                                                                   |       |   |   |
|                                                                                                                                                                                                                                                                                                            |       |                                 |        |                                                                                   |       |   |   |
| Cash paid during the period for:                                                                                                                                                                                                                                                                                |       |                                 |        |                                                                                   |       |   |   |
| Interest                                                                                                                                                                                                                                                                                                        |       | $                                    | 8,982,222   |                                                                                   | —     |   | $ | 8,982,222 |   |
|                                                                                                                                                                                                                                                                                                            |       |                                 |        |                                                                                   |       |   |   |
| Supplemental schedule of non-cash investing  and financing activities:                                                                                                                                                                                                                                          |       |                                 |        |                                                                                   |       |   |   |
| During the quarter ended March 31, 2004, AA Capital converted to  equity the unpaid principal outstanding under the loan and security agreement  of $34,819,190 plus accrued interest of $2,775,216, and made a cash  contribution of $15,180,810 resulting in additional member’s equity of  $52,775,216. |       |                                 |        |                                                                                   |       |   |   |

 

Seethe accompanying notes to the unaudited condensed consolidated financialstatements

 

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**PREMIER ENTERTAINMENT BILOXI LLC**

**(*A DEVELOPMENT STAGE COMPANY*)**

 

**Notes to Condensed Consolidated Financial Statements**

 

**1.  Basis of Presentation**

 

The accompanying condensedconsolidated financial statements should be read in conjunction with theaudited consolidated financial statements for the period from the commencementof operations on March 27, 2003 through December 31, 2003 included in thePremier Entertainment Biloxi LLC (the Company) Registration Statement on FormS-4 filed effective with the Securities Exchange Commission in July 2004. Inthe opinion of management, all adjustments (consisting of normal recurringaccruals) necessary for a fair presentation have been included.  The results for the three and nine monthsended September 30, 2004 and 2003 and the period from the commencement ofoperations on March 27, 2003 through September 30, 2004 do not necessarilyindicate the results that may be expected for the full year or for the periodfrom commencement of operations through December 31, 2004.

 

Premier Finance Biloxi Corp. (Premier Finance) wasincorporated in October 2003 as a Delaware corporation and is a wholly-ownedsubsidiary of Premier Entertainment Biloxi LLC. Under Mississippi law, certainexpenditures are exempt from sales tax if purchased with the proceeds fromindustrial development revenue bonds issued by the Mississippi FinanceCorporation.  Premier Finance was formedto fund the capital expenditures that qualify for the tax-exempt status.  At September 30, 2004, Premier Finance hadcash of $284,033 including interest income of $33 and a payable to the parent,Premier Entertainment Biloxi LLC, of $284,000. As of September 30, 2004, Premier Finance has funded consolidatedcapital expenditures of $4,843,692 to qualify for the tax-exempt status withequity contributions from the parent. Premier Finance’s assets and operations are included in the condensedconsolidated balance sheet and statements of operations and all significantinter-company balances and transactions have been eliminated.

 

**2.  Long-Term Debt and Loan and SecurityAgreement**

 

On January 23, 2004, theCompany issued $160,000,000 aggregate principal amount of 103⁄4% First MortgageNotes (Notes) due February 1, 2012 in a private placement offering.  The debt outstanding at September 30, 2004includes an unamortized discount of $1,996,810, which is being amortized overthe term of the agreement.  The Notes aresenior to all existing and future senior unsecured indebtedness andsubordinated up to $30,000,000 of senior secured indebtedness to be incurred tofinance the acquisition and installation of furniture, fixtures andequipment.  The Notes are secured by

 

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a pledge of the Company’s membershipinterests and substantially all of the existing and future assets, other thanfurniture, fixtures and equipment purchased with the proceeds of certain otherindebtedness, cash-on-hand and the casino vessels until they have beendelivered and the ship mortgages are recorded. The Notes may be redeemed, in whole or in part, at any time on or afterFebruary 1, 2008 at a premium.  Inaddition, up to 35% of the Notes may be redeemed at a premium on or prior toFebruary 1, 2007 with the net cash proceeds of an initial public offering.  The Company incurred $6,973,117 of costs, netof accumulated amortization, in connection with the private placement as of September30, 2004.  These deferred financing costsare included in other assets and are being amortized over the term of therelated long-term debt.

 

Concurrently with the issuance of the Notes,the Company borrowed $10,000,000 in the form of a junior subordinated note dueAugust 1, 2012 from Rank America, Inc., an affiliate of The Rank Group Plc,which owns Hard Rock Hotel Licensing, Inc. Also, at this time, AA Capital (consisting of AA Capital Equity FundL.P. and AA Capital Biloxi Co-Investment Fund L.P.) converted to equity the unpaidprincipal outstanding under the loan and security agreement of $34,819,190 plusaccrued interest of $2,775,216, and made a cash contribution of $15,180,810 inexchange for 100 Class B common and 100 Class A preferred membership units,resulting in an additional $52,775,216 of members’ equity.

 

Intereston the junior subordinated note accrues at a rate of 15% per annum and will bepaid semiannually once the Property opens.** **The Company will be required topay a repayment premium of 3% of the principal amount of the juniorsubordinated note when it is repaid.  TheCompany is accruing the repayment premium over the term of the juniorsubordinated note.  In the event of achange of control or if the Hard Rock license agreement is terminated and theProperty becomes owned, operated or licensed by a Hard Rock competitor, theCompany will be required to repay all amounts due under the junior subordinatednote agreement.  In addition, the Companymay be required to make quarterly mandatory prepayments as calculated under theterms of the junior subordinated note once the Property opens.

 

**3.  Restricted Cash**

 

Thenet proceeds from the issuance of the First Mortgage Notes, a portion of theequity investment and the proceeds from the junior subordinated note all totaling$177,600,000 were deposited into a construction disbursement account, aninterest reserve account and a tidelands lease reserve account.  These accounts were pledged to the trustee assecurity for the Company’s obligations under the Notes.  The funds will be disbursed in accordancewith a disbursement agreement (the Disbursement Agreement) under concurrencewith the disbursement agent, the trustee and the independent constructionconsultant.  At September 30, 2004, therewas $139,080,802 in the construction disbursement, the direct disbursement andreserve accounts, which is classified as restricted cash.

 

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**4.****             ****Government Securities - Restricted**

 

Duringthe nine months ended September 30, 2004, the Company invested $32,946,442 inU.S. Treasury securities in accordance with the Disbursement Agreement. Theinvestment is classified as held to maturity, and is recorded as Governmentsecurities at its acquisition cost including accrued interest at September 30,2004.  The investment plus the interestearned will be used to pay the first four (4) interest payments on the Notes asrequired by the Disbursement Agreement. On August 1, 2004, the Company made itsfirst interest payment on the 103⁄4%First Mortgage Notes of which $8,074,529 of the U S Treasury securities wereused.

 

**5.  Related PartyTransactions**

 

Amember of GAR LLC is the President and Chief Executive Officer of the Company’sgeneral contractor.  The Company believesthat the terms of the agreement with the contractor are similar to those thatcould otherwise be received from a third party. Total payments to the general contractor for the period from thecommencement of operations on March 27, 2003 through September 30, 2004 were $23,196,252.

 

In November 2004, the Company entered into a changeorder with the general contractor in the amount of $3,640,933. The Companybelieves that the terms of this change order with the contractor are similar toterms that could otherwise be received from a third party and will be fundedout of contingency funds with no increase to the total project budget.

 

(See Management’s Discussion and Analysis forfurther details)

 

**6.  Commitments andContingencies**

 

In August 2004, the Company and Kojis andSons Signs, Inc. (Kojis) entered into an agreement whereby Kojis agreed tomanufacture, install and maintain for one year a one hundred twenty foot (120’)high marquee guitar sign for $540,000.

 

In August 2004, the Company entered into apurchasing consulting agreement whereby the consultant is to provide servicesrelated to the purchasing and installation of certain owner supplied furniture,fixtures and equipment for a fee of $174,000 and reasonable reimbursableexpenses. The services and payment for such services are to coincide and bothshall conclude in October 2005.

 

**7****.  Subsequent Events**

 

In November 2004, the Company executed achange order that enhanced the overall scope of work and amended the guaranteedmaximum price contract “GMP” with the General Contractor, Roy AndersonCorporation, in the amount of $3,640,933. Further details outlining the scopechanges are identified in the Management’s Discussion and Analyses in item 2.

 

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**Item 2.******* Management’s Discussion and Analysis ofFinancial Condition and Results of Operations***

 

**Overview**

 

We were formed on October 18, 2002 andcommenced operations on March 27, 2003. There were no assets, liabilities oroperations from inception through the commencement of operations. Since our formation,we have been in the development stage. Our activities included applying forcertain necessary permits, licenses and regulatory approvals to enable us toconstruct and manage the operations of the Hard Rock Hotel & Casino Biloxi,and development activities in connection with the Hard Rock Hotel & CasinoBiloxi. We have also purchased approximately 8.5 acres of land on theMississippi Gulf Coast in Biloxi, Mississippi to build the Hard Rock Hotel& Casino Biloxi. In addition, we have entered into a 20-year licensingagreement with Hard Rock Hotel Licensing, Inc. under which we were granted theright to use and develop the Hard Rock brand name for our hotel and casinoresort. We began construction in January 2004.

 

We anticipatethe Hard Rock Hotel & Casino Biloxi will be approximately 388,000square-foot in size featuring a casino (with approximately 1,500 slot machinesand 50 table games), a 318-room hotel, a Hard Rock Cafe, a Hard Rock Live!entertainment venue, a Hard Rock retail store, a tropical-themed Hard Rockbeach pool, restaurants, a full service fitness spa, a top floor lounge, and aparking garage with approximately 1,600 spaces, and various other amenities. Weexpect to open the Hard Rock Hotel & Casino Biloxi in the third quarter of2005.

 

PremierFinance Biloxi Corp. is serving as the co-issuer of the $160,000,000 10 3⁄4%First Mortgage Notes due February 1, 2012 (Notes) and will not have anymaterial assets or operations, other than in connection with the MississippiBusiness Finance Corporation financing. See “—Liquidity and Capital Resources.”

 

**Results ofOperations**

 

We are in thedevelopment stage and do not have any historical operating results other thancosts incurred in designing and developing the Hard Rock Hotel & CasinoBiloxi. For the period from commencement of operations on March 27, 2003through September 30, 2004, we incurred a total of $11.5 million of netinterest expense and non-capitalized design, development and pre-openingexpenses in connection with the Hard Rock Hotel & Casino Biloxi. For thesame time period interest expense was $10.4 million. These costs primarilyrelate to licensing expenses, transaction fees, legal fees, interest expenseand organizational costs to prepare us for becoming a gaming enterprise. We expectthese losses to continue and to increase until operations commence with theplanned opening of the Hard Rock Hotel and Casino Biloxi in the third quarterof 2005. Our historical operating results will not be indicative of futureoperating results because activities previously undertaken have beendevelopment stage in nature and planned future activities include the operationof a new gaming facility.

 

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In November the Company entered into a changeorder amending the GMP. This change order in-part creates approximately 31,000square feet of additional finished space to improve the property’s efficiencyand functionality.

Highlights of these enhancements and scopechanges are as follows.

 

•                  Created ten (10)additional typical rooms and two (2) entertainer suites to increase the totalroom count to 318. This was accomplished in the hotel area previouslydesignated for the spa on the third (3rd) floor. The spa has beenmodified and relocated to the lowrise. This modification took advantage ofunfinished space to produce revenue generating assets to the property.

 

•                  Expanded thethird level in the lowrise approximately 4,000 square feet to allow for back ofthe house functions to be relocated from the promenade area thus creating a “retailpromenade” area. Management is currently negotiating leases with varioustenants to fill this created space. A letter of intent has been entered intowith Starbucks Coffee.

 

•                  Created a totalof 7,800 square feet of restaurant space in the lowrise adjacent to the casinowhich caused certain functions to be relocated on the second and third floors.Management is currently in final negotiations to sign a national U S restauranttenant.

 

•                  Improved theoverall ceiling design in the casino by adding a more traditional ceiling tothe casino area consisting of approximately 50,000 square feet of wood trim anddrywall combination.

 

•                  Adjusted thegarage to include four (4) EIFS finished columns that will be up lit.

 

•                  Createdadditional office space on the third level of the lowrise for administrativeoffices that otherwise may have been leased off property from third parties.

 

The total cost of theseimprovements is approximately $3.64 million which is an increase to the GMP of4.4%. The total amended GMP is $85.6 million. The change order includes allrelated material and the additional labor burden associated with these areas.These improvements will be funded out of the contingency fund as set forth insection 5.1.1 of the Cash Collateral and Disbursement Agreement. Morespecifically, the cost of these improvements will be funded from that $5million dollar portion of the $12 million contingency fund that is segregatedfor the contractor under the GMP.

 

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**Liquidityand Capital Resources**

 

As of September 30, 2004, we spentapproximately $31.0 million to acquire the land and $15.0 million to fundoperations and loan costs and expended $32.8 million to finance the initialdesign and development costs of the Hard Rock Hotel & Casino Biloxi, whichhave been capitalized. As of September 30, 2004 capitalized interest was $6.4million. We will continue to use the gross proceeds we obtained on January 23,2004 from the offering of the Notes in conjunction with an equity investmentfrom AA Capital of $15.1 million, a junior subordinated note of $10.0 millionfrom Rank America, Inc., an affiliate of The Rank Group Plc and $17.1 millionin furniture, fixtures and equipment financing to fund the costs associatedwith the Hard Rock Hotel & Casino Biloxi. The $17.1 million in furniture,fixtures and equipment financing will be obtained from vendors or other thirdparty lenders. The net proceeds of the offering of the Notes, an equityinvestment from AA Capital and the proceeds of the junior subordinated notehave been deposited as follows: (1) approximately $143.5 million was depositedinto a construction disbursement account and is being periodically drawn uponto finance the design, development, construction, equipping and opening of theHard Rock Hotel & Casino Biloxi. As of September 30, 2004 the Company had abalance of $112.8 million remaining in the Company’s Construction DisbursementAccount and the Company’s Direct Disbursement Account. In September 2004 theCompany purchased one $50 million Certificate of Deposit for 180 days maturingin March 2005 at 2.00% and one $45 million Certificate of Deposit for 60 daysmaturing in November 2004 at 1.82%   (2) approximately $33.1 million was depositedin an interest reserve account and was used to purchase government securitiesof $32.9 million representing sufficient funds to pay the first four interestpayments on the Notes of which $8.1 million was used to pay the first interestpayment on August 1, 2004 leaving a balance as of September 30, 2004 of $25.3million. In addition, $.9 million was used from the construction disbursementaccount to fund the first interest payment shortfall and (3) approximately $1.0million was deposited into a tidelands lease account and will be used to fundrent payments to the State of Mississippi on a tidelands lease through thefirst year of operations. The balance in the Tidelands Lease Reserve Account asof September 30, 2004 was approximately $1.0 million.

 

The fundsprovided by the sources described above are expected to be sufficient todesign, develop, construct, equip and commence operations of the Hard RockHotel & Casino Biloxi, provided there are no unexpected delay costs orconstruction cost overruns.

 

Following theopening of the Hard Rock Hotel & Casino Biloxi, we expect to fund ourbusiness from operating cash flows.

 

*Mississippi Bond Financing*.    Mississippi law provides that certainexpenditures for materials made in connection with certain economic developmentprojects in the State of Mississippi, including the land-based portion of theHard Rock Hotel & Casino Biloxi (which includes the hotel tower, theparking garage, the low-rise pavilion and the pool area), are exempt fromMississippi’s sales tax if such expenditures are paid for with proceeds fromapproved industrial development revenue bonds issued by the MississippiBusiness Finance Corporation, (MBFC). Up to $60.0 million of our expected costsfor the Hard Rock Hotel & Casino Biloxi could be eligible for this program.We have submitted an application to the MBFC and have received approval of ourapplication.

 

In connectionwith the issuance of the industrial development revenue bonds, the followingactions were taken:

 

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•                  The disbursementagent distributed amounts to us from the construction disbursement account inaccordance with the procedures set forth in the disbursement agreement to availourselves of this program.

•                  We used thesefunds distributed to us from the construction disbursement account to make anequity contribution to Premier Finance Biloxi Corp.

•                  Premier FinanceBiloxi Corp. used the proceeds of this equity contribution to purchaseindustrial development revenue bonds issued by the MBFC.

 

•                  The MBFC loanedthe proceeds from the sale and issuance of the industrial development revenuebonds to us.

 

•                  We will useamounts loaned to us by the MBFC to finance the purchase of certain permittedcomponent materials required to construct and install the improvements to theland-based portion of the Hard Rock Hotel & Casino Biloxi.

 

•                  Premier FinanceBiloxi Corp. pledged its interest in the industrial development revenue bondsthat it purchased from the MBFC to the trustee under the indenture governingthe Notes for the benefit of the holders of the Notes.

 

At September 30, 2004, Premier FinanceBiloxi, Corp. funded consolidated capital expenditures of $4.8 million toqualify for the tax-exempt status.  Weexpect to save up to $2.0 million in sales tax that we would have otherwisebeen required to pay in connection with purchasing materials to be used in theconstruction of the land-based portion of the Hard Rock Hotel & CasinoBiloxi. Any such sales tax savings that we are able to realize will reduce theconstruction costs for the project and will increase our excess liquidity.

 

The sale andissuance of the industrial development revenue bonds to Premier Finance BiloxiCorp. and the subsequent loan by the MBFC of the proceeds thereof to us did notresult in any additional net indebtedness for us. However, there can be noassurances that any purchases of materials made by or on behalf of us with theproceeds of industrial development revenue bonds will be exempt fromMississippi sales tax.

 

**Seasonality**

 

We have no operating history. We anticipatethat activity at the Hard Rock Hotel & Casino Biloxi may be modestlyseasonal, with stronger results expected during the second and third quartersdue to the relatively higher levels of tourism to the Mississippi Gulf Coastduring this time of the year. Results are expected to be lower during thefourth quarter. In addition, our operations may be impacted by adverse weatherconditions and fluctuations in the tourism business. Accordingly, our resultsof operations may fluctuate from quarter to quarter and the results for any onequarter may not be indicative of results for future quarters.

 

**Item 3.*****Quantitative and QualitativeDisclosures About Market Risk***

 

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. The borrowings in connection withthe offering of the Notes and the junior subordinated note from Rank America,Inc. are fixed-rate indebtedness. Through September 30, 2004, we had notinvested in derivative or foreign currency-based financial instruments.

 

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**FORWARD-LOOKING STATEMENTS AND RISK FACTORS**

 

Except for the historical information contained herein,the matters addressed in this Quarterly Report on Form 10-Q may constitute “forward-lookingstatements” within the meaning of Section 27 A of the Securities Act of 1933,as amended, and Section 2IE of the Securities and Exchange Act of 1934, asamended. Words such as, but not limited to, “believes”, “expects”, “anticipates”,“estimates”, “intends”, “plans”, “could”, “may”, “should” and similarexpressions are intended to identify forward-looking statements. Suchforward-looking statements, which may include, without limitation, statementsregarding expansion plans, cash needs, cash reserves, liquidity, operating andcapital expenses, financing options, expense reductions, operating results andpending regulatory matters, are subject to a variety of risks and uncertaintiesthat could cause actual results to differ materially from those anticipated bythe Company. From time to time, oral or written forward ­looking statements arealso included in the Company’s other periodic reports on Forms l0-K, l0-Q and8-K, press releases and other materials released to the public.

 

Actual results may differ materially from those thatmight be anticipated from forward-looking statements. This can occur as aresult of inaccurate assumptions or as a consequence of known or unknown risksand uncertainties. The Company undertakes no obligation to publicly update anyforward-looking statements, whether as a result of new information, futureevents or otherwise. Factors that may cause actual performance of the Companyto differ materially from that contemplated by such forward-looking statementsinclude, among others: (1) the gaming industry is very competitive andincreased competition from the legalization or expansion of gaming inMississippi or Alabama and the development or expansion of Native Americancasinos in or near the Company’s markets could adversely affect the Company’sprofitability, (2) general construction risks and other factors, some of whichare beyond the Company’s control, could prevent the Company from completing itsconstruction and development projects as planned, (3) changes in gaming laws orregulations, (4) changes in federal or state tax laws, (5) changes in theeconomy, and (6) the additional furniture, fixture, and equipment financing tocomplete the project. Additional factors that could cause actual performance ofthe Company to differ materially from that contemplated by such forward-lookingstatements are detailed in the Company’s Registration Statement on Form S-4filed effective with the Securities Exchange Commission in July 2004.

 

The Private Securities Litigation Reform Actof 1995 (the “Act”) provides certain “safe harbor” provisions for forward ­lookingstatements. All forward-looking statements made in this Quarterly Report onForm 10-Q are made pursuant to the Act. For more information on the potentialfactors that could affect the Company’s operating results and financialcondition, review the Company’s other filings with the Securities and ExchangeCommission.

 

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

 

The Company’s management, with the participation ofthe Company’s Chief Financial Officer, evaluated the effectiveness of theCompany’s disclosure controls and procedures as of September 30, 2004. Based onthis evaluation, the CFO concluded that the Company’s disclosure controls andprocedures were effective as of September 30, 2004

 

Such officers also confirm that there was nochange in the Company’s internal controls over financial reporting during thequarter ended September 30, 2004 that has materially affected, or is reasonablylikely to material affect, the Company’s internal control over financialreporting.

 

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**PART II**

 

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

**EXHIBIT INDEX**

 
| **Exhibit  Number** |   | **Description  of Exhibit** |
|---------------------|--------|-----------------------------|
|                |   |                        |
| 10.1                | *      |                        | Consulting Agreement  (Purchasing), dated August 10, 2004 between Premier Entertainment Biloxi LLC  and C P Procurement Services, Inc. |
|                |   |                        |   |
| 10.2                | *      |                        | Purchase Agreement  (Marquee), dated as of August 19, 2004, between Premier Entertainment Biloxi  LLC and Kojis and Sons Signs, Inc. |
|                |   |                        |   |
| 10.3                |   |                        | Change Order Agreement  Number 001 effective November 10, 2004 between Premier Entertainment Biloxi  LLC and Roy Anderson Corp. |
|                |   |                        |   |
| 31.1                |   |                        | Chief Operating Officer  Certification Pursuant to Section 13a-14 of the Securities Exchange Act. |
|                |   |                        |   |
| 31.2                |   |                        | Chief Financial Officer  Certification Pursuant to Section 13a-14 of the Securities Exchange Act. |
|                |   |                        |   |
| 32                  |   |                        | Certification pursuant to  18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002 — Chief Operating Officer and Chief Financial  Officer. |

 

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*              Previously Filed

 

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**SIGNATURE**

 

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

 
|                    | PREMIER  ENTERTAINMENT BILOXI LLC           |
|-------------------------|---------------------------------------------|
|                    | (Registrant)                                |   |
| Date: November 10, 2004 |                                        |   |
|                    |                                        |   |
|                    |                                        |   |
|                    |                                        | /s/     Gregory  J Bosarge |   |   |
|                    | Gregory  J Bosarge                          |   |
|                    | Vice  President and Chief Financial Officer |   |
|                         |                                             |  |  |  |

 

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