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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
      EXCHANGE ACT OF 1934

      For the fiscal year ended December 31, 2002

                                       OR


[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
      EXCHANGE ACT OF 1934

      For the transition period from ____________ to ____________

                        Commission File Number 333-88829


             Peninsula Gaming Company, LLC / Peninsula Gaming Corp.
             (Exact name of registrant as specified in its charter)


                Delaware                               42-1483875
    (State or other jurisdiction of       (I.R.S. Employer Identification No.)
             incorporation)

  3rd Street Ice Harbor, PO Box 1750,                  52004-1683
             Dubuque, Iowa
(Address of principal executive offices)               (Zip Code)

                                 (563) 583-7005
              (Registrant's telephone number, including area code)

      Securities registered pursuant to Section 12 (g) of the Act: None

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

      Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. Yes __ No X

      Indicate by check mark whether the registrant is an accelerated  filer (as
defined in Rule 12b-2 of the Act). Yes __ No X

      All of the common equity interests of Peninsula  Gaming Company,  LLC (the
"Company")  are held by Peninsula  Gaming  Partners,  LLC, and all of the common
stock of Peninsula Gaming Corp. is held by Peninsula Gaming Company, LLC.

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<PAGE>


                                TABLE OF CONTENTS

Part I

      ITEM 1.     BUSINESS...................................................1
      ITEM 2.     PROPERTIES................................................16
      ITEM 3.     LEGAL PROCEEDINGS.........................................17
      ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.......18

Part II

      ITEM 5.     MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
                  RELATED STOCKHOLDER MATTERS...............................19
      ITEM 6.     SELECTED FINANCIAL DATA...................................19
      ITEM 7.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                  CONDITION AND RESULTS OF OPERATIONS.......................21
      ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...............30
      ITEM 9.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                  ACCOUNTING AND FINANCIAL DISCLOSURE.......................30

Part III

      ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT............31
      ITEM 11.    EXECUTIVE COMPENSATION....................................32
      ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                  MANAGEMENT................................................34
      ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............36
      ITEM 14.    CONTROLS AND PROCEDURES...................................38

Part IV

      ITEM 15.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
                  ON FORM 8-K...............................................39


                                      -i-
<PAGE>
                                  Part I

ITEM 1  BUSINESS

Description of the Business

General

      We are wholly owned by Peninsula Gaming Partners,  LLC, a Delaware limited
liability  company ("PGP") and our sole managing member.  Peninsula Gaming Corp.
is our  wholly  owned  subsidiary,  has no assets or  operations  and was formed
solely to facilitate  the offering of our 12 1/4% Senior  Secured Notes due 2006
(the  "Peninsula  Notes")  in certain  jurisdictions.  OED  Acquisition,  LLC, a
Delaware limited liability company ("OEDA"), is a wholly owned subsidiary formed
on July 9, 2001 to facilitate the purchase of The Old Evangeline Downs,  L.C., a
Louisiana  limited  liability  company  whose name was later  changed to The Old
Evangeline  Downs,  LLC, a Delaware  limited  liability  company  ("OED").  OEDA
currently owns 100% of the  membership  interests of OED. OED currently owns and
operates  the  Evangeline  Downs,  a  horse  track  in  Lafayette,  LA.  The Old
Evangeline  Downs  Capital  Corp.  is a wholly owned  subsidiary  of OED, has no
assets or operations  and was formed solely to facilitate  the offering of OED's
13% Senior Secured Notes due 2010 with Contingent  Interest (the "OED Notes") in
certain  jurisdictions.  Unless otherwise specified herein,  references to "us,"
"our," "we" or the "Company" shall mean Peninsula Gaming Company, LLC.

      Our  address  is 3rd  Street  Ice  Harbor,  PO  Box  1750,  Dubuque,  Iowa
52004-1750, and our telephone number is (563) 583-7005.

The Diamond Jo

      We own and  operate  the  Diamond  Jo  riverboat  casino,  one of only two
licensed gaming  operations in Dubuque,  Iowa. We are organized in Delaware as a
limited liability  company and commenced  operations upon our acquisition of the
Diamond Jo riverboat casino on July 15, 1999.

      The  Diamond  Jo  is  a  three-story,  approximately  51,900  square  foot
riverboat casino, replicating a classic 19th century paddlewheel.  The riverboat
has the capacity for 1,390 patrons,  features a spacious  two-story atrium,  and
offers 729 slot machines and 17 table games in approximately  17,800 square feet
of gaming space. Adjacent to the Diamond Jo is a two-story, approximately 33,000
square foot dockside pavilion,  featuring our 142-seat capacity Lighthouse Grill
restaurant,  our 180-seat capacity High Steaks restaurant,  our 25-seat capacity
Club Wild  players  lounge and our  205-seat  capacity  Harbor View Room, a full
service banquet  facility.  Approximately  1,100  convenient  parking spaces are
available to our patrons,  including valet parking. The Diamond Jo is open seven
days a week and  functions  primarily as a dockside  riverboat  with  continuous
boarding.  The  Diamond Jo is  required by Iowa law to cruise at least 100 times
per year, for a minimum of two hours per cruise,  which we satisfy by conducting
a two-hour cruise at 7:30 a.m. on weekdays during the spring and summer months.

      The Diamond Jo operates from, and the dockside pavilion is located in, the
Port of Dubuque,  a waterfront  development on the Mississippi River in downtown
Dubuque  and is  accessible  from each of the  major  highways  in the area.  On
average,  more than 30,000  vehicles  pass our site per day. We believe that the
Diamond Jo is among the  principal  entertainment  venues for  residents  in and
around  Dubuque.  We share our  dockside  pavilion  with the  Spirit of  Dubuque
dinner-boat  and the  Dubuque  County  Historical  Society,  featuring a museum,
historical exhibits, and an observation deck.


<PAGE>
      Continued  growth is also anticipated  through locally funded  development
programs,  including a redevelopment  project in the Port of Dubuque,  where the
Diamond Jo is located, known as the America's River project. The America's River
project is an estimated  $188,000,000  project on a 90-acre site planned for the
Dubuque riverfront that features a Mississippi River Discovery Center, education
and conference  center,  a river walk and accompanying  amenities,  a riverfront
hotel and indoor water park and conference center. This redevelopment project is
designed  to enhance  the  attractiveness  of the Port of Dubuque as a community
center and tourist destination.

      Operations

      Our business operations generate revenue from two main sources:

      Gaming  Operations.  We regularly adjust our overall game mix to appeal to
our target market, based on, among other factors, the coin-in,  hold percentage,
location and age of our various slot machines.  Approximately 85% of the Diamond
Jo's gaming positions are slot machines.  Since February 2002, we have increased
the number of slot machines in the casino from 650 to 729 slot machines,  all of
which have bill validators. The slot machines include denominations ranging from
$0.01  to  $25.00,  with  more  than  97% of the  machines  $1.00  or  lower  in
denomination.  Approximately  221 of our  $0.02  and  $0.05  machines  have been
converted to coin-free  machines in  connection  with our recent  upgrade of our
slot  tracking  system.  At any one time,  approximately  15% to 20% of our slot
machines are video poker,  video keno, and other  electronic  games of skill. We
currently  replace or install  conversion  packages on approximately  10% of our
slot machines each year.  Conversion  packages are  installations  of new glass,
reels and, on occasion, other coin handling equipment to slot machines to update
or replace the game and its appearance without replacing the entire machine. The
authorization  in Iowa of wide area  progressives  and networks of slot machines
throughout  several  casinos  resulting  in higher  jackpots  has  allowed us to
further improve our product mix with the introduction of 4 linked slot machines.
The 17 table games offered by the Diamond Jo include,  11 blackjack,  two craps,
one three-card poker, one roulette, one Caribbean Stud, and one Let-It-Ride, all
primarily with low betting limits.

      Food and  Beverage  Operations.  The food and beverage  operations  at the
Diamond Jo include  our  142-seat  capacity  Lighthouse  Grill  restaurant,  our
180-seat  capacity High Steaks  restaurant and our 205-seat capacity Harbor View
Room, a full service banquet facility.

      Business Strategy

      The  Diamond Jo is the  leading  gaming  facility  in our  market,  having
captured over half of Dubuque's  casino gaming revenues since 1995, the casino's
first full year of  operations.  We  attribute  our  success to our  competitive
position  and our unique  local  gaming  operations,  offering  the most  gaming
positions  and the only table games,  video poker and video keno within 60 miles
of Dubuque.

      We have developed marketing and promotional strategies designed to attract
new customers and reward frequent  gaming  customers.  Our tag line,  "Where the
River Runs Wild" appears in all our  advertising,  including  billboard,  print,
radio, and television throughout the Dubuque area, as well as in our promotional
offerings.  In  addition  to our tag line,  we have  established  core-marketing
programs  utilizing  the "River Runs Wild" theme and have included this theme in
naming  our  players'  club and VIP  lounge.  We have  used our  theme to create
core-marketing  programs  which have  allowed  us to  continue  to  attract  new
customers as well as maintain loyalty within our existing customer base.

      We also  believe in  aggressively  using the  information  in our customer
database  obtained  through our electronic  player  tracking system to focus our
marketing  efforts on our most valued  customers to help increase  revenues from
our  existing  customer  base.  With the help of this  system,  we can  identify


                                       2
<PAGE>

customers'  habits,  such as the  day of the  week,  time of the day and  dollar
denominations  our  players'  club  members  prefer to play.  We can also  store
pertinent information for each member, including birthdays,  favorite sports and
music  preferences.  These  customer  preferences  allow us to better define our
members and give us the ability to improve our  marketing  efforts by  tailoring
our promotions and direct mail offers.

      Competition

      General.  Riverboat  gaming licenses in the State of Iowa are granted to a
not-for-profit  "qualified sponsoring organization" and can be issued jointly to
a not-for-profit  qualified  sponsoring  organization  and a boat operator.  The
granting of new licenses requires  regulatory  approval,  which includes,  among
other things,  satisfactory  feasibility studies. The Dubuque Racing Association
is the not-for-profit  qualified  sponsoring  organization  that,  pursuant to a
contract  between the parties,  holds the  excursion  riverboat  gaming  license
together with the Company as the boat operator.

      In 1998, the Iowa Racing and Gaming Commission  adopted a rule that limits
the  number of  riverboat  gaming  licenses  in Iowa to ten,  subject to limited
exceptions,  including  licenses  issued  to  purchasers  of  existing  licensed
facilities and licenses issued to replace an existing facility if its license is
surrendered,  not renewed,  or revoked and  prohibits  the transfer of a license
outside the county in which the  riverboat  operated  on May 1, 1998.  There are
currently ten licensed  riverboat gaming facilities  operating in Iowa. The rule
also prohibits existing licensees from increasing the number of gaming positions
at their gaming facilities without prior gaming commission approval.

      The Dubuque gaming market borders other neighboring gaming markets.  These
neighboring markets include:

      (1)   Elgin and Aurora, Illinois to the east;

      (2)   Marquette,   Iowa  and  Native  American  gaming  in  Wisconsin  and
            Minnesota to the north;

      (3)   Des Moines,  Iowa and Native  American  gaming in Tama,  Iowa to the
            west; and

      (4)   Clinton,  Iowa and the Quad Cities  (Bettendorf and Davenport,  Iowa
            and Moline and Rock Island, Illinois) to the south.

      We believe  that the  Diamond Jo  competes  only  indirectly  with  gaming
facilities in these neighboring markets.

      Dubuque.  The Diamond Jo's principal  competition is the Dubuque Greyhound
Park, the only other licensed gaming facility in Dubuque.  The Dubuque Greyhound
Park,  which  opened its casino in 1995,  is located  three  miles  north of the
Diamond Jo and offers  600 slot  machines  and live  greyhound  racing  from May
through October of each year with simulcasts  from other greyhound  tracks.  The
Dubuque  Greyhound  Park also offers,  on a limited  basis,  simulcasts of horse
races.  The Dubuque  Greyhound  Park is owned and operated by the Dubuque Racing
Association.  As a not-for-profit  organization,  the Dubuque Racing Association
distributes  a  percentage  of its cash  flow to the City of  Dubuque  and local
charities.

      Legislation was enacted in 1999 in Illinois to provide for dockside gaming
in Illinois, which dockside gaming is limited to ten licenses, nine of which are
currently  active.  We  believe  that  additional  competitors  are  effectively
precluded from entering our market due to  constraints  imposed by existing laws
on the availability of gaming licenses.


                                       3
<PAGE>

      Employees

      We  maintain  a staff of  approximately  400 to 425  full-time  equivalent
employees at the Diamond Jo,  depending  upon the time of the year.  None of our
employees  are  covered  by a  collective  bargaining  agreement.  We  have  not
experienced  any labor  problems  resulting in a work  stoppage,  and believe we
maintain good relations with our employees.

Recent Acquisition

      During 2002, the Company,  indirectly  through its wholly owned subsidiary
OEDA, acquired 100% of the outstanding  membership  interests in OED through the
following transactions:

      On June 27, 2001,  BIM3  Investments,  a Louisiana  partnership  and a 50%
owner of OED membership interests,  entered into an agreement to sell 50% of OED
membership  interests to PGP, our parent.  The  agreement was assigned by PGP to
OEDA on October 23, 2001. On February 15, 2002, OEDA consummated the acquisition
of 50% of the  membership  interests in OED and a one-half (1/2) interest in two
promissory notes issued by OED in the aggregate  principal amount of $10,909,244
(the "Old OED Notes"), for an aggregate purchase price of $15,000,000 (the "BIM3
Purchase").

      The source of funds for the BIM3  Purchase was  $3,000,000 of cash on-hand
and $12,000,000 of borrowings  under the Company's credit facility with Foothill
Capital  Corporation.  In connection  with the BIM3  Purchase,  the Company paid
consent fees  totaling  $887,500 to holders of the  Peninsula  Notes.

      On June 25, 2002,  PGP entered into an agreement  with William E. Trotter,
II ("Trotter")  and William E. Trotter,  II Family L.L.C.,  a Louisiana  limited
liability  company  ("WET2LLC") to acquire (i) the remaining 50% interest in the
Old OED Notes owned by WET2, and (ii) the remaining 50%  membership  interest in
OED owned by  WET2LLC  (the  "Trotter  Purchase").  On  August  30,  2002,  OEDA
consummated  the Trotter  Purchase for a purchase  price  consisting  of cash of
$15,546,000  plus a contingent  fee of one half of one percent (0.5%) of the net
slot revenues generated by the new casino to be located in St. Landry Parish for
a period of ten years commencing on the date the casino opens to the public.

      The  source  of funds for the  Trotter  Purchase  described  above was (1)
$8,450,000 of borrowings under OEDA's loan and security  agreement with Foothill
Capital  Corporation  entered  into and  assigned to OED on August 30, 2002 (the
"Term Loan") and (2) proceeds from a $7,325,000 intercompany note issued by OEDA
in favor of PGP due June 30, 2003 (the "PGP Note"). Additionally,  in connection
with the Trotter Purchase,  OED and PGP issued, as joint obligors,  a $4,500,000
note payable to Trotter (the "Trotter Note"), the proceeds of which were used to
purchase  the land on which  the  racino  will be  operated  and to pay  certain
deferred financing costs and reimbursable  expenses. The source of cash provided
by PGP  pursuant  to the  intercompany  note  relates  to  the  proceeds  from a
$7,325,000 note payable issued by PGP in favor of WET2LLC due June 30, 2003 (the
"WET2LLC Note"). For more information regarding the Term Loan, PGP Note, Trotter
Note and WET2LLC Note,  see  "Management's  Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources" below.


                                       4
<PAGE>

      We accounted for OEDA's acquisition of all the membership interests in OED
as a purchase in accordance with SFAS No. 141 "Business  Combinations"  and SFAS
No. 142  "Goodwill  and Other  Intangible  Assets." The purchase  price has been
allocated to the underlying assets and liabilities based on their estimated fair
values at the date of acquisition. To the extent the purchase price exceeded the
fair  value  of the net  identifiable  assets  acquired,  such  excess  has been
recorded as goodwill and other  intangible  assets.  As of December 31, 2002, we
recorded goodwill of approximately $28.4 million related to the acquisition.  We
have not yet completed  our  evaluation of the  intangible  assets  acquired and
contingent liabilities assumed in the acquisition. This evaluation may result in
adjustments to the purchase price allocation.  Under the provisions of SFAS 142,
goodwill and other  intangible  assets with  indefinite  lives  arising from the
acquisition  will not be  amortized  but will be reviewed at least  annually for
impairment  and  written  down and  charged to income  when its  recorded  value
exceeds its estimated fair value.

      The following  table  summarizes  the  estimated  fair value of the assets
acquired  and the  liabilities  assumed at the  acquisition  date.  Third  party
valuations have been obtained for property and equipment.

                                                        (in thousands)
     Current assets                                       $  2,317
     Property and equipment                                  1,369
     Other assets                                            1,090
     Goodwill and other intangible assets                   28,393
                                                       -----------------
        Total assets                                        33,169

     Liabilities assumed                                    (2,623)
                                                       -----------------
     Purchase price                                      $  30,546
                                                       =================

The Old Evangeline Downs

      As a result of the above  recent  transaction,  the  Company,  through its
wholly owned subsidiary OED,  currently owns and operates the Evangeline  Downs.
The Evangeline  Downs is located five miles north of Lafayette off Interstate 49
and is  comprised  of a 94,200  square foot  pari-mutuel  wagering  complex,  an
approximate  2,000-space  parking  lot,  7/8-mile  dirt  track and  stables  for
approximately  1,000  horses.  The  complex  features  an  approximate  750-seat
grandstand,   an  approximate   3,000-person   capacity  apron  and  patio,   an
approximately  850-seat  restaurant,  four concession  stands and four bars. The
horse racetrack offers live thoroughbred and quarter horse races a minimum of 80
days a year from mid-April  through Labor Day in September.  The horse racetrack
also offers simulcast wagering six days a week year-round.

      OED also operates an OTB in New Iberia,  Louisiana,  that offers simulcast
pari-mutuel  wagering,  and an OTB in Port Allen,  Louisiana,  that offers video
poker gaming and simulcast pari-mutuel wagering.

      Operations

      OED's business operations generate revenue from three main sources:

      Pari-Mutuel  Operations.  The pari-mutuel  segment consists of pari-mutuel
wagering on live  thoroughbred and quarter horse races, from the middle of April
through Labor Day in September. OED


                                       5
<PAGE>

also  offers a mixture of  simulcast  wagering  six days per week.  The two OTBs
offer six days of pari-mutuel wagering on simulcast races.  Pari-mutuel revenues
are a function of wagering handle,  or the total amount wagered,  without regard
to predetermined deductions. The total amounts wagered form a pool of funds from
which  winnings  are  paid  based  on odds  determined  solely  by the  wagering
activity.  In pari-mutuel  wagering,  patrons bet against each other rather than
against the operator of the facility,  or with pre-set odds. The horse racetrack
acts as a  stakeholder  for the  wagering  patron and  deducts  from the amounts
wagered a gross  commission.  OED also generates  revenue from  simulcasting its
races to other  horse  racetracks.  The  simulcast  fees are  determined  by the
contract agreed upon with the horse racetrack in question. Out of OED's live and
simulcast  commission  revenues,  OED is required by statute to pay taxes to the
state of Louisiana.

      Food and Beverage Operations. The food and beverage operations at the main
horse  racetrack  include a full service  850-seat  clubhouse  restaurant,  four
concession  stands and four other bars. The two off-track  betting  parlors each
include a kitchen that prepares short order food and a bar that serves alcoholic
and non-alcoholic beverages.

      Gaming  Operations.  Currently,  only the Port Allen OTB  parlor  operates
video poker  gaming.  The machines are  currently  owned and operated by a third
party. OED is currently  expanding the Port Allen OTB from 18 to 100 video poker
machines  which will  initially be operated by a third party until OED obtains a
license. Under Louisiana's racing and off-track betting laws, OED has a right of
prior approval with respect to any applicant  seeking a permit to operate an OTB
within a 55-mile radius of OED's horse racetrack. This effectively gives OED the
exclusive right, at its option, to operate OTBs within a 55-mile radius of OED's
horse racetrack, provided that such OTBs are not also within a 55-mile radius of
another horse racetrack.

      Gaming  revenues  represent  net revenues from video poker gaming which is
calculated  by taking  gross  revenues  from video poker  gaming taken in by the
third party operator, or the total amount wagered, net of winning patron payout,
less:  (i)  franchise  fees (22.5% of the net device  revenue) to the  Louisiana
Office of State  Police,  (ii) fees paid to the  machine  owner  (60% of the net
device  revenue  less the  franchise  fees),  and (iii) $100 fee per machine per
month. The remaining amount is recorded as gaming revenue.

      Racino Development and Related Financing

      In  1997,  the  State of  Louisiana  passed  the  Pari-Mutuel  Act,  which
permitted three of the four companies operating  pari-mutuel wagering facilities
in Louisiana  which offer live horse  racing to install  slot  machines at their
horse  racetrack  facilities,  subject  to  ratification  by the  voters  of the
individual parishes.  The voters of Lafayette Parish, where OED's existing horse
racetrack is located,  have not approved the  installation  of slot  machines at
OED's  horse  racetrack  facility.  However,  in October  1997 the voters of St.
Landry  Parish  approved  the  operation of both slot  machines and  pari-mutuel
wagering.  Therefore, OED is currently developing a casino and pari-mutuel horse
racetrack  facility,  or "racino,"  in nearby  Opelousas,  Louisiana  within St.
Landry Parish,  which will replace OED's existing horse racetrack near Lafayette
and where OED will be  permitted  to  operate  slot  machines,  in  addition  to
conducting  live horse  racing.  OED's  approximately  532-acre  racino  site is
located approximately 20 miles north of Lafayette,  OED's primary market, at the
intersection  of Interstate 49 and U.S.  Highway 190. On December 19, 2002,  OED
received a racing  license to operate in St. Landry  Parish,  and on January 21,
2003,  OED  received a gaming  license to operate  slot  machines at the racino,
subject to customary conditions.

      OED has  purchased all the  necessary  land to develop  OED's racino.  The
total remaining cost to design, develop, construct, equip and open the racino is
expected  to  be  approximately   $88.5  million.  On  February  26,  2003,  OED
consummated a private placement of $123.2 million principal amount of OED Notes.
A portion  of the net  proceeds  from this  offering  was used to repay  certain
existing  indebtedness,  including termination of the Term Loan and repayment of
all outstanding borrowings thereunder.  The balance of the net proceeds from the
offering will be used (1) to fund (together with cash from  operations and other
available financing) the cost to design, develop,  construct, equip and open the
racino, (2) to pay the first three semi-annual payments of fixed interest on the
OED Notes and (3) upon satisfaction of certain disbursement conditions,  to fund
potential  cost  overruns  and  contingency  amounts with respect to the design,
development,   construction  and  equipping  and  opening  of  the  racino.  See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations" for further information about the OED Notes.


                                       6
<PAGE>

      OED has  entered  into a bonded  guaranteed  maximum  price  contract  for
approximately $52.0 million with W.G. Yates & Sons Construction  Company for the
construction of the racino  facility.  The approximate  $36.5 million  remaining
project  budget  includes the costs of  equipment,  additional  land  purchases,
off-site  improvements,  cage cash,  pre-opening expenses and development costs.
Kitrell  Garlock  and  Associates,  AIA,  Ltd.,  d/b/a  KGA  Architecture  ("KGA
Architects") has been retained as the racino architect.  The design of the horse
racetrack and related  facilities has been  sub-contracted  by KGA Architects to
Foehlich,  Kow & Gong Architects.  KGA Architects' project management subsidiary
will administer the construction  contract on OED's behalf. OED has also engaged
Abacus  Project  Management,   Inc.  to  act  as  the  independent  construction
consultant,  on behalf of the holders of OED Notes,  who will certify the proper
use of the portion of the net  proceeds  of the  offering of the OED Notes to be
used to develop the racino.

      The  construction  and development of the racino project is expected to be
completed in two phases.  During the first phase,  OED will construct the casino
and related  casino  amenities,  which OED  expects to open in March 2004,  at a
total  remaining  cost of $68.6  million.  During  the  second  phase,  OED will
construct the horse racetrack and related  facilities for a total remaining cost
of $19.9  million.  OED expects to be prepared to begin  scheduling  live racing
meets in December  2004.  OED expects to continue to operate its existing  horse
racetrack until live racing meets are scheduled at the racino, at which time OED
will cease operations at its existing horse racetrack.

      Competition

      Under  current  Louisiana  law,  there are a total of 15 riverboat  gaming
licenses  and one land  based  casino  license.  In  addition,  pursuant  to the
Pari-Mutuel  Act,  three of the four existing  pari-mutuel  horse  racetracks in
Louisiana  conducting live racing (including the Evangeline Downs) are permitted
to install slot  machines.  The nearest horse  racetrack that is allowed to have
gaming operations is located in Vinton,  Louisiana,  near Lake Charles, which is
over 100  miles  away.  In  addition,  there are three  Native  American  tribes
operating casinos in Louisiana, the closest of which is located approximately 50
miles from its proposed facility.  We believe,  because of OED's close proximity
to Lafayette and ease of access via major  interstates  and  highways,  that OED
will be the primary  source of gaming  entertainment  in its  primary  market of
Lafayette.  The nearest  competitor  to  Lafayette is a Native  American  casino
approximately  50 miles to the south of Lafayette,  including  several miles off
the highway. Beyond that, patrons in Lafayette would need to drive approximately
50 miles to reach  riverboat  casinos  in Baton  Rouge or more  than 70 miles to
reach  riverboat  casinos  in  Lake  Charles  and  Native  American  casinos  in
Marksville and Kinder. Because OED's competition in Marksville is inconveniently
situated  more than 20 miles off the  highway,  we believe  that  patrons of the
Marksville  casino  may find the  ease of  highway  access  to its  racino  more
convenient.

      OED plans to offer its patrons an  experience at the racino that cannot be
matched by its casino-only competitors.  In addition to approximately 1,600 slot
machines,  OED will offer its guests live horse  racing a minimum of 80 days per
year and year-round  simulcast  pari-mutuel racing. Since only two other racinos
are  legislatively  authorized in Louisiana,  with the nearest  located over 100
miles  to the  west,  we  believe  that  OED's  entertainment  offering  will be
unrivaled in both its primary  market area of Lafayette and  secondary  markets,
including Baton Rouge which is approximately 50 miles to the east.

      Employees

      OED  currently  employs  approximately  145  employees.  During its racing
season,  OED employs up to approximately 325 employees.  We anticipate that when
the racino opens OED will require approximately 600 additional  employees.  None
of OED's current employees are covered by a collective


                                       7
<PAGE>

bargaining agreement.  OED has not experienced any labor problems resulting in a
work stoppage, and we believe OED maintains good relations with its employees.

Regulatory Matters

      We and our  subsidiaries  are subject to  regulation by the State of Iowa,
the State of  Louisiana  and,  to a lesser  extent,  by federal  law. We and our
subsidiaries  are subject to regulations  that apply  specifically to the gaming
and pari-mutuel  industry,  in addition to regulations  applicable to businesses
generally.   Legislative   or   administrative   changes  in  applicable   legal
requirements,  including  legislation  to  prohibit  casino  gaming,  have  been
proposed in the past. It is possible that the applicable requirements to operate
an Iowa or Louisiana  gaming facility will become more stringent and burdensome,
and that taxes,  fees and expenses may  increase.  It is also  possible that the
number of authorized  gaming licenses in Iowa and Louisiana may increase,  which
would intensify the competition that we face. Our failure and the failure of OED
to  comply  with  detailed  regulatory  requirements  may  be  grounds  for  the
suspension or revocation of one or more of our  respective  licenses which would
have a material adverse effect on our respective businesses.

      Iowa Riverboat Gaming Regulation

      Our Diamond Jo operations  are subject to Chapter 99F of the Iowa Code and
the regulations  promulgate  under that Chapter and the licensing and regulatory
control of the gaming commission.

      Under  Iowa law,  the  legal  age for  gaming  is 21,  and  wagering  on a
"gambling game" is legal when conducted by a licensee on an "excursion  gambling
boat." An "excursion  gambling boat" is a  self-propelled  excursion boat, and a
"gambling game" is any game of chance authorized by the gaming commission. While
dockside  casino  gaming is currently  authorized  by the gaming  commission,  a
licensed  excursion  gambling  boat is required to conduct at least one two-hour
excursion  cruise each day for at least 100 days during the excursion  season to
operate during the  off-season.  The excursion  season is from April 1st through
October 31st of each calendar year.  The excursions  conducted by the Diamond Jo
during the 2002 cruising season  satisfied the  requirements of Iowa law for the
conduct of off-season operations.

      The  legislation  permitting  riverboat  gaming  in  Iowa  authorizes  the
granting of licenses  to  "qualified  sponsoring  organizations."  A  "qualified
sponsoring  organization" is defined as a nonprofit  corporation organized under
Iowa  law,  whether  or  not  exempt  from  federal  taxation,  or a  person  or
association that can show to the satisfaction of the gaming  commission that the
person or association  is eligible for exemption  from federal  income  taxation
under ss.ss.  501(c)(3),  (4),  (5), (6), (7), (8), (10) or (19) of the Internal
Revenue Code. Such nonprofit corporation may operate the riverboat itself, or it
may enter into an agreement  with another boat operator to operate the riverboat
on its  behalf.  A boat  operator  must be approved  and  licensed by the gaming
commission.   The  Dubuque  Racing  Association,  a  not-for-profit  corporation
organized for the purpose of operating a pari-mutuel  greyhound  racing facility
in Dubuque,  Iowa,  first  received a riverboat  gaming  license in 1990 and has
served as the "qualified sponsoring  organization" of the Diamond Jo since March
18, 1993. The Dubuque Racing Association  subsequently  entered into the Dubuque
Racing   Association   operating   agreement  with  Greater  Dubuque   Riverboat
Entertainment  Company,  the  previous  owner and  operator  of the  Diamond Jo,
authorizing Greater Dubuque Riverboat Entertainment Company to operate riverboat
gaming operations in Dubuque. The Dubuque Racing Association operating agreement
was approved by the gaming commission on March 18, 1993. The term of the Dubuque
Racing Association  operating agreement expires on December 31, 2008. We assumed
the rights and obligations of Greater Dubuque  Riverboat  Entertainment  Company
under the Dubuque Racing Association operating agreement.


                                       8
<PAGE>

      Under Iowa law, a license to conduct gaming may be issued in a county only
if the county  electorate  has approved the gaming.  The  electorate  of Dubuque
County,  Iowa,  which includes the City of Dubuque,  approved  gaming on May 17,
1994 by referendum, including gaming conducted by the Diamond Jo. In addition, a
referendum must be held every eight years in each of the counties where gambling
games are conducted and the  proposition  to continue to allow gambling games in
such counties must be approved by a majority of the county  electorate voting on
the  proposition.  Such a referendum  took place on November 5, 2002 with 79% of
the electorate voting on the proposition favoring continued gaming on riverboats
in  Dubuque  County.   The  next  referendum  is  scheduled  for  2010.  If  any
reauthorization  referendum is defeated,  Iowa law provides that any  previously
issued  gaming  license  will remain valid and subject to renewal for a total of
nine years from the date of original issuance of the license, subject to earlier
non-renewal  or  revocation  under Iowa law and  regulations  applicable  to all
licenses.

      Proposals to amend or  supplement  Iowa's gaming  statutes are  frequently
introduced in the Iowa state  legislature.  In addition,  the state  legislature
sometimes considers proposals to amend or repeal Iowa law and regulations, which
could  effectively  prohibit  riverboat  gaming in the State of Iowa,  limit the
expansion of existing operations or otherwise affect our operations. Although we
do not believe that a prohibition of riverboat gaming in Iowa is likely,  we can
give no  assurance  that  changes in Iowa gaming laws will not occur or that the
changes will not have a material adverse effect on our business.

      The gaming  commission  adopted in 1998 a rule that  prohibits  licensees,
including the Diamond Jo, from increasing the number of gaming positions without
gaming commission approval. This approval is based on several factors, including
whether the increase will:

      (1)   positively impact the community in which the licensee operates,

      (2)   result in permanent improvements and land-based developments, and

      (3)   have a  detrimental  impact  on the  financial  viability  of  other
            licensees operating in the same market.

      As a result  of this  rule,  we may be unable to  increase  the  number of
gaming positions on the Diamond Jo.

      Substantially all of the Diamond Jo's material transactions are subject to
review  and  approval  by the  gaming  commission.  All  contracts  or  business
arrangements,  verbal or written,  with any  related  party or in which the term
exceeds  three years or the total value of the  contract  exceeds  $100,000  are
agreements that qualify for submission to and approval by the gaming  commission
subject to certain limited exceptions. The agreement must be submitted within 30
days of execution and approval must be obtained prior to  implementation  unless
the agreement contains a written clause stating that the agreement is subject to
commission approval.  Additionally,  contracts negotiated between the Diamond Jo
and  a  related  party  must  be   accompanied   by  economic  and   qualitative
justification.

      We must submit  detailed  financial,  operating  and other  reports to the
gaming commission.  We must file weekly gaming reports indicating adjusted gross
receipts  received  from  gambling  games.  Additionally,  we must  file  annual
financial statements covering all financial activities related to our operations
for each fiscal year.  We must also keep detailed  records  regarding our equity
structure and owners.

      Iowa has a graduated  wagering  tax on  riverboat  gambling  equal to five
percent of the first one million dollars of adjusted gross receipts, ten percent
on the next two million dollars of adjusted gross


                                       9
<PAGE>

receipts  and  twenty  percent on  adjusted  gross  receipts  of more than three
million  dollars.  In addition,  Iowa  riverboats  share equally in costs of the
gaming  commission  and related  entities to administer  gaming in Iowa. For the
fiscal  year  ended   December  31,  2002,   our  share  of  such  expenses  was
approximately  $503,000.  Further,  the Diamond Jo pays to the City of Dubuque a
fee equal to $.50 per passenger.

      If the gaming commission  decides that a gaming law or regulation has been
violated, the gaming commission has the power to assess fines, revoke or suspend
licenses or to take any other  action as may be  reasonable  or  appropriate  to
enforce the gaming rules and  regulations.  In addition,  renewal is subject to,
among other things, continued satisfaction of suitability requirements.

      We are required to notify the gaming commission as to the identity of, and
may be required  to submit  background  information  regarding,  each  director,
corporate officer and owner, partner, joint venture, trustee or any other person
who has a beneficial  interest of five percent or more,  direct or indirect,  in
the Company.  The gaming commission may also request that we provide them with a
list of persons holding  beneficial  ownership  interests in the Company of less
than five percent. For purposes of these rules,  "beneficial  interest" includes
all  direct  and  indirect  forms  of  ownership  or  control,  voting  power or
investment  power  held  through  any  contract,   lien,   lease,   partnership,
stockholding,  syndication, joint venture, understanding,  relationship, present
or reversionary  right, title or interest,  or otherwise.  The gaming commission
may  determine  that  holders  of the  Peninsula  Notes,  the  Company's  common
membership  interests  and  preferred  membership  interests,  and PGP's  common
membership  interests and  convertible  preferred  membership  interests  have a
"beneficial  interest" in us. The gaming commission may limit, make conditional,
suspend or revoke  the  license of a  licensee  in which a  director,  corporate
officer or holder of a  beneficial  interest in the person  includes or involves
any  person or  entity  which is found to be  ineligible  as a result of want of
character,   moral   fitness,   financial   responsibility,    or   professional
qualifications  or due to failure to meet other criteria  employed by the gaming
commission.

      If any gaming  authority,  including the gaming  commission,  requires any
person,  including  a  record  or  beneficial  owner  of the  securities,  to be
licensed,  qualified  or found  suitable,  the person  must apply for a license,
qualification or finding of suitability  within the time period specified by the
gaming authority. The person would be required to pay all costs of obtaining the
license,  qualification  or finding of  suitability.  If a record or  beneficial
owner of any of the  Peninsula  Notes or any  membership  interest of PGP or the
Company is required  to be  licensed,  qualified  or found  suitable  and is not
licensed,  qualified  or found  suitable  by the  gaming  authority  within  the
applicable time period,  these  Peninsula Notes or membership  interests will be
subject to  regulatory  redemption  procedures.  Peninsula  Notes to be redeemed
under a required  regulatory  redemption  are  redeemable  by us, in whole or in
part,  at any time  upon not less  than 20  business  days nor more than 60 days
notice, or such earlier date as may be ordered by any governmental authority.

      As of the date of this report,  the gaming commission has not required the
security  holders to apply for a finding of suitability  to own the  securities.
However,  the gaming  commission  could  require a holder of the  securities  to
submit an application in the future.

      Federal Regulation of Slot Machines

      We are required to make annual filings with the U.S.  Attorney  General in
connection  with the sale,  distribution  or operation of slot machines.  We are
currently in compliance with such filing requirements.



                                       10
<PAGE>
      Potential Changes in Tax and Regulatory Requirements

      In the past,  federal and state  legislators  and officials  have proposed
changes in tax law, or in the  administration of the laws,  affecting the gaming
industry.  Regulatory  commissions  and state  legislatures  sometimes  consider
limitations  on the  expansion of gaming in  jurisdictions  where we operate and
other changes in gaming laws and  regulations.  Proposals at the national  level
have included a federal  gaming tax and  limitations  on the federal  income tax
deductibility  of the  cost of  furnishing  complimentary  promotional  items to
customers,  as well as various  measures  which  would  require  withholding  on
amounts won by customers  or on  negotiated  discounts  provided to customers on
amounts owed to gaming companies. It is not possible to determine with certainty
the likelihood of possible changes in tax or other laws or in the administration
of the laws. The changes,  if adopted,  could have a material  adverse effect on
our financial results.

      Liquor Regulations

      The sale of alcoholic beverages by us in Iowa is or will be subject to the
licensing, control and regulation by the liquor agencies, which include the City
of  Dubuque  and the  Alcoholic  Beverage  Division  of the Iowa  Department  of
Commerce.  The applicable Iowa liquor laws allow the sale of liquor during legal
hours which are Monday  through  Saturday from 6 a.m. to 2 a.m. the next day and
Sunday from 8 a.m. to 2 a.m. on Monday.

      The sale of alcoholic  beverages by OED in Louisiana is or will be subject
to the licensing,  control and regulation by the liquor agencies,  which include
the City of Carencro,  City of New Iberia,  Parish of West Baton Rouge,  and the
Office of Alcoholic and Tobacco Control of the Louisiana  Department of Revenue.
The applicable Louisiana liquor laws allow the sale of liquor during legal hours
which are from 6 a.m. to 2 a.m. the next day, seven days a week.

      Subject to few  exceptions,  all persons who have a financial  interest in
us, by ownership,  loan or otherwise,  must be disclosed in an application filed
with, and are subject to investigation by, the liquor agencies. Persons who have
a direct or indirect  interest in any Iowa liquor  license,  other than hotel or
restaurant  liquor  licenses,  may be prohibited  from purchasing or holding the
Peninsula Notes.  All licenses are subject to annual renewal,  are revocable and
are not  transferable.  The  liquor  agencies  have  the full  power  to  limit,
condition,  suspend  or revoke  any  license  or to place a liquor  licensee  on
probation  with or  without  conditions.  Any  disciplinary  action  could,  and
revocation  would,  have a material  adverse  effect upon the  operations of our
business.  Many of our owners, officers and managers must be investigated by the
liquor  agencies  in  connection  with our liquor  permits.  Changes in licensed
positions must be approved by the liquor agencies.

      United States Coast Guard

      The Diamond Jo is also  regulated by the United States Coast Guard,  whose
regulations affect boat design and stipulate on-board facilities,  equipment and
personnel,  including  requirements  that each  vessel be  operated by a minimum
complement  of licensed  personnel,  in addition  to  restricting  the number of
persons who can be aboard the boat at any one time. Our riverboat must hold, and
currently   possesses,   a  Certificate  of  Inspection  and  a  Certificate  of
Documentation  from the United States Coast Guard.  Loss of the  Certificate  of
Inspection  would preclude our use of the Diamond Jo as an operating  riverboat.
In addition,  the riverboat is subject to United States Coast Guard  regulations
requiring  periodic hull  inspections.  The United States Coast Guard,  upon our
request,  allowed us to conduct an  underwater  hull  inspection  instead of the
traditional  out of water  dry dock  inspection.  We  completed  the  underwater
inspection in March 2003. The underwater  hull  inspection did not result in any
loss of services of the riverboat.  We will be required to perform  another hull
inspection  within 60 months from the date of the  completion of the  underwater
hull  inspection.  At that time, we may again seek approval from the Coast Guard
for an underwater  hull inspection in order to avoid any loss of services of the
riverboat.

                                       11
<PAGE>
      All  of our  marine  employees  employed  on  United  States  Coast  Guard
regulated  vessels,  even those who have nothing to do with the actual operation
of the vessel, such as dealers,  cocktail hostesses and security personnel,  may
be subject to  maritime  law at certain  times of the year,  which,  among other
things,  exempts  those  employees  from state  limits on workers'  compensation
awards.  We  maintain  workers'   compensation   insurance  in  compliance  with
applicable Iowa law.

      The Maritime Transportation Security Act and Homeland Security.

      The Maritime Transportation Security Act was passed by the Congress of the
United States and signed into law following the September 11 attacks.  The Coast
Guard recently completed a series of public hearings with regard to contemplated
regulations   pursuant  to  that  Act.  It  is  anticipated  that  the  proposed
regulations  will be available  for comment by  mid-2003.  It is not possible to
predict the precise  nature of the final  regulations  and their  impact on upon
access to our facility. Further, regulations pursuant to other homeland security
continues to be  discussed  although  there is nothing  currently in effect that
substantially negatively impacts our operations.

      The Shipping Act of 1916; The Merchant Marine Act of 1936

      The  Shipping  Act of 1916,  and the  Merchant  Marine  Act of  1936,  and
applicable  regulations  contain  provisions which would prevent persons who are
not citizens of the United States from holding in the aggregate more than 25% of
our outstanding membership interests,  directly or indirectly. The Company's and
PGP's respective  operating agreements contain prohibitions against any purchase
or transfer of the  Company's or PGP's  respective  membership  interests to any
person or entity if,  following  the purchase or transfer,  more than 25% of the
Company's membership interests are owned, directly or indirectly, by persons who
are not  citizens  of the  United  States.  Any such  purchase  or  transfer  in
violation of the Company's or PGP's respective  operating agreements is null and
void,  and the Company and PGP will not recognize the  purchaser,  transferee or
purported  beneficial owner as a direct or indirect holder of an interest in the
Company  or PGP,  respectively,  for any  purpose.  To the  extent  required  by
maritime  laws,  the managing  member,  managers and the officers of PGP and the
Company must be citizens of the United States.

      Louisiana Pari-Mutuel Live Racing Facility Economic Redevelopment and
Gaming Control Act (the "Pari-Mutuel Act") and the Louisiana Horse Racing Act

      The Horse  Racing  Act has been in effect  since 1968 and is the basis for
the current  statutory  scheme  regulating live and off-track  betting for horse
racing. The Horse Racing Act states,  among other things,  that certain policies
of Louisiana  with respect to horse racing are to encourage the  development  of
horse  racing  with  pari-mutuel  wagering  on a high plane;  to  encourage  the
development  and  ownership of race  horses;  to regulate the business of racing
horses and to provide  the  orderly  conduct  of  racing;  to provide  financial
assistance to encourage the business of racing horses;  and to provide a program
for the regulation,  ownership,  possession,  licensing,  keeping,  breeding and
inoculation of horses.

      The  Pari-Mutuel  Act became  effective  on July 9, 1997 and  provides for
numerous  controls and  supervision  over the operation of slot  facilities  and
requires us to comply with complex and extensive requirements. Failure to adhere
to these statutes and  regulations  will result in serious  disciplinary  action
against  us,  including  monetary  fines and  suspension  or  revocation  of our
licenses, once issued.

      The Pari-Mutuel Act allows only one facility in each of St. Landry Parish,
Bossier Parish and Calcasieu Parish to be licensed to operate slot machines at a
live horse racing facility. OED is presently the only "eligible facility" in St.
Landry Parish under the  Pari-Mutuel  Act. The  Pari-Mutuel  Act requires (among
other things) that two conditions be met prior to the opening and operation of a
slot machine

                                       12
<PAGE>

casino at a live racing venue.  First,  a parish-wide  election must approve the
operation.  In 1997,  voters in St.  Landry  Parish  voted to  approve  the slot
machine casino at the racino site.  Secondly,  the Pari-Mutuel Act requires that
an appropriate  tax be levied on the slot machine  operation.  In 2000, an 18.5%
license tax was levied upon taxable net slot machine proceeds.

      The Pari-Mutuel  Act also provides that the  "designated  gaming space" in
any eligible  facility  cannot exceed 15,000 square foot, that the licensee will
not allow underage gaming and that notice of toll-free telephone  assistance for
compulsive gamblers will be posted at the facility.

      The Pari-Mutuel Act requires that licensees supplement horse racing purses
and pay certain other fees from slot machine proceeds.  The Pari-Mutuel Act also
levies taxes on the net slot machine proceeds.  Licensees must pay fifteen (15%)
percent of gross slot machine proceeds to supplement purses at their facilities,
pay two (2%) percent to the Louisiana Thoroughbred Breeders Association and also
pay one (1%) percent to the Louisiana  Quarter Horse  Breeders  Association.  In
addition to these payments,  OED will pay eighteen and one-half  (18.5%) percent
of the net slot machine proceeds (net of the payments  described above) as state
taxes and four (4%) percent as local taxes.  The  effective  rate of total taxes
and fees is therefore approximately 36.5%.  Additionally,  OED will also have to
pay $0.25 to the Louisiana State Racing  Commission for each patron  attending a
live race at our horse racetrack and all patrons at our OTBs.

      To remain an  "eligible  facility"  under the  Pari-Mutuel  Act, OED must,
among  other  things,  have a minimum of 80 live  racing  days in a  consecutive
20-week period each year of live horse race meetings.

      The Louisiana State Gaming Control Board

      In 1996,  Louisiana created the Louisiana Gaming Control Board,  which was
granted all of the regulatory authority, control and jurisdiction to license and
monitor gaming facilities in Louisiana, including our planned racino. To receive
a gaming  license an applicant  and its  management  must apply to the Louisiana
Gaming Control Board and be  investigated by the Louisiana State Police prior to
licensing.  The Louisiana  Gaming Control Board and Louisiana  State Police must
determine  that the  applicant  is suitable  to conduct  the gaming  operations,
including  that the  applicant  (and its  owners,  officers,  directors  and key
employees)  is  of  good  character,  honesty  and  integrity,  that  its  prior
activities, reputation and associations pose no threat to the public interest or
to the effective regulation of the industry and that the applicant is capable of
conducting  the operation of the slot machine  facility.  The  Louisiana  Gaming
Control Board must also determine that the applicant has adequate financing from
a source suitable and acceptable to the Louisiana Gaming Control Board.

      The  applicant  for  a  gaming  license,  its  directors,   officers,  key
personnel,  partners,  and persons holding a five (5%) percent or greater equity
or economic  interest in the applicant  will be required to be found suitable by
the Louisiana Gaming Control Board. To receive a license the applicant must file
an extensive  application  with the Louisiana  Gaming Control Board,  disclosing
personal, financial,  criminal, business and other information. The applicant is
required  to pay all costs of  investigation.  An  application  for a finding of
suitability  of a person may be denied for any cause  deemed  reasonable  by the
Louisiana Gaming Control Board. Any other person who is found to have a material
relationship  to or a material  involvement  with a gaming  company  also may be
required to be  investigated  in order to be found  suitable or be licensed as a
business associate of an applicant. Key employees, controlling persons or others
who exercise  significant  influence  upon the management or affairs of a gaming
company may be deemed to have such a relationship or involvement.

      If the Louisiana Gaming Control Board were to find a director,  officer or
key employee of an applicant  unsuitable for licensing purposes or unsuitable to
continue  having a relationship  with an

                                       13
<PAGE>

applicant,  the applicant would have to dismiss and sever all relationships with
such person.  The applicant  would have similar  obligations  with regard to any
person who refuses to file appropriate  applications.  Each gaming employee must
obtain a gaming  employee  permit  which may be revoked upon the  occurrence  of
certain specified events.

      An applicant must also  demonstrate that the proposed gaming operation has
adequate  financial  resources  generated  from  suitable  sources and  adequate
procedures to comply with the operating controls and requirements imposed by the
laws and regulations in the State of Louisiana. Additionally, the applicant must
submit plans and specifications of the gaming premises specifying the layout and
design of the gaming space. Proof of tax compliance,  both state and federal, is
also required.  This submission is followed by a thorough  investigation  by the
regulatory authorities of the applicant,  its business probity, the premises and
other matters.  An application  for any gaming  license,  approval or finding of
suitability  may be denied for any cause that the  regulatory  authorities  deem
reasonable.

      OED  received  its  gaming  license  to  operate  slot  machines  from the
Louisiana  Gaming Control Board on January 21, 2003. OED's license has a term of
five years and is renewable for  succeeding  five year periods upon  application
for such renewal. The Louisiana Gaming Control Board retains absolute discretion
over the right to renew such license upon the termination of its initial term.

      OED's  gaming  license  authorizes  the  use  of  15,000  square  feet  of
designated  gaming space.  On February 18, 2003,  OED submitted for approval its
layout for the casino, which incorporated 1,631 slot machines.  OED's layout was
approved based on the type of machines which were all upright  machines.  Should
OED change the  manufacturer,  type and/or design of its slot machines  prior to
installation, it must once again go before the Louisiana Gaming Control Board to
obtain approval for the new machines. Once the machines are installed, they must
be inspected by regulators and tested prior to the approval of their operation.

      Maintaining  OED's gaming license is contingent in certain respects on the
horse  racetrack  operations at OED's planned  racino.  First,  OED's failure to
complete  construction  of the horse  racetrack  at the racino or to establish a
schedule of live  racing  meets at the new horse  racetrack  by January 21, 2005
will result in the cancellation of OED's gaming license.  While Louisiana allows
OED to operate slot  machines at the racino prior to completion of the new horse
racing facility and the  commencement of live racing at the new horse racetrack,
Louisiana  gaming  regulations  and OED's gaming license require that the racino
must be  constructed  and a  schedule  of live  racing  meets  at the new  horse
racetrack be established by January 21, 2005, which is within two years from the
date of the grant of OED's  gaming  license.  Second,  to maintain  OED's gaming
license,  OED must remain an "eligible facility" under the Pari-Mutuel Act which
includes having a minimum of 80 live racing days in a consecutive 20-week period
each year of live horse race meetings at the new horse racetrack.

      Although OED has  obtained a license to conduct  slot machine  operations,
OED continues to be subject to ongoing monitoring and compliance requirements by
the Louisiana  Gaming Control Board and the Louisiana State Police.  Regulations
require  OED to  comply  with  rigorous  accounting  and  operating  procedures,
including the  submission of detailed  financial  and operating  reports.  OED's
accounting records must include accurate,  complete and permanent records of all
transactions  pertaining to revenue.  Detailed ownership records must be kept on
site available for inspection. All records must be retained for a period of five
years.  Audited  financial  statements  are  required  to be  submitted  to  the
Louisiana  State  Police.  Internal  controls  must  be  approved  and in  place
beginning the first day of operation.  These  controls will include  handling of
cash, tips and gratuities, slot operations, count room procedures and management
information  systems.  Each licensed  facility is required by the Gaming Control
Board to maintain cash or cash equivalent  amounts on site sufficient to protect
patrons  against  defaults in gaming

                                       14
<PAGE>

debts owed by the  licensee.  In addition,  licensees are be subject to currency
transaction report regulations.

      OED must also  strictly  comply with  mandated  operating  procedures  and
supply detailed  reports  disclosing such  compliance.  Regulation of a casino's
methods of operations is extensive and will include substantially all aspects of
our casino  operation.  Operating  procedures  that are  subject  to  regulation
include  slot  machine  maintenance  and  operation,  cash  management  and cash
procedures,  cage  procedures,  drop  procedures,  regulation  of weapons in the
casino, parking, access to the premises and records by regulators, gaming credit
and  advertising,   surveillance  and  security  standards,  safeguards  against
underage gambling, compulsive gambling programs, physical layout and progressive
jackpots.

      The Louisiana  Gaming Control Board retains the power to suspend,  revoke,
condition, limit or restrict OED's license to conduct slot machine operations as
a sanction for violating  licensing terms or for any cause they deem reasonable.
In addition,  monetary  fines for  violations may be levied against OED, and its
gaming  operation   revenues  may  be  forfeited  to  the  state  under  certain
circumstances. Initial enforcement actions against a licensee are brought by the
Louisiana State Police and are heard before an administrative  law judge to whom
the Louisiana Gaming Control Board has delegated  decision making power.  Either
party may  appeal  the ruling of the  administrative  law judge  before the full
Louisiana  Gaming Control  Board.  Either party may further appeal the ruling of
the Louisiana  Gaming Control Board in state court.  The laws,  regulations  and
procedures  pertaining  to  gaming  are  subject  to the  interpretation  of the
regulatory  authorities  and  may be  amended.  Any  changes  in  such  laws  or
regulations,  or their current  interpretations,  could have a material  adverse
effect on OED's business, financial condition and results of operations.

      The  Louisiana  Gaming  Control  Board has  broad  regulatory  power  over
securities  issuances  and  incurrence  of  indebtedness  by gaming  facilities.
Substantially  all loans,  leases,  private sales of  securities,  extensions of
credit and similar  financing  transactions  entered into by a licensee  must be
approved by the Louisiana Gaming Control Board.

      At any time,  the  Louisiana  Gaming  Control  Board may  investigate  and
require the finding of suitability of any shareholder or beneficial  shareholder
(and  if  the  shareholder  is a  corporate  or  partnership  entity,  then  the
shareholders or partners of the entity),  officer,  partner, manager or director
of a licensee if the Gaming  Control  Board  believes  such  holder  exercises a
material influence over the licensee. Furthermore, all holders of more than a 5%
interest in the licensee, or proposed purchasers of more than a 5% interest, are
automatically   investigated   and  are   required  to  submit  to   suitability
requirements of the Louisiana Gaming Control Board. Any sale or transfer of more
than a 5% interest in any  riverboat  or slot project is subject to the approval
of the Louisiana Gaming Control Board.

      Although the Pari-Mutuel Act does not specifically require debt holders to
be licensed or to be found suitable,  the Louisiana Gaming Control Board, in its
sole discretion, may require the holders of debt securities to file applications
and obtain  suitability  certificates  from it.  Furthermore,  if the  Louisiana
Gaming Control Board finds that any holder  exercises a material  influence over
the gaming operations, a suitability certificate will be required.

      Louisiana State Racing Commission

      Pari-mutuel  betting  and the  conducting  of live  horse  race  meets  in
Louisiana are strictly regulated by the Louisiana State Racing Commission, which
was created pursuant to the Horse Racing Act. The Racing Commission is comprised
of ten (10) members and is domiciled in New Orleans,  Louisiana.  In order to be
approved  to  conduct  a live  race  meet and to  operate  pari-mutuel  wagering
(including  off-track  betting),  an applicant  must show,  among other  things:
racing experience; financial qualifications;  moral

                                       15
<PAGE>

and financial qualifications of applicant and applicant's partners, officers and
officials;  the  expected  effect on the breeding  and horse  industry;  and the
expected effect on the State's economy.

      In 2000, OED received from the Louisiana State Racing Commission a license
to conduct live race meets and to operate  pari-mutuel  wagering at its existing
facility.  The initial term of this  license is ten years  subject to renewal in
2010.  On December 19, 2002,  OED received  approval to transfer its  operations
under its license  from  Lafayette  Parish to St.  Landry  Parish for the racing
season commencing in 2005. As a condition to the approval of our racing license,
OED is required to offer pari-mutuel wagering in the defined casino gaming space
at the time OED begins  conducting slot machine gaming.  OED's current plans for
its new racino  include  monitors  and other  equipment to  facilitate  live and
simulcast wagering within the casino area in compliance with this condition.

      The Louisiana State Racing Commission  promulgates rules,  regulations and
conditions  for the holding,  conducting and operating of all race tracks in the
state. Failure to adhere to these regulations may result in substantial fines or
the suspension or revocation of our racing  license.  A revocation or suspension
of the racing license would, in turn,  result in the revocation or suspension of
OED's gaming license to conduct slot machine  operations.  Any alteration in the
regulation of these  activities  could have a material  adverse  effect on OED's
operations.

      Other Regulations

      We  and  our  subsidiaries  are  subject  to  federal,   state  and  local
environmental and safety and health laws,  regulations and ordinances that apply
to non-gaming  businesses  generally,  such as the Clean Air Act,  Federal Water
Pollution Control Act, Occupational Safety and Health Act, Resource Conservation
Recovery  Act,  Oil  Pollution  Act  of  1990  and  Comprehensive  Environmental
Response, Compensation and Liability Act, each as amended. We have not incurred,
and do not expect to incur,  material  expenditures  with respect to these laws.
There can be no assurances,  however,  that we will not incur material liability
under these laws in the future.

ITEM 2.     PROPERTIES

      The gaming commission  approved our application for a license to operate a
gaming riverboat on May 20, 1999,  effective upon the acquisition of the Diamond
Jo. The  properties  we acquired upon  consummation  of the  acquisition  of the
Diamond Jo are located  within the historic  Port of Dubuque on the west bank of
the Mississippi  River in Dubuque,  Iowa.  These  properties  consist of several
parcels of real property previously owned by Harbor Community Investment. We own
a fee interest in the dockside  pavilion,  consisting  of  approximately  33,000
square  feet,  a surface  parking lot within  close  proximity  to the  dockside
pavilion,  and the walkway  connecting the dockside  pavilion to the ramp, which
leads to where the Diamond Jo is moored.

      The  Diamond  Jo and  its  dockside  facility  are  currently  pledged  as
collateral with respect to the Peninsula Notes.

      In addition to the  properties we purchased,  we currently  lease property
used as surface parking  consisting of approximately 194 parking spaces that are
in close proximity to the Diamond Jo. This leased property is currently owned by
the City of Dubuque and leased to the Dubuque Racing Association,  which in turn
subleases these properties to us. The sublease requires us to pay one dollar per
year as rent. The terms of the Dubuque Racing Association lease with the City of
Dubuque and our  sublease  with the Dubuque  Racing  Association  have each been
extended through December 31, 2008.

                                       16
<PAGE>

      We are also party to a parking agreement by and among the City of Dubuque,
the Dubuque Racing  Association,  the Dubuque County Historical  Society and the
Spirit  of  Dubuque,  which  governs  the use of  additional  parking  spaces we
currently  use.  This parking  agreement  gives our patrons the right to use the
approximately  194 parking  spaces  currently  subleased from the Dubuque Racing
Association.   The   agreement   also  gives  our  patrons  and   employees  the
non-exclusive  right to use approximately 633 additional parking spaces that are
owned by the City of Dubuque and the Dubuque County  Historical  Society and are
located in close  proximity  to the Diamond Jo. In  exchange  for these  parking
rights and the extension of the sublease with the Dubuque Racing Association, we
are  required,  under some  circumstances,  to share  costs of  maintaining  the
subleased parking lots.

      During  2002,  we  indirectly  through our wholly owned  subsidiary  OEDA,
acquired 100% of the  membership  interests in OED,  which owns and operates the
Evangeline Downs. The Evangeline Downs is located five miles north of Lafayette,
Louisiana and includes a 94,200 square foot pari-mutuel  wagering complex and an
adjacent 7/8-mile dirt track for live horse racing.  OED also operates an OTB in
New Iberia, Louisiana, that offers simulcast pari-mutuel wagering, and an OTB in
Port Allen, Louisiana,  that offers video poker gaming and simulcast pari-mutuel
wagering.

      OED currently  leases the land on which the pari-mutuel  wagering  complex
and leasehold improvements are located. The ground lease annual rental is $0 per
year and the lease term  expires on the earlier of (i) December 31, 2004 or (ii)
the first day the Company opens a new horse  racetrack  facility for business in
St.  Landry  Parish,  Louisiana.  OED also leases the  building in which its New
Iberia OTB conducts operations for $5,000 per month.

      OED currently  owns  approximately  532 acres of land on which it plans to
build the racino.

      See Item 1 "Business" for further  information about the properties of the
Company.

ITEM 3.     LEGAL PROCEEDINGS

      On November 8, 1994,  the Louisiana  Horsemen's  Benevolent and Protective
Association  1993,  Inc.  ("LHBPA")  filed a lawsuit  against all licensed horse
racetracks  in the State of  Louisiana.  The lawsuit  alleged that LHBPA did not
receive the  appropriate  share of net revenues from video poker devices located
at licensed  horse  racetracks.  In February 2003, OED entered into a settlement
agreement  with LHBPA for $1.6 million.  The terms of the  settlement  agreement
requires OED to make payments of $400,000 annually beginning in March 2003, with
additional $400,000 payments due in March 2004 through 2006.

      On June 21, 2002,  PGP filed a complaint  with the United States  District
Court in the Western  District of Louisiana (the "Trotter  Complaint")  alleging
breach of contract by WET2LLC for failing to honor its  previous  agreement  to,
among other things,  enter into a management services agreement with the Company
for the management of the existing OED horse  racetrack and the  development and
management of the racino project.  However,  in connection with the consummation
of the  Trotter  Purchase  (as  discussed  above),  the  Trotter  Complaint  was
dismissed.

      Neither  we nor our  subsidiaries  are a party to, and none of our nor our
subsidiaries'  property is the subject of, any other pending  legal  proceedings
other  than  litigation  arising  in the normal  course of  business.  We do not
believe that adverse  determinations  in any or all such other  litigation would
have a material adverse effect on our financial condition, results of operations
or cash flows.

                                       17
<PAGE>

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

      None.



                                       18
<PAGE>

Part II

ITEM 5.     MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
            RELATED STOCKHOLDER MATTERS

      There is no  established  public  trading  market for any of the Company's
common equity securities.

      As of March 15,  2003,  PGP was the only  holder  of record of the  common
equity of the Company. The Company paid distributions of $1,260,012,  $1,760,908
and $1,917,551 in 2002,  2001 and 2000,  respectively,  to PGP in respect of (i)
compensation for certain  consulting and financial advisory services rendered by
certain  executive  officers of PGP,  (ii) board fees and  expenses  paid to the
members of the board of managers of PGP,  and (iii) tax,  accounting,  legal and
administrative costs and expenses of PGP.

ITEM 6.     SELECTED FINANCIAL DATA

      The following table represents  selected  financial data of the Company or
its predecessor companies,  Greater Dubuque Riverboat  Entertainment Company and
Harbor Community Investment, L.C., for the five years ended December 31, 2002.

      The selected  historical  financial data for the five years ended December
31, 2002 are derived from  audited  financial  statements  of the Company or its
predecessor  combined  companies.  The Company  acquired the  operations  of the
predecessor  companies on July 15, 1999.  The selected  financial data set forth
below should be read in  conjunction  with,  and is qualified in its entirety by
reference to,  "Management's  Discussion and Analysis of Financial Condition and
Results of Operations," and the Company's  financial  statements and the related
notes included elsewhere in this document.

      As set forth in the table  below,  the  amount of  non-recurring  expenses
consists of  non-recurring  charges  related to sale of business and  litigation
involving  the prior  owners of the  Diamond Jo and  Greater  Dubuque  Riverboat
Entertainment  Company as well as  organizational  costs and severance  expenses
incurred by the Company  during the period July 15, 1999 (date of  inception) to
December 31, 1999.  For purposes of  determining  the ratio of earnings to fixed
charges,  earnings are defined as income before income taxes plus fixed charges.
Fixed charges  include  interest  expense on all  indebtedness,  amortization of
deferred financing costs and bond discount,  preferred member  distributions and
minority  interest.  The  Company's  ratio of earnings to fixed  charges for the
period from July 15, 1999 (date of  inception)  to December  31, 1999 would have
been 1.1x if the start-up and  organizational  costs expensed during this period
were excluded.

                                       19
<PAGE>

<TABLE>
<CAPTION>
                                                                             Peninsula
                                                                               Gaming
                               Peninsula Gaming Company           Pro Forma    Company       Predecessor Companies
                               ------------------------           ---------    -------       ---------------------
                                                                              Period from     Period from
                                                                                July 15,       January 1,
                                                                                1999 to       1999 to
                                                                                December         July
                             2002          2001        2000          1999       31,1999        14, 1999       1998
                             ----          ----        ----          ----       -------        --------       ----
                                                       (Dollars in thousands)
<S>                       <C>          <C>          <C>          <C>          <C>          <C>          <C>
Statement of Operations Data
Revenues:
Casino                    $  48,262    $  47,710    $  45,519    $  44,916    $  21,153    $  23,763    $  44,167
Racing                       10,279
Food and beverage             3,886        2,745        2,663        2,643        1,235        1,408        2,469
Other                           145          132          169          243          122          121          290
Less:  Promotional
   allowances                (2,615)      (2,470)      (2,599)      (1,927)      (1,017)        (910)      (1,802)
                             ------       ------       ------       ------       ------         ----       ------
Net revenues                 59,957       48,117       45,752       45,875       21,493       24,382       45,124

Expenses:
Casino                       20,555       20,375       19,517       18,399        8,599        9,800       17,850
Racing                        7,881
Food and beverage             3,820        2,857        2,856        2,808        1,328        1,480        2,460
Boat operations               2,296        2,259        2,242        2,100          991        1,109        2,176
Other                            27           22           37           37           16           21           54
Selling, general and
   administrative             8,278        6,681        6,459        7,383        3,736        3,647        6,477
Depreciation and
   amortization               2,950        3,963        3,571        2,698        1,541        1,157        1,895
Litigation settlement         1,600
Referendum                      771
State of Wisconsin
   government relations          55          147
Non-recurring expenses                                               5,005        3,134        1,871          928
                             ------       ------       ------       ------       ------         ----       ------
Total expenses               48,234       36,304       34,682       38,430       19,345       19,085       31,840

Income From
   Operations                11,723       11,813       11,070        7,445        2,148        5,297       13,284
Other income (expense)
Interest income                  46          184          434          231          155           76          142
Interest expense            (11,888)      (9,640)      (9,507)      (4,714)      (4,383)        (331)      (1,142)
Loss on sale of assets           (8)        (152)        (122)        (166)         (68)         (98)         (74)
                             ------       ------       ------       ------       ------         ----       ------
Total other expense         (11,850)      (9,608)      (9,195)      (4,649)      (4,296)        (353)      (1,074)

Preferred member
   distributions               (373)        (386)        (630)        (289)        (289)
Minority interest              (232)
                             ------       ------       ------       ------       ------         ----       ------
Net income (loss) to
   common interests       $    (732)   $   1,819    $   1,245    $   2,507    $  (2,437)   $   4,944    $  12,210
                          =========    =========    =========    =========    =========    =========    =========

Ratio of earnings to
   fixed charges               0.9x         1.2x         1.1x                       .5x        13.5x        10.8x



                                       20
<PAGE>

                                                                             Peninsula
                                                                               Gaming
                               Peninsula Gaming Company           Pro Forma    Company       Predecessor Companies
                               ------------------------           ---------    -------       ---------------------
                                                                              Period from     Period from
                                                                                July 15,       January 1,
                                                                                1999 to       1999 to
                                                                                December         July
                             2002          2001        2000          1999       31,1999        14, 1999       1998
                             ----          ----        ----          ----       -------        --------       ----
                                                       (Dollars in thousands)
Other Data
Cash flows from
   operating activities   $  11,784    $   7,250    $   4,951                 $   2,475    $   6,134    $  14,638
Cash flows from
   investing activities     (37,790)      (2,816)      (2,409)                  (68,611)          80       (1,793)
Cash flows from
   financing activities     (28,993)      (5,273)      (2,099)                   74,055       (8,277)     (12,806)
Distributions to
   common members             1,260        1,761        1,918                       286        5,258        7,027


Balance Sheet Data:           2002         2001         2000                       1999                      1998
                              ----         ----         ----                       ----                      ----
Current assets            $  12,160    $   8,034    $   9,134                 $   8,765                 $   6,767
Total assets                126,448       84,374       86,788                    88,175                    29,252
Current liabilities          35,358        3,964        3,533                     4,370                     8,133
Total debt                  102,944       70,860       70,764                    70,680                     9,822
Preferred member
   interest, redeemable       4,000        4,000        7,000                     7,000
Total members' equity         3,671        5,663        5,604                     6,277                    16,697
</TABLE>

ITEM 7.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS

      The following  discussion and analysis should be read in conjunction with,
and is  qualified  in its entirety  by, our  "Selected  Financial  Data" and the
financial  statements and the related notes thereto appearing  elsewhere in this
report.

Forward Looking Statements

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

      o     the  availability  and  adequacy  of our cash  flow to  satisfy  our
            obligations, including payment of the Peninsula Notes and additional
            funds required to support capital improvements and development,


                                       21
<PAGE>

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

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

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

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

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

      o     the  termination of our operating  agreement with the Dubuque Racing
            Association,  Ltd. or the failure of the Dubuque Racing Association,
            Ltd. to continue as our "qualified sponsoring organization,"

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

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

      o     adverse circumstances,  changes,  developments or events relating to
            or resulting from our ownership and control of OED,

      o     other factors discussed in our other filings with the Securities and
            Exchange Commission.

Results of Operations

      The following discussion of the results of operations is presented for the
years ended December 31, 2002, 2001 and 2000.

2002 Compared to 2001

      Net revenues  increased 24.6% to $60.0 million for 2002 from $48.1 million
for 2001 primarily due to net revenues from OED of $11.3 million and an increase
in the Diamond Jo's casino  revenues of $0.6  million.  This  increase in casino
revenue is due to an increase in slot revenue of 3.8%,  or $1.6 million for 2002
compared to 2001.  This  increase in slot  revenues was a result of an increased
marketing  focus on the  addition  of new  players  club  members  as well as on
targeting players club promotions towards more profitable market segments and an
increase in the number of slot  machines on the gaming  floor.  This increase in
slot  revenues was offset by a decrease in table games revenue at the Diamond Jo
of $1.0 million.  This decrease was a direct  result of a 0.9  percentage  point
decrease in our table game hold  percentage  and a 10.4%  decrease in table game
drop.

                                       22
<PAGE>

      Casino gaming win in the Dubuque  market  increased  2.8% to $88.7 million
for 2002 from $86.3 million for 2001. We believe this increase was primarily due
to targeted  players club promotions and a continued focus on maintenance of our
slot mix as well as a continued  focus by  operators  at the  Greyhound  Park on
maintenance  of their  slot mix during  such  period.  Our share of the  Dubuque
market  casino  gaming win  decreased  slightly to 54.4% for 2002 from 55.3% for
2001.  This  decrease is  attributed  to a decrease in our table game revenue as
discussed  above.  Our casino revenues  increased 1.2% to $48.3 million for 2002
from $47.7 million for 2001. This increase is due to an increase in slot revenue
offset by a decrease in table game revenues as discussed above.  Casino revenues
were  derived  87.8% from slot  machines  and 12.2%  from  table  games for 2002
compared  to 85.6%  from slot  machines  and 14.4%  from  table  games for 2001.
Consistent  with an  increase  in casino  revenue,  our  casino  win per  gaming
position per day at the Diamond Jo increased 4.0% to $157 for 2002 from $151 for
2001.  Admissions  to the casinos in the Dubuque  market  increased  slightly to
1,959,709 for 2002 from  1,946,326 for 2001.  For 2002, our share of the Dubuque
market casino admissions decreased to 50.5% from 51.7% for 2001. We believe this
decrease is primarily  attributable  to our  targeted  use of marketing  dollars
directed  primarily towards more profitable market segments during 2002 compared
to 2001. Our admissions at the Diamond Jo for 2002 decreased slightly to 989,865
for 2002 from  1,006,237 for 2001.  For 2002 our casino win per admission at the
Diamond Jo increased 2.8% to $48.76 from $47.41 for 2001.

      Racing revenues of $10.3 million related solely to revenues at OED for the
period  February 15, 2002 (date of  acquisition)  to December 31, 2002. Net food
and beverage revenues,  other revenues and promotional  allowances  increased to
$1.4  million  for 2002  from  $0.4  million  for 2001 due to food and  beverage
revenues at OED of $1.0 million.

      Casino  operating  expenses at the Diamond Jo increased  slightly to $20.6
million for 2002 from $20.4 million for 2001 due mainly to an increase in gaming
taxes paid as a result of an  increase in gaming  revenues  of  $106,000  and an
increase  in the state  admission  fee  imposed by the State of Iowa of $98,000.
Racing  expenses at OED were $7.9 million for the period February 15, 2002 (date
of acquisition) to December 31, 2002.  Food and beverage  expenses  increased to
$3.8  million  for 2002 from $2.9  million  for 2001 due  primarily  to food and
beverage  expenses from OED of $0.9 million.  Boat operation  expenses and other
expenses   were  $2.3   million  for  2002  and  2001.   Selling,   general  and
administrative expenses increased to $8.3 million for 2002 from $6.7 million for
2001.  This  increase  in such  expenses  resulted  from  selling,  general  and
administrative expenses at OED of $1.0 million, an increase in legal expenses of
$301,000 (resulting  primarily from a credit of $230,000 in legal expense during
the prior year), and an increase in management bonuses of $284,000. Depreciation
and  amortization  expenses  decreased  25.6% to $3.0 million for 2002 from $4.0
million for 2001.  This  decrease is due to adoption of SFAS 142 which  provides
that goodwill and certain  indefinite lived intangible  assets will no longer be
amortized but will be reviewed at least annually for impairment and written down
and charged to income when their  recorded  value exceeds their  estimated  fair
value.  Goodwill  amortization during 2001 was approximately $1.4 million.  This
decrease  was offset by an  increase in  depreciation  at the Diamond Jo of $0.2
million  and at OED of $0.2  million.  Litigation  settlement  of  $1.6  million
relates  to  OED's  settlement  with the  Louisiana  Horsemen's  Benevolent  and
Protective  Association  1993,  Inc. in February  2003.  Although the settlement
occurred  after the date of the  financial  statements,  Statement  of Financial
Accounting  Standards No. 5 "Accounting for Contingencies"  requires the Company
to accrue the loss  contingency  during 2002.  During 2002, the Company incurred
various advertising,  promotional and other referendum related expenses totaling
$771,000 to promote the approval of continued  gaming on  riverboats  in Dubuque
County.  During  2002,  the Company  incurred  expenses of $55,000  related to a
governmental  relations  services  agreement  with respect to gaming  issues and
developments  in the State of  Wisconsin  which might affect the Company and its
gaming operations. The Company does not plan to incur any additional expenses to
provide such governmental relations services relative to the State of Wisconsin.


                                       23
<PAGE>

      Net interest  expense  increased 25.2% to $11.8 million for 2002 from $9.5
million for 2001.  This  increase  is due to an increase in interest  expense of
$1.2 million  associated with our senior credit  facility with Foothill  Capital
Corporation  providing  for  commitments  of up to $12.5 million which mature in
2005,  $12.0 million of which was drawn down by the Company on February 15, 2002
to  consummate  an  investment  in OED and net  interest  expense at OED of $1.1
million.

2001 Compared to 2000

      Dubuque  was a  two-casino  market  consisting  of the  Diamond Jo and the
Greyhound  Park during 2001 and 2000.  Casino  gaming win in the Dubuque  market
increased  6.1% to $86.3  million in 2001 from $81.3 million in 2000. We believe
this  increase  was  primarily  due to targeted  players club  promotions  and a
continued  focus on maintenance of our slot mix as well as a continued  focus by
operators at the  Greyhound  Park on  maintenance  of their slot mix during such
period.  Admissions  to casinos in the  Dubuque  market  decreased  slightly  to
1,946,326 in 2001 from  1,960,915 in 2000. We believe this decrease is primarily
attributable  to the Diamond Jo's  targeted use of  marketing  dollars  directed
primarily towards more profitable market segments and one less gaming day during
2001  compared to 2000.  During  2001,  our share of the Dubuque  market  casino
admissions  decreased to 51.7% from 53.9% in 2000.  We believe this  decrease is
primarily  attributable  to our  targeted  use  of  marketing  dollars  directed
primarily  towards more profitable market segments during 2001 compared to 2000.
Our share of the Dubuque  market  casino  gaming win  decreased to 55.3% in 2001
from 56.0% in 2000.  This decrease is attributed to a decrease in our table game
revenue of  $1,343,000,  resulting  from a 9.2%  decrease in our table game hold
percentage  to 19.8% in 2001 from 21.8% in 2000, as well as the  elimination  of
live poker  games  which  accounted  for  approximately  $315,000  in table game
revenue during 2000.

      Net revenues increased 5.2% to $48.1 million in 2001 from $45.8 million in
2000,  primarily due to an increase in our casino revenue of $2.2 million.  This
increase in casino revenue is due to an increase in our slot revenue of 9.5%, or
$3.5  million  in 2001  compared  to 2000.  This  increase  was a  result  of an
increased  marketing  focus to  attract  new  players  club  members  as well as
targeting players club promotions toward specific market segments. This increase
was offset by a decrease in table games revenue of $1.3  million.  This decrease
was a direct result of a 2.0  percentage  point  decrease in our table game hold
percentage  and  the  elimination  of  live  poker  games  which  accounted  for
approximately  $315,000 in table game revenue during 2000. Our admissions during
2001  decreased  4.8% to  1,006,237  from  1,057,386  in 2000.  We believe  this
decrease is primarily  attributable  to our  targeted  use of marketing  dollars
directed  primarily towards more profitable market segments,  the elimination of
live poker and one less gaming day during 2001  compared to 2000.  During  2001,
our win per  admission  per day  increased  10.1% to $47.41 from $43.05 in 2000.
Consistent with an increase in net revenue,  our win per gaming position per day
increased  9.4% to $150.59 in 2001 from  $137.68  in 2000.  Our casino  revenues
increased  4.8% to $47.7  million in 2001 from $45.5  million in 2000.  Based on
revenues  reported to the Iowa  Racing and Gaming  Commission,  this  percentage
increase is above the average among riverboat casinos in the State of Iowa whose
overall  average  casino  revenues  increased  only 3.0% during 2001 compared to
2000. Casino revenues were derived 85.6% from slot machines and 14.4% from table
games in 2001,  compared to 81.9% from slot  machines and 18.1% from table games
in  2000.  Net  food and  beverage  revenues,  other  revenues  and  promotional
allowances increased slightly to $0.4 million in 2001 from $0.2 million in 2000.

      Casino  operating  expenses  increased  4.4% to $20.4 million in 2001 from
$19.5 million in 2000.  This increase was due primarily to an increase in gaming
taxes of $515,000  primarily due to increased  gaming revenue and an increase in
slot lease  expense of $458,000.  Food and  beverage  expenses,  boat  operation
expenses and other expenses were substantially  unchanged.  Selling, general and
administrative expenses increased 3.4% to $6.7 million in 2001 from $6.5 million
in 2000 due primarily to an increase in marketing  promotions and advertising of
$191,000. Depreciation and amortization expenses increased


                                       24
<PAGE>

11.0% to $4.0  million in 2001 from $3.6  million in 2000 due  primarily  to the
construction  of a new restaurant and VIP room in the land based pavilion during
the first  quarter of 2001.  During  2001,  the  Company  incurred  expenses  of
$147,163 related to a governmental  relations services agreement with respect to
gaming issues and  developments in the State of Wisconsin which might affect the
Company and its gaming operations. Additional expenses related to this agreement
totaling  $55,000 were charged to operating  expenses  through the first half of
2002 at  which  time the  agreement  for such  governmental  relations  services
expired.

      Net  interest  expense  increased  4.2% to $9.5  million in 2001 from $9.1
million in 2000 due  primarily  to a decrease  in interest  income of  $250,000,
which is a direct  result of a decrease  in  short-term  interest  rates in 2001
compared to 2000, and an increase in interest expense of $95,000 in amortization
of  deferred  financing  costs  related to the senior  secured  credit  facility
entered into by the Company in March of 2001.

Liquidity and Capital Resources

      At December 31, 2002, we had  outstanding  current debt of $20.7  million,
outstanding  long-term  debt of  approximately  $82.2 million and total members'
equity of $3.7 million.

Financing Activities

      On July 15,  1999,  we  completed  the  private  placement  of $71 million
aggregate  principal  amount of the Peninsula  Notes.  The Peninsula  Notes bear
interest at a rate of 12 1/4% per year which is payable semi-annually on January
1 and July 1 of each year. The Peninsula Notes are secured by all of our current
and  future  tangible  and  intangible  assets  (with the  exception  of certain
excluded  assets).  The  Peninsula  Notes,  which  mature on July 1,  2006,  are
redeemable at our option,  in whole or in part at any time or from time to time,
on and after July 1, 2003 at certain  specified  redemption  prices set forth in
our indenture  governing  these  Peninsula  Notes.  The indenture  governing the
Peninsula  Notes  contains a number of  restrictive  covenants  and  agreements,
including  covenants  that limit our ability to, among other  things:  (1) incur
more debt;  (2) pay  dividends,  redeem stock or make other  distributions;  (3)
issue stock of subsidiaries;  (4) make investments;  (5) create liens; (6) enter
into transactions with affiliates; (7) merge or consolidate; and (8) transfer or
sell assets.  The events of default under the indenture include  provisions that
are typical of senior debt  financings.  Upon the occurrence and  continuance of
certain  events of  default,  the trustee or the holders of not less than 25% in
aggregate principal amount of outstanding Peninsula Notes may declare all unpaid
principal and accrued  interest on all of the Peninsula  Notes to be immediately
due and payable.  Upon the  occurrence of a change of control (as defined in the
indenture),  each holder of Peninsula Notes will have the right to require us to
purchase all or a portion of such holder's Peninsula Notes pursuant to the offer
described in the  indenture at a purchase  price equal to 101% of the  principal
amount  thereof  plus  accrued  and  unpaid  interest,  if any,  to the  date of
repurchase.

      The  Peninsula  Notes are  guaranteed  by all of our  existing  and future
restricted  subsidiaries,  other than OED and its subsidiaries.  OED and The Old
Evangeline Downs Capital Corp. have been designated as unrestricted subsidiaries
under the indenture governing the Peninsula Notes.

      On March 12, 2001, the Company entered into a Loan and Security  Agreement
(the  "Credit  Agreement")  with  Foothill  Capital  Corporation  providing  for
commitments  of up to $10 million which mature in 2005.  The  outstanding  loans
will bear interest at a rate equal to (a) the LIBOR rate plus 3.00% with respect
to LIBOR rate  loans and (b) the base rate plus 0.75% with  respect to base rate
loans,  provided  that the  outstanding  obligations  shall not at any time bear
interest  at a rate per annum  less than  8.50%.  Indebtedness  under the Credit
Agreement is secured by substantially  all of the Company's assets (which assets
also secure the Company's  obligations  under the Peninsula  Notes).  The Credit
Agreement


                                       25
<PAGE>

contains a number of  restrictive  covenants and  agreements  similar to (and in
certain cases more restrictive than) those contained in the indenture  governing
the Peninsula  Notes,  including a minimum  earnings  requirement of maintaining
EBITDA of at least $10 million as of the end of each fiscal quarter  (calculated
based upon the  immediately  preceding 12 month  period),  and certain events of
default  customary  for  senior  secured  credit  facilities.  Under the  Credit
Agreement,  EBITDA is defined as  consolidated  net  earnings  (or loss),  minus
extraordinary  gains, plus interest expense,  income taxes, and depreciation and
amortization.  On February 15, 2002, the Company  amended its credit facility to
increase  aggregate  commitments  under its revolver to $12,500,000.  In October
2002, the Company further amended its credit facility which requires the Company
to begin making  principal  payments on  outstanding  borrowings  of $50,000 per
month  beginning  in October  2002 and  continuing  through  February  2005.  In
addition,  the maximum  available  funds under the  facility  are required to be
reduced by the amount of each  principal  repayment.  At December 31, 2002,  the
Company had borrowings outstanding under the Credit Agreement of $11,850,000.

      On August 30, 2002, OEDA entered into the Term Loan with Foothill  Capital
Corporation providing for borrowings of $8,450,000 million. Borrowings under the
Term Loan bear  interest at a rate equal to Prime + 3.75%,  subject to a minimum
rate of 7.5%  (interest  rate of 8.0% at  December  31,  2002).  The  Term  Loan
contained,  among other things,  covenants,  representations  and warranties and
events of default customary for loans of this type,  including,  but not limited
to certain requirements relative to the financing,  construction and development
of the racino project and a minimum EBITDA maintenance covenant.  Under the Term
Loan,  EBITDA was defined as  consolidated  net  earnings  (or loss),  excluding
extraordinary  gains  or  losses,  plus  interest  expense,  income  taxes,  and
depreciation and amortization.  The obligations under the Term Loan were secured
by  substantially  all of OED's assets and  guaranteed by PGP. In addition,  the
Term Loan required OED to make principal payments of $50,000 per month beginning
October 1, 2002. At December 31, 2002, OED had borrowings  outstanding under the
Term Loan of $8,300,000.  On February 26, 2003, a portion of the net proceeds of
the offering of the OED Notes was used to terminate  the Term Loan and repay all
outstanding borrowings thereunder.

      On August 30, 2002, OEDA issued a $7,325,000 note in favor of PGP due June
30, 2003 (the "PGP  Note").  The source of cash  provided by PGP pursuant to the
PGP Note relates to the proceeds from a $7,325,000 note payable issued by PGP in
favor of William E.  Trotter,  II Family,  LLC due June 30,  2003 (the  "WET2LLC
Note").  The PGP Note and the WET2LLC  Note bear  interest at a rate of 7% until
January 31, 2003, thereafter at a rate of 8% until February 28, 2003, thereafter
at a rate of 9% until  March  31,  2003 and  thereafter  at a rate  equal to the
greater of (1) 12% or (2) the fixed interest rate on indebtedness evidenced by a
note offering  consummated by OED to finance the racino project. On February 26,
2003, a portion of the net proceeds of the offering of the OED Notes was used to
repay all  outstanding  borrowings  under the PGP Note (the proceeds of which in
turn paid off the WET2LLC Note).

      On August 30, 2002,  OED and PGP, as joint  obligors,  issued a $4,500,000
note in favor of William E. Trotter,  II due June 30, 2003 and bearing  interest
at a rate of 7% until  March  31,  2003 and  thereafter  at a rate  equal to the
greater of (1) 12% or (2) the fixed interest rate on indebtedness evidenced by a
note  offering  consummated  by OED to finance the racino  project (the "Trotter
Note").  On February  26, 2003, a portion of the net proceeds of the offering of
the OED Notes was used to repay all  outstanding  borrowings  under the  Trotter
Note.

      On February 26, 2003, OED completed a private  placement of $123.2 million
aggregate  principal  amount of OED Notes. The OED Notes bear interest at a rate
of 13% per year which is payable  semi-annually  on March 1 and  September  1 of
each year, beginning on September 1, 2003.  Contingent interest is payable after
the casino portion of the racino begins  operating on the terms set forth in the
indenture  governing  the OED  Notes.  The OED Notes are  secured  by a security
interest  in  substantially  all of OED's  (and  OED's  subsidiary  guarantors')
current and future assets (other than equipment  secured by equipment  financing
and  certain  other  excluded  assets)  and a  pledge  by OEDA of  OED's  equity
interests. We are not a guarantor under the OED Notes, and none of our assets or
properties secure the obligations of OED under the OED Notes.

                                       26
<PAGE>

      OED used the net proceeds  from the sale of the OED Notes to (a) repay the
then existing  indebtedness  under the Term Loan, the PGP Note, the WET2LLC Note
and the Trotter Note,  (b) fund  (together  with cash from  operations and other
available  financing)  the  design,  construction,  development,  equipping  and
opening  costs of the  racino  and (c) fund the first  three  payments  of fixed
interest on the OED Notes.  OED  deposited the net proceeds from the offering of
the OED Notes, after repaying certain existing  indebtedness,  into construction
disbursement, interest reserve and completion reserve accounts, from which funds
will be periodically  withdrawn.  These accounts are pledged as security for the
OED Notes.

Cash Flows from Operating, Investing and Financing Activities

      Our level of  indebtedness  will have  several  important  effects  on our
future  operations,  including,  but  not  limited  to,  the  following:  (1)  a
significant  portion of our cash flow from  operations  will be  required to pay
interest on our indebtedness;  (2) the financial  covenants contained in certain
of the  agreements  governing our  indebtedness  will require us to meet certain
financial  tests and may  limit our  ability  to borrow  additional  funds or to
dispose of assets; (3) our ability to obtain additional  financing in the future
for working capital, capital expenditures,  or general corporate purposes may be
impaired; and (4) our ability to adapt to changes in the casino gaming and horse
racing industries and to economic conditions in general could be limited.

      We generated  $11.8 million in cash flows from  operations in 2002,  which
consisted  of a net loss of $0.7 million  increased by non-cash  charges of $4.8
million,  principally depreciation and amortization and amortization of deferred
financing costs, and an increase in working capital of $7.7 million.  The change
in working capital is primarily  comprised of an increase in accrued expenses of
$5.5 million,  an increase in litigation  settlement payable of $1.6 million and
an increase in restricted cash of $0.6 million. The increase in accrued expenses
is due to an increase in accrued interest related to the Peninsula Notes of $4.3
million.,  an increase in accrued referendum  related costs of $0.5 million,  an
increase  in accrued  preferred  member  distributions  of $0.4  million  and an
increase in accrued interest related to the Term Loan, PGP Note and WET2 Note at
OED of $0.3 million.

      Cash  flows  used in  investing  activities  in 2002  was  $37.8  million,
including  $29.3  million for the purchase of OED (net of cash  acquired),  $5.3
million for the  purchase of land at St.  Landry  Parish (the future site of the
racino  project)  and  architecture  fees  associated  with the racino  project,
approximately  $1.5 million in development  costs related to the OED acquisition
and  related  to  OED's  racing  and  gaming  license,   and  cash  outflows  of
approximately $1.7 million used for capital expenditures in 2002 (mainly related
to the purchase of new slot machines and an upgrade to our current slot tracking
system in an effort to improve the gaming  experience of our  patrons).  Capital
expenditures were $1.6 million and $2.4 million for the years ended December 31,
2001  and  2000,   respectively.   Capital   expenditures  are  expected  to  be
approximately $1.6 million for the year ended December 31, 2003.

      Cash flows from financing activities in 2002 of $29.0 million reflects the
proceeds of a $12.0 million borrowing under the Credit Agreement, proceeds of an
$8.5 million  borrowing  under the Term Loan,  proceeds from the issuance of the
$7.3  million PGP Note and  proceeds  from the issuance of the $4.5 million WET2
Note.  These  proceeds  were  offset by  deferred  financing  costs paid of $1.7
million,  including  consent  fees  totaling  $887,500  paid to  holders  of the
Peninsula Notes and $700,000 paid to Foothill Capital Corporation under the Term
Loan, member  distributions of $1.3 million and aggregate  principal payments on
borrowings under the Credit Agreement and the Term Loan of $0.3 million.


                                       27
<PAGE>
      We believe that cash on hand and cash  generated from  operations  will be
sufficient to satisfy our working capital and capital expenditure  requirements,
repay borrowings under the Credit Agreement,  and satisfy our other current debt
service  requirements  (which do not include the Term Loan,  the PGP Note or the
Trotter Note, which obligations were paid in full in February 2003 from proceeds
related to the issuance of the OED Notes).  However,  we cannot  assure you that
this will be the case. If cash on hand and cash  generated  from  operations are
insufficient  to meet these  obligations,  we may have to refinance  our debt or
sell some or all of our  assets to meet our  obligations.  We cannot  assure you
that we would be able to  obtain  such  financing  or sell any or all  assets on
commercially reasonable terms or at all.

Contractual Obligations and Contingent Liabilities and Commitments

      The Company's future  contractual  obligations  related to long-term debt,
capital  leases and  operating  leases at December  31, 2002 were as follows (in
millions of dollars):

                                           Payments due by Period
                                           ----------------------
                                              Less Than   1-3
 Contractual Obligations             Total     1 Year    Years   4-5 Years
 -----------------------             -----     ------    -----   ---------

 Long-Term Debt                     $103.0       $20.7   $11.3    $71.0
 Capital Lease Obligations             0.5          -      0.5      -
 Operating Leases                      1.2         0.4     0.8      -
                                    ------       -----   -----    -----
 Total Contractual Cash
   Obligations                      $104.7       $21.1   $12.6    $71.0

Off-Balance Sheet Transactions

      The  Company  does  not  maintain  any  off-balance  sheet   transactions,
arrangements, obligations or other relationships with unconsolidated entities or
others that are reasonable likely to have a material current or future effect on
the Company's financial condition,  changes in financial condition,  revenues or
expenses,  results of operations,  liquidity,  capital  expenditures  or capital
resources.

Seasonality and Inflation

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

Recent Accounting Pronouncements

      SFAS No.  142  "Goodwill  and  Other  Intangible  Assets" -  Statement  of
Financial  Accounting  Standards  ("SFAS")  No. 142 provides  that  goodwill and
certain  indefinite lived intangible assets will no longer be amortized but will
be reviewed at least  annually  for  impairment  and written down and charged to
income when their recorded value exceeds their estimated fair value.

      In  October  2001,  the FASB  issued  SFAS No.  144,  "Accounting  for the
Impairment or Disposal of Long-Lived  Assets".  SFAS No. 144 addresses financial
accounting  and reporting for the  impairment or disposal of long-lived  assets.
This  statement  supersedes  SFAS No. 121,  "Accounting  for the  Impairment  of
Long-Lived  Assets  and  for  Long-Lived  Assets  to be  Disposed  Of,"  and the
accounting  and  reporting


                                       28
<PAGE>

provisions  of APB  Opinion  No. 30,  "Reporting  the  Results of  Operations  -
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual  and  Infrequently   Occurring  Events  and   Transactions."   This  new
pronouncement  also amends ARB No. 51 "Consolidated  Financials  Statements," to
eliminate the exception to  consolidation  for a subsidiary for which control is
likely to be temporary.  SFAS No. 144 requires that one accounting model be used
for long-lived  assets to be disposed of by sale,  whether  previously  held and
used or newly  acquired  and also  broadens  the  presentation  of  discontinued
operations to include more disposal transactions.  SFAS No. 144 is effective for
fiscal years  beginning after December 15, 2001 and interim periods within those
fiscal  years.  Adoption  of SFAS No. 144 on  January 1, 2002,  did not have any
impact on our  financial  position or results of  operations  for the year ended
December 31, 2002.

      In July  2002,  the  FASB  issued  SFAS No.  146,  "Accounting  for  Costs
Associated with Exit or Disposal Activities." This statement addresses financial
accounting and reporting for costs  associated with exit or disposal  activities
and nullifies the previous  guidance on the subject.  This  statement  requires,
among other  things,  that a  liability  for a cost  associated  with an exit or
disposal  activity be recognized when the liability is incurred.  The provisions
for this  statement  are  effective  for exit or  disposal  activities  that are
initiated  after December 31, 2002.  Management  does not expect the adoption of
SFAS No. 146 to have a material effect on the Company's results of operations or
financial position.

Critical Accounting Policies

      The  preparation  of financial  statements in accordance  with  accounting
principles   generally  accepted  in  the  United  States  of  America  requires
management to make estimates and assumptions  that affect the reported amount of
assets and  liabilities  and disclosure of contingent  assets and liabilities at
the date of the financial  statements  and the reported  amounts of revenues and
expenses  during the reporting  periods.  Actual results could differ from those
estimates.   We  periodically  evaluate  our  policies  and  the  estimates  and
assumptions  related  to  these  policies.  We also  periodically  evaluate  the
carrying value of our assets in accordance  with generally  accepted  accounting
principles.  We and our subsidiaries  operate in a highly regulated industry and
are subject to  regulations  that  describe and regulate  operating and internal
control procedures.  The majority of our revenues are in the form of cash, which
by its  nature,  does not  require  complex  estimations.  We also made  certain
estimates  surrounding  our  application of purchase  accounting  related to the
acquisition and the related assignment of costs to goodwill and other intangible
assets.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      We are exposed to certain market risks which are inherent in our financial
instruments which arise from  transactions  entered into in the normal course of
business.  Market risk is the risk of loss from adverse changes in market prices
and interest rates. Neither we nor our subsidiaries currently utilize derivative
financial   instruments  to  hedge  market  risk.  Also,   neither  we  nor  our
subsidiaries  hold  or  issue  derivative  financial   instruments  for  trading
purposes.

      We are exposed to interest rate risk due to changes in interest rates with
respect to our long-term  variable interest rate debt borrowing under our senior
credit  facilities.  As of December 31, 2002, we and our  subsidiaries had $11.9
million in borrowings  under the Credit Agreement and $8.3 million in borrowings
under the Term Loan (which was subsequently  paid off in February 2003). We have
estimated our market risk exposure using sensitivity  analysis.  We have defined
our market risk exposure as the potential loss in future  earnings and cash flow
with respect to interest rate exposure of our market risk sensitive  instruments
assuming a  hypothetical  increase in market rates of interest of one percentage
point.  Assuming we borrow the maximum amount allowed under the Credit Agreement
as of March


                                       29
<PAGE>

2003 of $12.2  million,  if market rates of interest on such  variable rate debt
increased by one  percentage  point,  the estimated  annual market risk exposure
under our senior credit facility would be approximately $0.1 million.

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

Description              Contract Terms     Interest Rate    Cost     Fair Value
-----------              --------------     -------------    ----     ----------
Senior Secured Notes    Due July 1, 2006    12 1/4% Fixed    $71.0       $72.4*

*     Represents  fair value as of March 21, 2003 based on information  provided
      by the Company's investment banking firm.

      We have no  investments  in market risk  sensitive  instruments  issued by
others.  The only securities owned by the Company are the shares of common stock
of its wholly owned  subsidiary,  Peninsula  Gaming  Corp.,  and the  membership
interests of its wholly owned subsidiary, OEDA. In addition, the only securities
owned by OEDA are  membership  interests  in its wholly owned  subsidiary,  OED,
which holds all the shares of common stock of its wholly owned  subsidiary,  The
Old Evangeline Downs Capital Corp.

ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

      Audited  financial  statements and the notes thereto are combined in pages
F-1 through F-22.

ITEM 9.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
            FINANCIAL DISCLOSURE

      None.



                                       30
<PAGE>

Part III

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

      PGP is our  parent and sole  member.  The  following  table sets forth the
names and ages of the  executive  officers of the Company and of the managers of
PGP.

    Name                           Age                   Position
    ----                           ---                   --------
    M. Brent Stevens.........       42     Chief Executive Officer of the
                                           Company and Manager of PGP

    George T. Papanier.......       45     Chief Operating Officer of the
                                           Company

    Natalie A. Schramm.......       32     Chief Financial Officer of the
                                           Company

    Michael S. Luzich........       48     President and Secretary of the
                                           Company and Manager of PGP

    Terrance W. Oliver.......       53     Manager of PGP

    Andrew R. Whittaker......       41     Manager of PGP


Management Profiles

      Following is a brief description of the business experience of each of the
executive  officers  of the  Company  and of the  managers  of PGP listed in the
preceding table.

      M. Brent Stevens.  Mr. Stevens has served as our Chief  Executive  Officer
since  December  1998 and has been a manager of PGP since  January  1999.  Since
1990, Mr. Stevens has been employed by Jefferies & Company,  Inc., and presently
is an Executive Vice President in the Investment Banking department. Mr. Stevens
has been a board member of American Restaurant Group, Inc. since 1999.

      George T. Papanier. Mr. Papanier has served as our Chief Operating Officer
since July 2000.  Prior to joining the  Company,  Mr.  Papanier  was employed by
Resorts  Casino Hotel in Atlantic  City,  New Jersey as Executive Vice President
and Chief  Operating  Officer  from May 1997 to March 2000.  Prior to that,  Mr.
Papanier  served as Senior Vice  President and Chief  Financial  Officer for Sun
International  since March 1997 and Senior Vice  President  of Finance and Chief
Financial  Officer of Mohegan Sun Casino since  October 1995.  Mr.  Papanier has
been in the casino industry for 20 years working for various  casinos  including
Sands Hotel and Casino,  Golden Nugget Casino Hotel,  Bally's Grand, Trump Plaza
Hotel and Casino and Hemmeter Enterprises.

      Natalie A. Schramm.  Ms. Schramm has served as our Chief Financial Officer
since July 15, 1999 and as our Assistant  General  Manager from April 1, 2000 to
December 31, 2002. On January 1, 2003, Ms. Schramm was appointed General Manager
of the Company.  Ms. Schramm joined our predecessor,  Greater Dubuque  Riverboat
Entertainment Company, L.C., in November 1996 and was formerly employed by Aerie
Hotels and Resorts in Oak Brook,  Illinois as Corporate Accounting Manager since
1992. She was responsible for the corporate  accounting  functions of the Silver
Eagle,  the Eagle Ridge Inn and  Resorts,  located in Galena,  Illinois  and the
Essex Hotel, located in Chicago,  Illinois. She served as Internal Audit Manager
for the Silver Eagle and was a member of a  development  team that  successfully
pursued a riverboat gaming license in Indiana.



                                       31
<PAGE>

      Michael S. Luzich.  Mr. Luzich has served as our  President  since October
2000,  as our  Secretary  since April 1999 and as a manager of PGP since January
1999. Mr. Luzich is the founder and President of the Cambridge Investment Group,
LLC., an investment and development company located in Las Vegas,  Nevada. Prior
to October 1995,  Mr. Luzich was a founding  partner and director of Fitzgeralds
New York, Inc. and Fitzgeralds Arizona  Management,  Inc., which are development
companies  responsible for the Turning Stone Casino near Syracuse,  New York for
the Oneida  Tribe and the Cliff  Castle  Casino  near  Sedona,  Arizona  for the
Yavapai-Apachi Tribe, respectively.

      Terrance W. Oliver.  Mr. Oliver has been a manager of PGP since  September
1999.  Since  1993,  Mr.  Oliver has served as a director of and  consultant  to
Mikohn Gaming Corporation,  a gaming equipment manufacturer headquartered in Las
Vegas.  From 1988 until 1993,  Mr. Oliver served as Chairman of the Board to the
predecessor  company of Mikohn.  From 1984 until 1996, Mr. Oliver was a founding
shareholder,   board  member  and  executive   officer  of  Fitzgeralds   Gaming
Corporation.  Mr. Oliver retired as the Chief  Operating  Officer of Fitzgeralds
Gaming Corporation in 1996.

      Andrew R. Whittaker.  Mr. Whittaker has been a manager of PGP since
July 1999.  Since 1990 Mr. Whittaker has been employed by Jefferies &
Company, Inc., where he is presently a Vice Chairman.

Code of Ethics

      The  Company  has  adopted  a code of  ethics  that  applies  to its chief
executive officer,  chief financial officer,  controller or persons performing a
similar function. The code of ethics has been filed as an exhibit to this Annual
Report on Form 10-K.


ITEM 11.    EXECUTIVE COMPENSATION

      Subject  to the  approval  of the  holders  of at least 85% of the  voting
common membership interests of PGP, PGP's board of managers may issue additional
incentive based equity interests in PGP at no less than fair market value.

Summary Compensation Table

      The  following  table  sets  forth  information  for the  years  indicated
concerning  the  compensation  awarded to,  earned by or paid to the persons who
served as Chief Executive Officer of the Company during 2002 and the most highly
paid executive officers,  other than the Chief Executive Officer,  who served as
executive  officers of the Company  during 2002,  for  services  rendered in all
capacities to the Company and its subsidiaries during such periods.


                                       32
<PAGE>
<TABLE>
<CAPTION>

                                                                    Other Annual
Name and                      Fiscal       Salary       Bonus       Compensation      Long-term        All other
Principal Position             Year          ($)         ($)             ($)         Compensation   Compensation ($)
--------                      ------       ------       -----       ------------      ---------        ---------
                                                    Annual Compensation
                                                    -------------------
<S>                             <C>        <C>        <C>             <C>               <C>             <C>
 M. Brent Stevens(1).........   2002          -           -              -                 -             -
 Chief Executive Officer
                                2001          -           -              -                 -             -

                                2000          -           -              -                 -             -

 George T. Papanier..........   2002       $350,046   $190,000        $12,465(2)           -           $5,500(7)
 Chief Operating Officer
                                2001        299,489       -            13,150(3)           -            5,250(7)

                                2000        109,203       -            19,341(4)           -             -

 Natalie A. Schramm..........   2002        136,955     40,000          3,408(5)           -            5,500(7)
 Chief Financial Officer
                                2001        129,567     19,328          4,200(5)           -            5,082(7)

                                2000        114,207     20,000          3,840(5)           -            4,480(7)

 Michael S. Luzich ..........   2002          -           -               -(6)             -             -
 President and Secretary
                                2001          -           -               -(6)             -             -

                                2000          -           -               -(6)             -             -

 James P. Rix................   2000          -           -              -                 -          360,316(8)
 Formerly, Chief Operating
   Officer
</TABLE>
__________________

(1)   Mr. Stevens receives  $125,000 for his services as a manager for the board
      of managers of PGP.

(2)   Includes   $3,115  in  club  membership  fees  and  $9,350  in  automobile
      allowances.  In 2000,  in  connection  with his  relocation,  the  Company
      acquired Mr.  Papanier's  current residence for which he pays all property
      taxes,   utility  expenses  and  other   out-of-pocket  costs  related  to
      maintaining such residence,  excluding the fair market value equivalent of
      rental expense.

(3)   Includes  $2,950  in  club  membership  fees  and  $10,200  in  automobile
      allowances.  In 2000,  in  connection  with his  relocation,  the  Company
      acquired Mr.  Papanier's  current residence for which he pays all property
      taxes,   utility  expenses  and  other   out-of-pocket  costs  related  to
      maintaining such residence,  excluding the fair market value equivalent of
      rental expense.

(4)   Includes $6,200 in club membership fees,  $4,250 in automobile  allowances
      and $8,891 for reimbursement of certain out-of-pocket relocation expenses.
      Additionally,  in connection with his relocation, the Company acquired Mr.
      Papanier's current residence for which he pays all property taxes, utility
      expenses  and  other  out-of-pocket  costs  related  to  maintaining  such
      residence, excluding the fair market value equivalent of rental expense.

(5)   Represents club membership fees.

(6)   Cambridge  Capital  Advisors,  LLC,  which is 99%  owned  directly  by Mr.
      Luzich,  received  compensation  pursuant  to the terms of its  consulting
      agreement with PGP. See "- Employment and Consulting Agreements".

                                       33
<PAGE>

(7)   Represents  matching  contributions  made by the Company to the  Company's
      401(k) plan.

(8)   In connection with Mr. Rix's resignation in November 1999, we entered into
      a separation and release agreement  pursuant to which, among other things,
      we agreed to pay Mr. Rix $360,316 in full  satisfaction of all amounts due
      to him upon termination, which amount was paid to Mr. Rix in January 2000.

Employment and Consulting Agreements

      In April 2000,  Ms. Schramm  entered into a new employment  agreement with
the  Company.  Under the terms of this  employment  agreement,  Ms.  Schramm  is
entitled to receive from the Company a base annual salary that is reviewed on an
annual basis and adjusted  upward annually by not less than five percent (5%) of
the prior year's compensation. In addition to the base salary, Ms. Schramm shall
be entitled to receive an annual cash bonus  payable by the Company based on her
performance  during the previous  employment  year, which is consistent with the
Company's bonus plan for department  directors.  The employment agreement has an
initial  term  of  three  years  and,  subject  to  the  occurrence  of  various
termination events, is renewable automatically for successive one-year terms.

      In January  2003,  Cambridge  Capital  Advisors,  LLC,  which is 99% owned
directly by Mr. Luzich, entered into  an amended consulting  agreement with PGP.
Under the terms of this amended consulting agreement,  Mr. Luzich is entitled to
receive from PGP  compensation in an aggregate  annual amount equal to (a) 2% of
the Company's  unconsolidated  earnings before  interest,  taxes,  depreciation,
amortization and other non-recurring charges during the preceding calendar year,
plus  (b)  2.5%  of  OED's  earnings  before  interest,   taxes,   depreciation,
amortization and other non-recurring  charges during the preceding calendar year
commencing  on the  first  day of the  month  succeeding  the month in which OED
commences gaming operations.  The consulting  agreement has a one-year term and,
subject  to  the  occurrence  of  various   termination   events,  is  renewable
automatically for successive one-year terms. Under this agreement, Mr. Luzich is
also entitled to  reimbursement of reasonable  business  expenses as approved by
the board of managers  of PGP.  For the years  ended  2002,  2001 and 2000,  Mr.
Luzich  received  $336,829,  $327,128  and  $335,420,  respectively,  under  his
consulting agreement.

Compensation of Managers

      All managers of PGP receive an annual  payment of $25,000  (other than Mr.
Stevens who receives  $125,000)  for their  services as managers on the board of
managers of PGP and are  reimbursed  for their travel and related  out-of-pocket
expenses for attendance at board of managers meetings.

Compensation Committee Interlocks and Insider Participation

      We have no standing Compensation  Committees.  All compensation  decisions
are  made by PGP,  our  parent  and  sole  manager.  The  managers  of PGP  each
participate in the determination of executive officer compensation.

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      All of the Company's  outstanding common membership interests are owned by
PGP, its parent and sole manager.  All of Peninsula  Gaming Corp.'s  outstanding
common stock and all of the outstanding  membership  interests in OEDA are owned
by the Company.  OEDA holds a 100% membership interest in OED, which is the sole
shareholder of The Old Evangeline Downs Capital Corp.

      Greater Dubuque Riverboat  Entertainment  Company holds 100% of our issued
and  outstanding  preferred  membership  interests,  which,  subject  to limited
exceptions,  has no voting rights, except as required by applicable law. On July
15, 1999, PGP issued 499,982 convertible preferred membership interests,



                                       34
<PAGE>

each of which is initially convertible into one PGP non-voting common membership
interest,  representing 33.33% of the fully diluted common membership  interests
of PGP on such date. PGP does not have outstanding any of its non-voting  common
membership interests.

      Unless  otherwise  indicated,  the  address of each  manager or  executive
officer of PGP is c/o Peninsula Gaming Company, LLC, 3rd Street Ice Harbor, P.O.
Box 1750, Dubuque, IA 52004-1750.

      The table below sets forth information  regarding the beneficial ownership
of the voting common membership interests of PGP by:

      (a)   each person or entity known by us to own  beneficially 5% or more of
            the common membership interests of PGP;

      (b)   each manager and executive officer of PGP; and

      (c)   all managers and executive officers of PGP as a group.

      The following information is helpful to an understanding of, and qualifies
the  beneficial  ownership  data  contained  in, the table set forth below.  Mr.
Stevens holds 248,334 PGP common membership  interests  directly and 413,333 PGP
common membership interests  indirectly through PGP Investors,  LLC. Mr. Stevens
is the sole  managing  member of PGP  Investors,  LLC and  exercises  voting and
investment  power  over  the  PGP  common  membership  interests  owned  by  PGP
Investors, LLC. Mr. Stevens and Mr. Whittaker, managers of PGP, are an Executive
Vice President and a Vice Chairman,  respectively, of Jefferies & Company, Inc.,
the initial  purchaser in the offering of the Peninsula  Notes on July 15, 1999.
In addition, Jefferies & Company, Inc. and some of its affiliates,  officers and
employees are members of PGP  Investors,  LLC. Mr.  Whittaker  holds an economic
interest in  approximately  41,667 PGP common  membership  interests  indirectly
through his  membership in PGP Investors,  LLC, but does not exercise  voting or
investment  power with  respect to these PGP common  membership  interests.  Mr.
Oliver holds his interest  through The Oliver Family Trust. The total holding of
all managers and executive  officers as a group  includes the 413,333 PGP common
membership  interests  held  by PGP  Investors,  LLC,  over  which  Mr.  Stevens
exercises voting and investment power.

                                         Voting Common
     Name and Address                 Membership Interests     Percent of
     of Beneficial Owner               Beneficially Owned         Class
     -------------------               ------------------         -----

     M. Brent Stevens..............        661,667                66.17%
     c/o Peninsula Gaming Company, LLC
     3rd Street Ice Harbor
     P.O. Box 1750
     Dubuque, Iowa 52004

     PGP Investors, LLC............        413,333                41.33%
     11100 Santa Monica, 10th Floor
     Los Angeles, CA 90071

     Michael S. Luzich.............        323,333                32.33%
     c/o Peninsula Gaming Company,
     LLC
     3rd Street Ice Harbor
     P.O. Box 1750
     Dubuque, Iowa 52004



                                       35
<PAGE>

     Terrance Oliver...............         15,000                 1.50%
     c/o Peninsula Gaming Company,
     LLC
     3rd Street Ice Harbor
     P.O. Box 1750
     Dubuque, Iowa 52004

     Andrew R. Whittaker...........         41,667                 4.17%
     c/o Peninsula Gaming Company,
     LLC
     3rd Street Ice Harbor
     P.O. Box 1750
     Dubuque, Iowa 52004

     All managers and executive
       officers as a group (6
       persons)....................     1,000,000               100.00%


ITEM 13     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Relationship with Dubuque Racing Association

      The Dubuque Racing Association is a not-for-profit  corporation  organized
for the purpose of operating the Dubuque Greyhound Park, a pari-mutuel greyhound
racing  facility in Dubuque,  Iowa.  On February  22, 1993,  the Dubuque  Racing
Association  entered into the Dubuque  Racing  Association  operating  agreement
which  authorizes us to operate  riverboat  gaming  operations  in Dubuque.  The
Dubuque Racing  Association  operating  agreement has since been amended several
times and expires by its terms on December 31, 2008.

      Beginning  April 1, 2000,  we were  required to make a $0.50 per admission
payment to the Dubuque  Racing  Association,  without  regard to our revenues or
profits.  Payments made and accrued to the Dubuque Racing  Association  based on
2002,  2001  and 2000  admissions  were  approximately  $495,000,  $503,000  and
$405,000,  respectively. Based on 2002 admissions, we anticipate this payment to
be approximately $500,000 in 2003.

      Under the  Dubuque  Racing  Association  operating  agreement,  subject to
limited conditions,  we are also required to pay the Dubuque Racing Association,
for the right to operate the Diamond Jo, an amount equal to the excess of 32% of
the first $30 million of the  combined  gaming  revenues  of the Dubuque  Racing
Association  and the  Diamond Jo, plus 8% of the next $12 million of these total
gaming  revenues,   plus,  if  there  are  no  competing  gaming  operations  in
neighboring  counties of Illinois  and  Wisconsin,  8% of the next $4 million of
total gaming  revenues,  over the Dubuque Racing  Association's  gaming revenues
from the Dubuque  Greyhound  Park.  Gaming  revenues  under this contract  means
adjusted gross receipts less gaming taxes.  This formula is subject to change if
the Dubuque Racing  Association  ceases to operate the Dubuque Greyhound Park or
if we operate a riverboat  smaller than the current Diamond Jo. We are currently
not required to make any such payments to the Dubuque Racing Association because
the Dubuque Racing  Association's  revenues from the Dubuque  Greyhound Park are
greater than the specified percentage of our total gaming revenues.

Managing Member Indemnification

      Under our and PGP's operating agreements,  we and PGP have agreed, subject
to few  exceptions,  to indemnify  and hold  harmless  our members,  PGP and PGP
members,  as the case may be,  from  liabilities  incurred  as a result of their
positions as our sole manager and as members of us or PGP, as the case may be.



                                       36
<PAGE>

Equity Contribution

      The common members of PGP have made a capital contribution of $6.0 million
to PGP in  exchange  for their  common  membership  interests.  PGP  immediately
contributed this $6.0 million and the $3.0 million raised in the offering of the
Peninsula  Notes  through  the sale of PGP's  convertible  preferred  membership
interests to the Company,  in exchange  for common  membership  interests in the
Company.  The Company used this capital contribution from PGP to finance in part
the  acquisition  of the Diamond Jo.  Additionally,  we issued $7.0 million face
amount  of  preferred   membership   interests  to  Greater  Dubuque   Riverboat
Entertainment  Company in connection  with the acquisition of the Diamond Jo. We
redeemed $3.0 million of the preferred membership interests on January 19, 2001.

Operating Agreement of Peninsula Gaming Partners

      Under PGP's  operating  agreement,  the  management  of PGP is vested in a
board of managers composed of five individuals,  two of whom must be independent
managers. At any time that M. Brent Stevens, together with any entity controlled
by Mr. Stevens,  beneficially  holds at least 5% of the voting common membership
interests of PGP, Mr. Stevens is entitled to designate  three of PGP's managers,
including one of the two  independent  managers.  The two  independent  managers
shall  serve as members of the  independent  committee.  Under  PGP's  operating
agreement, PGP Advisors, LLC, a Delaware limited liability company, of which Mr.
Stevens  is  the  sole  managing  member,  may  render  financial  advisory  and
consulting  services  to PGP  and  will  be  entitled  to  receive  commercially
reasonable fees for the services consistent with industry practices.  Subject to
the terms of the indenture  governing the  Peninsula  Notes,  these fees will be
paid by us as distributions to PGP.

      At any time that Michael  Luzich,  together with any entity  controlled by
Mr.  Luzich,  beneficially  holds at least 5% of the  voting  common  membership
interests of PGP, Mr.  Luzich is entitled to  designate  two of PGP's  managers,
including the other independent manager.

      Presently,  PGP's board of managers is composed of four  managers.  If not
appointed  earlier,  a fifth  manager will be  appointed at a future  meeting of
managers.  A manager  may resign at any time,  and the member who  designates  a
manager  may remove or replace  that  manager  from the board of managers at any
time.

Operating Agreement of Peninsula Gaming Company

      Under the terms of the Company's operating agreement,  if we repay, redeem
or  refinance  90% or more of the  Peninsula  Notes on or prior to July 1, 2003,
particular members of management,  including Messrs. Luzich and Stevens, will be
entitled to receive, at Mr. Stevens'  discretion,  an aggregate of $1.5 million,
payable by the Company.

Management Services Agreement

      OED has entered into a management  services agreement with the Company and
OEDA (together, as the "Operator"). Pursuant to the terms of that agreement, the
Operator  will manage and operate  OED's  existing  horse  racetrack and design,
develop,  construct,  manage and  operate  the new racino  and  provide  certain
pre-opening services in connection  therewith.  Although the Operator may obtain
services from affiliates to the extent necessary to perform its obligations, the
Operator will be fully responsible for all obligations under the agreement.

      Prior to the  opening of the  racino,  the  Operator  will  supervise  the
design,  development  and  construction  of the racino and  perform  pre-opening
budgeting,   marketing,   hiring  of  personnel,  and


                                       37
<PAGE>

coordinating of initial  inventories and will establish  security systems,  data
processing systems, accounting and internal controls, and preventive maintenance
programs.

      The  Operator is entitled  to receive a  pre-opening  service fee equal to
$40,000  per month,  retroactive  to June 27,  2001,  which fee has not yet been
paid.  Payments in respect of these pre-opening service fees are not required to
be paid until the  earlier to occur of the  commencement  of  operations  at the
casino  or the  operating  deadline  applicable  to the  casino  under  the Cash
Collateral  and  Disbursement  Agreement.  The  Operator is also  entitled to be
reimbursed for all reasonable and documented out-of-pocket expenses permitted to
be incurred under the management services agreement,  including, but not limited
to, tax  preparation,  accounting,  legal and  administrative  fees and expenses
incurred in connection with the Operator's ownership of us. The Operator is also
entitled to receive a basic  management  fee equal to 1.75% of net revenue (less
net food and beverage revenue) and an incentive fee equal to:

      o     3.0% of the first $25.0 million of EBITDA (as defined below);

      o     4.0% of  EBITDA  in excess  of $25.0  million  but less  than  $30.0
            million of EBITDA; and

      o     5.0% of EBITDA in excess of $30.0 million.

"EBITDA" is defined in the  management  services  agreement  as earnings  before
interest, income taxes, depreciation and amortization;  provided,  however, that
in  calculating  earnings,  the basic  management  fee,  the  incentive  fee and
reimbursables  payable  under the  management  services  agreement  shall not be
deducted.

ITEM 14.    CONTROLS AND PROCEDURES

      (a) Evaluation of disclosure controls and procedures.  The Company's Chief
Executive   Officer  and  Chief   Financial   Officer,   after   evaluating  the
effectiveness of the design and operation of the Company's  disclosure  controls
and procedures (as defined in Exchange Act Rules  13a-14(c) and 15d-14(c)) as of
a date within ninety days of the filing date of this Form 10-K,  have  concluded
that as of such date the  Company's  disclosure  controls  and  procedures  were
adequate and effective and designed to ensure that material information relating
to the Company and its  subsidiaries  would be made known to such  officers on a
timely basis.

      (b) Changes in internal controls.  There have been no significant  changes
(including  corrective  actions  with  regard  to  significant  deficiencies  or
material  weaknesses)  in our  internal  controls  or other  factors  that could
significantly  affect these  controls  subsequent to the date of the  evaluation
referenced in paragraph (a) above.



                                       38
<PAGE>
Part IV

ITEM 15.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

      (a)   The following documents are filed as a part of this report:

            (1)   Financial  Statements  -- see  Index to  Financial  Statements
                  appearing on page F-1.

            (2)   Exhibits:

    Exhibit
    Number                                Description
    -------                               -----------
     *3.1A    Certificate of Formation of Peninsula Gaming Company, LLC

     *3.1B    Amendment to Certificate of Formation of Peninsula Gaming
              Company, LLC

     *3.2     Operating Agreement of Peninsula Gaming Company, LLC

     *3.3     Articles of Incorporation of Peninsula Gaming Corp.

     *3.4     By-laws of Peninsula Gaming Corp.

     *4.1     Specimen Certificate of Common Stock of Peninsula Gaming Corp.

     *4.2     Indenture,  dated July 15, 1999,  by and among  Peninsula  Gaming
              Company,   LLC,  Peninsula  Gaming  Corp.  and  Firstar  Bank  of
              Minnesota, N.A., as trustee

   ***4.3     First  Supplemental  Indenture,  dated  January 15, 2002,  by and
              among Peninsula Gaming Company LLC and Peninsula Gaming Corp., as
              Issuers,  the Subsidiary  Guarantors referred to therein and U.S.
              Bank National Association, as trustee

     10.1+    Employment  Agreement,  dated April 1, 2000, by and among Natalie
              Schramm and Peninsula Gaming Company, LLC

    *10.2     Indemnification  Agreement,  dated  June 7,  1999,  by and  among
              Natalie  Schramm  and AB Capital,  L.L.C.  and  Peninsula  Gaming
              Company, LLC

    *10.3A    Operating  Agreement,  dated  February  22,  1993,  by and  among
              Dubuque Racing  Association,  Ltd. and Greater Dubuque  Riverboat
              Entertainment Company, L.C.

    *10.3B    Amendment to Operating Agreement, dated February 22, 1993, by and
              among  Dubuque  Racing  Association,  Ltd.  and  Greater  Dubuque
              Riverboat Entertainment Company, L.C.

    *10.3C    Amendment to  Operating  Agreement,  dated March 4, 1993,  by and
              among  Dubuque  Racing  Association,  Ltd.  and  Greater  Dubuque
              Riverboat Entertainment Company, L.C.

    *10.3D    Third Amendment to Operating Agreement,  dated March 11, 1993, by
              and among Dubuque Racing  Association,  Ltd. and Greater  Dubuque
              Riverboat Entertainment Company, L.C.

    *10.3E    Fourth Amendment to Operating Agreement, dated March 11, 1993, by
              and among Dubuque Racing  Association,  Ltd. and Greater  Dubuque
              Riverboat Entertainment Company, L.C.

    *10.3F    Fifth Amendment to Operating  Agreement, dated April 9, 1993, by
              and among Dubuque Racing Association, Ltd. and Greater Dubuque
              Riverboat Entertainment Company, L.C.


                                       39
<PAGE>

    Exhibit
    Number                                Description
    ------                                -----------

    *10.3G    Sixth Amendment to Operating Agreement,  dated November 29, 1993,
              by and among Dubuque Racing Association, Ltd. and Greater Dubuque
              Riverboat Entertainment Company, L.C.

    *10.3H    Seventh Amendment to Operating Agreement, dated April 6, 1994, by
              and among Dubuque Racing  Association,  Ltd. and Greater  Dubuque
              Riverboat Entertainment Company, L.C.

    *10.3I    Eighth Amendment to Operating Agreement, dated April 29, 1994, by
              and among Dubuque Racing  Association,  Ltd. and Greater  Dubuque
              Riverboat Entertainment Company, L.C.

    *10.3J    Ninth Amendment to Operating  Agreement,  dated July 11, 1995, by
              and among Dubuque Racing  Association,  Ltd. and Greater  Dubuque
              Riverboat Entertainment Company, L.C.

    *10.3K    Tenth Amendment to Operating  Agreement,  dated July 15, 1999, by
              and among Dubuque Racing  Association,  Ltd. and Greater  Dubuque
              Riverboat Entertainment Company, L.C.

    *10.4     Operating Agreement Assignment, dated July 15, 1999, by and among
              Greater  Dubuque  Riverboat   Entertainment   Company,  L.C.  and
              Peninsula Gaming Company, LLC

    *10.5     First Preferred Ship Mortgage,  dated July 15, 1999, by Peninsula
              Gaming Company, LLC in favor of Firstar Bank of Minnesota,  N.A.,
              as trustee

    *10.6     Mortgage,  Leasehold  Mortgage,  Assignment  of  Rents,  Security
              Agreement and Fixture Financing Statement dated July 15, 1999, by
              Peninsula  Gaming  Company,  LLC in  favor  of  Firstar  Bank  of
              Minnesota, N.A., as trustee

    *10.7     Ice Harbor Parking Agreement Assignment,  dated July 15, 1999, by
              and among Greater Dubuque Riverboat  Entertainment  Company, L.C.
              and Peninsula Gaming Company, LLC

    *10.8     First  Amendment to Sublease  Agreement,  dated July 15, 1999, by
              and among Dubuque Racing  Association,  Ltd. and Greater  Dubuque
              Riverboat Entertainment Company, L.C.

    *10.9     Sublease  Assignment,  dated July 15, 1999,  by and among Greater
              Dubuque Entertainment Company, L.C. and Peninsula Gaming Company,
              LLC

    *10.10    Iowa Racing and Gaming Commission Gaming License,  dated July 15,
              1999

    *10.11    Assignment of Iowa IGT Declaration and Agreement of Trust,  dated
              July  15,   1999  by  and   among   Greater   Dubuque   Riverboat
              Entertainment Company, L.C. and Peninsula Gaming Company, LLC

 ****10.12    Agreement of Sale,  dated August 30, 2002, by and among Peninsula
              Gaming Partners, LLC, OED Acquisition, LLC, William E. Trotter II
              and William E. Trotter II Family, LLC.

     10.13+   Loan and Security  Agreement,  dated  February  23, 2001,  by and
              between  Foothill   Capital   Corporation  and  Peninsula  Gaming
              Company, LLC

  ****10.14   Amendment  Number  One to  Loan  and  Security  Agreement,  dated
              February 15, 2002, by and between  Foothill  Capital  Corporation
              and Peninsula Gaming Company, LLC

  ****10.15   Amendment  Number  Two to  Loan  and  Security  Agreement,  dated
              October 16, 2002, by and between Foothill Capital Corporation and
              Peninsula Gaming Company, LLC



                                       40
<PAGE>

    Exhibit
    Number                                Description
    ------                                -----------

  ***10.16    Purchase  Agreement,  dated June 27, 2002, by and among Peninsula
              Gaming Partners,  LLC, a Delaware limited liability company,  The
              Old Evangeline Downs,  L.C., a Louisiana limited company and BIM3
              Investments, a Louisiana partnership

  ***10.17    First Amendment to Purchase Agreement,  dated January 1, 2002, by
              and among BIM3  Investments,  a  Louisiana  partnership,  The Old
              Evangeline  Downs,  L.C.,  a  Louisiana  limited  company and OED
              Acquisition, LLC, a Delaware limited liability company

  ***10.18    Assignment  Agreement,  dated  October 23,  2001,  by and between
              Peninsula Gaming Partners and OED Acquisition, LLC

 ****10.19    Agreement of Sale,  dated August 30, 2002, by and among Peninsula
              Gaming Partners, LLC, OED Acquisition, LLC, William E. Trotter II
              and William E. Trotter II Family, LLC.

     12.1+    Computation of ratio of earnings to fixed charges

     14.1+    Code of Ethics of Chief  Executive  Officer and senior  financial
              officers of Peninsula Gaming Company, LLC

     21.1+    Subsidiaries of the Registrant

     99.1+    Certification  of M.  Brent  Stevens,  Chief  Executive  Officer,
              pursuant  to Section  302 of the  Sarbanes-Oxley  Act of 2002 and
              Rule 15d-14 of the Securities Exchange Act, as amended.

     99.2+    Certification  of Natalie A. Schramm,  Chief  Financial  Officer,
              pursuant  to Section  302 of the  Sarbanes-Oxley  Act of 2002 and
              Rule 15d-14 of the Securities Exchange Act, as amended.


+     Filed herewith.

*     Previously filed as an exhibit to the  registration  statement on Form S-4
      (Registration  Number  333-88829)  of Peninsula  Gaming  Company,  LLC and
      Peninsula Gaming Corp. on October 12, 1999.

**    Previously  filed as an  exhibit  to the Form  10-K  (Registration  Number
      333-88829) of Peninsula Gaming Company,  LLC and Peninsula Gaming Corp. on
      March 30, 2001.

***   Previously  filed  as an  exhibit  to the  Form  8-K of  Peninsula  Gaming
      Company, LLC and Peninsula Gaming Corp. on March 4, 2002.

****  Previously  filed as an  exhibit  to the  Form  10-Q of  Peninsula  Gaming
      Company, LLC and Peninsula Gaming Corp. on November 14, 2002.

(b)   Reports on Form 8-K. None.



                                       41
<PAGE>

                                   SIGNATURES

      Pursuant  to the  requirements  of Section  13 or 15(d) of the  Securities
Exchange  Act of 1934,  the  Company has duly caused this report to be signed on
its  behalf  by the  undersigned,  thereunto  duly  authorized,  in the  City of
Dubuque, State of Iowa on March 31, 2003.

                                    PENINSULA GAMING COMPANY, LLC

                                    By: /s/ M. Brent Stevens
                                       ------------------------
                                        M. Brent Stevens
                                        Chief Executive Officer

                                    By: /s/ Natalie A. Schramm
                                       ------------------------
                                        Natalie A. Schramm
                                        Chief Financial Officer

                                    PENINSULA GAMING CORP.

                                    By: /s/ M. Brent Stevens
                                       ------------------------
                                        M. Brent Stevens
                                        President and Treasurer

                                    By: /s/ Michael S. Luzich
                                       ------------------------
                                        Michael S. Luzich
                                        Vice President

      Pursuant to the requirements of the Securities  Exchange Act of 1934, this
report has been signed below by the following  persons in the  capacities and on
the dates indicated.

                                    PENINSULA GAMING PARTNERS, LLC
                                    Managing Member of Peninsula Gaming
                                    Company, LLC

Date: March 31, 2003                By: /s/ M. Brent Stevens
                                       ------------------------
                                        M. Brent Stevens
                                        Chief Executive Officer and Manager

Date: March 31, 2003                By: /s/ Michael S. Luzich
                                       ------------------------
                                        Michael S. Luzich
                                        President, Secretary and Manager

Date: March 31, 2003                By: /s/ Terrance W. Oliver
                                       ------------------------
                                        Terrance W. Oliver
                                        Manager of Peninsula Gaming Partners

Date: March 31, 2003                By: /s/ Andrew R. Whittaker
                                       ------------------------
                                        Andrew R. Whittaker
                                        Manager of Peninsula Gaming Partners




                                       42
<PAGE>

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


CONSOLIDATED FINANCIAL STATEMENTS OF PENINSULA GAMING COMPANY, LLC

<TABLE>
<S>                                                                                                      <C>
   Independent Auditors' Report                                                                        F-2
   Consolidated Balance Sheets at December 31, 2002 and December 31, 2001                              F-3
   Consolidated Statements of Operations for the Years Ended December 31, 2002, 2001 and 2000          F-4
   Consolidated Statements of Changes in Members' Equity for the Years Ended December 31, 2002, 2001
     and 2000                                                                                          F-5
   Consolidated Statements of Cash Flows for the Years Ended December 31, 2002, 2001 and 2000          F-6
   Notes to Consolidated Financial Statements                                                          F-7

SCHEDULE II:  VALUATION AND QUALIFYING ACCOUNTS                                                        F-23
</TABLE>





                                      F-1
<PAGE>


INDEPENDENT AUDITORS' REPORT


To the Members of
Peninsula Gaming Company, LLC
Dubuque, Iowa

We have audited the accompanying consolidated balance sheets of Peninsula Gaming
Company,  LLC (the  "Company") as of December 31, 2002 and 2001, and the related
consolidated  statements of  operations,  changes in members'  equity,  and cash
flows for the years ended  December  31,  2002,  2001 and 2000.  Our audits also
included the financial  statement  schedule listed in the Index to the Financial
Statements at item F-22.  These  financial  statements  and financial  statement
schedule are the responsibility of the Company's management.  Our responsibility
is to express an opinion on these financial  statements and financial  statement
schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our  opinion,  such  financial  statements  present  fairly,  in all material
respects, the financial position of Peninsula Gaming Company, LLC as of December
31, 2002 and 2001,  and the results of its operations and its cash flows for the
years ended  December  31, 2002,  2001 and 2000 in  conformity  with  accounting
principles  generally  accepted in the United  States of America.  Also,  in our
opinion,  such financial statement schedule,  when considered in relation to the
basic  financial  statements  taken as a whole,  presents fairly in all material
respects the information set forth therein.

DELOITTE & TOUCHE LLP

Cedar Rapids, Iowa
March 14, 2003



                                      F-2
<PAGE>

PENINSULA GAMING COMPANY, LLC
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2002 and 2001
<TABLE>
<CAPTION>
                                                                                               2002             2001
                                                                                               ----             ----
<S>                                                                                     <C>              <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents                                                               $  10,510,205    $   7,523,652
Restricted cash                                                                               840,366
Accounts receivable, less allowance of $45,648 and $56,917, respectively                      275,822          105,480
Inventory                                                                                     138,405           97,677
Prepaid expenses                                                                              395,056          307,064
                                                                                           ----------        ---------
         Total current assets                                                              12,159,854        8,033,873
                                                                                           ----------        ---------

PROPERTY AND EQUIPMENT, NET                                                                18,246,857       17,930,643
                                                                                           ----------        ---------

PROPERTY AND EQUIPMENT AT ST. LANDRY PARISH                                                 7,455,885          246,753
                                                                                           ----------        ---------

OTHER ASSETS:
  Deferred financing costs, net of accumulated amortization of $3,229,782 and               4,064,987        3,687,698
     $1,844,783, respectively
  Goodwill and other intangible assets, net of accumulated amortization of $3,476,051      84,413,263       53,083,429
     and $3,476,051, respectively
Business acquisition and licensing costs                                                                     1,355,750
Deposits                                                                                      106,938           35,405
                                                                                           ----------        ---------
         Total other assets                                                                88,585,188       58,162,282
                                                                                           ----------        ---------
TOTAL                                                                                   $ 126,447,784    $  84,373,551
                                                                                        =============    =============

LIABILITIES AND MEMBERS' EQUITY

CURRENT LIABILITIES:
Accounts payable                                                                        $   4,336,694    $     335,416
Purse settlement payable                                                                      846,778
Accrued payroll and payroll taxes                                                           1,340,395        1,280,177
Other accrued expenses                                                                      8,109,213        2,234,922
Current maturities of capital lease obligations                                                                113,552
Current maturities - line of credit                                                           600,000
Notes payable                                                                               4,500,000
Term loan payable                                                                           8,300,000
Note payable to parent                                                                      7,325,000
                                                                                           ----------        ---------
         Total current liabilities                                                         35,358,080        3,964,067
                                                                                           ----------        ---------

LONG-TERM LIABILITIES:
Senior secured notes, net of discount                                                      70,493,155       70,384,482
Line of credit                                                                             11,250,000
Capital lease obligations, net of current maturities                                          475,781          362,229
Litigation settlement                                                                       1,200,000
                                                                                           ----------        ---------
         Total long-term liabilities                                                       83,418,936       70,746,711
                                                                                           ----------        ---------
         Total liabilities                                                                118,777,016       74,710,778
                                                                                           ----------        ---------

COMMITMENTS AND CONTINGENCIES

PREFERRED MEMBERS' INTEREST, REDEEMABLE                                                     4,000,000        4,000,000

MEMBERS' EQUITY:
Common members' interest                                                                    9,000,000        9,000,000
Accumulated deficit                                                                        (5,329,232)      (3,337,227)
                                                                                           ----------        ---------
         Total members' equity                                                              3,670,768        5,662,773
                                                                                           ----------        ---------

TOTAL                                                                                   $ 126,447,784    $  84,373,551
                                                                                        =============    =============
</TABLE>

See notes to consolidated financial statements.




                                      F-3
<PAGE>

PENINSULA GAMING COMPANY, LLC
CONSOLIDATED STATEMENTS OF OPERATIONS
THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
<TABLE>
<CAPTION>
                                                                   2002            2001            2000
                                                                   ----            ----            ----
<S>                                                           <C>             <C>             <C>
REVENUES:
Casino                                                        $ 48,262,485    $ 47,710,208    $ 45,518,772
Racing                                                          10,278,554
Food and beverage                                                3,886,326       2,745,333       2,663,380
Other                                                              144,817         131,916         169,446
Less promotional allowances                                     (2,615,355)     (2,470,310)     (2,599,174)
                                                                ----------      ----------      ----------
         Total net revenues                                     59,956,827      48,117,147      45,752,424
                                                                ----------      ----------      ----------

EXPENSES:
Casino                                                          20,554,920      20,375,265      19,517,455
Racing                                                           7,880,953
Food and beverage                                                3,820,365       2,856,568       2,856,151
Boat operations                                                  2,295,771       2,259,314       2,242,392
Other                                                               27,471          21,801          36,826
Selling, general and administrative                              8,278,250       6,680,581       6,458,795
Depreciation and amortization                                    2,950,369       3,963,350       3,571,220
Litigation settlement                                            1,600,000
Referendum                                                         771,111
State of Wisconsin government relations                             55,000         147,163
                                                                ----------      ----------      ----------
         Total expenses                                         48,234,210      36,304,042      34,682,839
                                                                ----------      ----------      ----------

INCOME FROM OPERATIONS                                          11,722,617      11,813,105      11,069,585
                                                                ----------      ----------      ----------

OTHER INCOME (EXPENSE):
Interest income                                                     46,475         183,912         434,283
Interest expense                                               (11,887,979)     (9,639,947)     (9,506,969)
Loss on sale of assets                                              (8,000)       (151,415)       (122,207)
                                                                ----------      ----------      ----------
         Total other expense                                   (11,849,504)     (9,607,450)     (9,194,893)
                                                                ----------      ----------      ----------

NET INCOME (LOSS) BEFORE PREFERRED MEMBER DISTRIBUTIONS AND
MINORITY INTEREST                                                 (126,887)      2,205,655       1,874,692

LESS PREFERRED MEMBER DISTRIBUTIONS                               (373,050)       (386,174)       (630,000)

LESS MINORITY INTEREST                                            (232,056)
                                                                ----------      ----------      ----------

NET INCOME (LOSS) TO COMMON MEMBERS' INTEREST                 $   (731,993)   $  1,819,481    $  1,244,692
                                                              ============    ============    ============
</TABLE>



See notes to consolidated financial statements.




                                      F-4
<PAGE>

PENINSULA GAMING COMPANY, LLC

CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS' EQUITY
THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

                                         COMMON                       TOTAL
                                         MEMBERS'     ACCUMULATED     MEMBERS'
                                         INTEREST       DEFICIT       EQUITY
                                         --------       -------       ------

BALANCE, JANUARY 1, 2000                 $ 9,000,000  $(2,722,941)  $ 6,277,059
                                         -----------  -----------   -----------

Net income to common members' interest                  1,244,692     1,244,692

Member distributions                                   (1,917,551)   (1,917,551)
                                         -----------  -----------   -----------
BALANCE, DECEMBER 31, 2000                 9,000,000   (3,395,800)    5,604,200


Net income to common members' interest                  1,819,481     1,819,481

Member distributions                                   (1,760,908)   (1,760,908)
                                         -----------  -----------   -----------
BALANCE, DECEMBER 31, 2001                 9,000,000   (3,337,227)    5,662,773


Net loss to common members' interest                     (731,993)     (731,993)

Member distributions                                   (1,260,012)   (1,260,012)
                                         -----------  -----------   -----------
BALANCE, DECEMBER 31, 2002               $ 9,000,000  $(5,329,232)  $ 3,670,768
                                         ===========  ===========   ===========



See notes to consolidated financial statements.



                                      F-5
<PAGE>


PENINSULA GAMING COMPANY, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

<TABLE>
<CAPTION>
                                                                    2002            2001            2000
                                                                    ----            ----            ----
<S>                                                            <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss                                                   $   (731,993)   $  1,819,481    $  1,244,692
    Adjustments to reconcile net income to net cash flows
      provided by operating activities:
        Depreciation and amortization                             2,950,369       3,963,350       3,571,220
        Provision for doubtful accounts                             138,751         152,158         107,505
        Amortization of deferred financing costs and
          bond discount                                           1,493,671         911,272         795,268
        Loss on sale of assets                                        8,000         151,415         122,207
        Minority interest                                           232,056
    Changes in operating assets and liabilities:
        Restricted cash                                             639,655
        Receivables                                                 (91,398)       (183,479)        (66,046)
        Inventory                                                     5,285          15,906         (13,770)
        Prepaid expenses and other assets                           (27,301)        326,699         (10,941)
        Accounts payable                                             60,088        (375,121)        233,668
        Accrued expenses                                          5,506,627         468,743      (1,032,749)
        Litigation settlement                                     1,600,000
                                                                 ----------       ---------       ---------
          Net cash flows from operating activities               11,783,810       7,250,424       4,951,054
                                                                 ----------       ---------       ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Acquisition of subsidiary, net of cash acquired             (29,275,862)       (500,000)
    Business acquisition and licensing costs                     (1,503,944)       (518,047)
    Racino project development costs                             (5,315,279)       (246,753)
    Proceeds from sale of property and equipment                                     51,378          23,331
    Purchase of property and equipment                           (1,695,075)     (1,602,930)     (2,432,446)
                                                                 ----------       ---------       ---------
          Net cash flows from investing activities              (37,790,160)     (2,816,352)     (2,409,115)
                                                                 ----------       ---------       ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Deferred financing costs                                     (1,703,706)       (511,634)       (181,008)
    Preferred members' interest redeemed                                         (3,000,000)
    Principal payments on debt                                     (318,379)
    Proceeds from notes payable                                  11,825,000
    Proceeds from senior credit facilities                       20,450,000
    Member distributions                                         (1,260,012)     (1,760,908)     (1,917,551)
                                                                 ----------       ---------       ---------
          Net cash flows from financing activities               28,992,903      (5,272,542)     (2,098,559)
                                                                 ----------       ---------       ---------

NET INCREASE (DECREASE) IN CASH                                   2,986,553        (838,470)        443,380

CASH AND CASH EQUIVALENTS AT
    BEGINNING OF PERIOD                                           7,523,652       8,362,122       7,918,742
                                                                 ----------       ---------       ---------

CASH AND CASH EQUIVALENTS AT
    END OF PERIOD                                              $ 10,510,205    $  7,523,652    $  8,362,122
                                                               ============    ============    ============

SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:

Cash paid during the year for interest                         $  5,701,057    $  8,728,788    $  8,697,500


See notes to consolidated financial statements


</TABLE>



                                      F-6
<PAGE>

PENINSULA GAMING COMPANY, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION, BUSINESS PURPOSE AND BASIS OF PRESENTATION

Peninsula  Gaming  Company,  LLC (the  "Company")  is wholly  owned by Peninsula
Gaming Partners,  LLC, a Delaware limited liability company ("PGP") and our sole
managing member.  The Company is a Delaware limited  liability company formed on
January 26, 1999 for the purpose of purchasing  assets comprising the Diamond Jo
Casino and related  real  property.  Peninsula  Gaming  Corp.  is a wholly owned
subsidiary of the Company,  has no assets or operations and was formed solely to
facilitate  the offering of our 12 1/4% Senior Secured Notes due 2006 in certain
jurisdictions.  OED  Acquisition,  LLC, a  Delaware  limited  liability  company
("OEDA") is a wholly owned  subsidiary  formed on July 9, 2001 to facilitate the
purchase of a 50% membership  interest in The Old Evangeline Downs, LLC ("OED"),
a Delaware  limited  liability  company that currently owns and operates a horse
track in Lafayette, LA. On August 30, 2002, OEDA consummated the purchase of the
remaining 50% membership  interest in OED. The Old Evangeline Downs Capital Corp
is a wholly owned  subsidiary  of the OED, has no assets or  operations  and was
formed  solely to  facilitate  the offering of our 13% Senior  Secured Notes due
2010 with Contingent Interest in certain  jurisdictions.  The financial position
of OED as of December  31, 2002 and the results of its  operations  and its cash
flows for the period  February  15, 2002 (date of  acquisition)  to December 31,
2002  have  been   consolidated  into  the  Company's   consolidated   financial
statements.  During the period February 15, 2002 to August 30, 2002, the Company
had substantive control of OED. All significant  intercompany  transactions have
been eliminated.

The common  membership  interests  of the Company are wholly  owned by PGP.  The
Company and PGP  completed  the sale of  $71,000,000  of 12 1/4% Senior  Secured
Notes due 2006  ("Peninsula  Notes") and  $3,000,000  in  convertible  preferred
membership interests, respectively, during July 1999. Concurrently with the sale
of the securities, the Company received a $9.0 million capital contribution from
PGP ($6.0  million  of which was  contributed  to the  capital  of PGP by common
members of PGP and $3.0 million of which was  contributed  to the capital of PGP
through  the  sale  of  convertible  preferred  membership  interests  of PGP as
previously  described).  The  proceeds for the above  transactions  were used to
complete the  purchase of certain  assets  comprising  the Diamond Jo casino and
related real property. On July 15, 1999, the Company acquired  substantially all
of the assets of Greater Dubuque Riverboat Entertainment Company, L.C. ("GDREC")
and Harbor Community  Investment,  L.C.  ("HCI") for  $77,000,000.  The purchase
price was $70.0 million cash ($68.0  million net of casino cash acquired of $2.0
million) and $7.0 million in redeemable preferred membership interests (see Note
11). For financial  reporting  purposes,  the acquisition was accounted for as a
purchase and,  accordingly,  included in the Company's results since the date of
the  acquisition.  The purchase price has been allocated to the assets purchased
and the  liabilities  assumed  based  upon  the fair  values  on the date of the
acquisition.

2.    ACQUISITION OF THE OLD EVANGELINE DOWNS, LLC

During 2002, the Company,  indirectly  through its wholly owned subsidiary OEDA,
acquired  100%  of  the  membership  interests  in  OED  through  the  following
transactions:

On June 27, 2001, BIM3 Investments,  a Louisiana  partnership and a 50% owner of
OED  membership  interests,  entered  into  an  agreement  to  sell  50%  of OED
membership  interests to PGP,  parent company of the Company.  The agreement was
assigned  by PGP to OEDA on  October  23,  2001.  On  February  15,  2002,  OEDA
consummated its  acquisition of: (i) 50% of the membership  interests in OED and
(ii) a one-



                                      F-7
<PAGE>

half  (1/2)  interest  in two  promissory  notes  in  the  principal  amount  of
$10,909,244 issued by OED (the "Old OED Notes"), for an aggregate purchase price
of $15,000,000 in cash from the Company. This one-half (1/2) interest in the Old
OED Notes was converted by OEDA into members' equity of OED.

The source of funds for the  transaction  described above was $3,000,000 of cash
on-hand and $12,000,000 of borrowings  under the Company's credit agreement with
Foothill  Capital  Corporation.  On March 7, 2002, the Company paid consent fees
totaling  $887,500  to  holders  of the  Peninsula  Notes  related  to the above
transaction.

On June 25,  2002,  PGP entered into an agreement  with William E.  Trotter,  II
("WET2") and William E. Trotter, II Family L.L.C., a Louisiana limited liability
company  ("WET2LLC")  to acquire (i) the 50% interest in the Old OED Notes owned
by WET2,  and (ii) the 50%  membership  interest  in OED owned by  WET2LLC  (the
"Trotter  Purchase").  On August 30, 2002, OEDA consummated the Trotter Purchase
for a purchase  price of  $15,546,000  plus a contingent  fee of one half of one
percent  (0.5%)  of the net slot  revenues  from the  date of  opening  of a new
casino, located in St. Landry Parish, until the date that is ten years after the
opening of the casino to the public.

The  sources  of  funds  for the  Trotter  Purchase  described  above  were  (1)
$8,450,000 of borrowings under OEDA's loan and security  agreement with Foothill
Capital  Corporation entered into on August 30, 2002 and maturing on the earlier
of (a) June 30, 2003 or (b) the date on which OED  consummates  its financing of
the racino project, which loan and security agreement,  upon consummation of the
purchase of the Trotter  membership  interests,  was  assigned to OED (the "Term
Loan") and (2)  proceeds  from a  $7,325,000  intercompany  note  issued by OEDA
payable to PGP due June 30, 2002 (the "PGP Note").  The source of cash  provided
by PGP pursuant to the PGP Note relates to the proceeds  from a $7,325,000  note
payable  issued by PGP  payable  to  WET2LLC  due June 30,  2003.  The Term Loan
contains,  among other things,  covenants,  representations  and  warranties and
events of default customary for loans of this type,  including,  but not limited
to certain requirements relative to the financing,  construction and development
of the racino  project  and a minimum  EBITDA  maintenance  covenant.  EBITDA is
defined  as net  earnings  excluding  ordinary  gains or losses,  plus  interest
expense,  income taxes and depreciation  and  amortization  for the period.  The
obligations under the Term Loan are secured by substantially all of OED's assets
and guaranteed by PGP.  OEDA's  one-half (1/2) interest in the Old OED Notes was
canceled  upon  OED's  assumption  of OEDA's  obligations  under the Term  Loan.
Additionally,  in connection with the Trotter  Purchase,  OED and PGP issued, as
joint  obligors,  a  $4,500,000  note  payable  to WET2 (the "WET2  Note"),  the
proceeds of which were used to purchase  the land on which OED's  racino will be
operated and to pay certain deferred financing costs and reimbursable expenses.

We accounted for OEDA's acquisition of all the membership  interests in OED as a
purchase in accordance with SFAS No. 141 "Business  Combinations."  The purchase
price has been allocated to the underlying assets and liabilities based on their
estimated  fair values at the date of  acquisition.  To the extent the  purchase
price  exceeded the fair value of the net  identifiable  assets  acquired,  such
excess has been recorded as goodwill and other intangible assets. As of December
31, 2002, we recorded  goodwill of  approximately  $28.4 million  related to the
acquisition.  We have not yet completed our evaluation of the intangible  assets
acquired and contingent liabilities assumed in the acquisition.  This evaluation
may result in adjustments to the purchase price  allocation.  As of December 31,
2002, there were no indications of impairment of any of OED's intangible assets.
Under the  provisions  of SFAS 142,  goodwill and other  intangible  assets with
indefinite  lives arising from the acquisition will not be amortized but will be
reviewed at least annually for impairment and written down and charged to income
when its recorded value exceeds its estimated fair value.

The following  table  summarizes the estimated fair value of the assets acquired
and the liabilities assumed at the acquisition date. Third party valuations have
been obtained for property and equipment.



                                      F-8
<PAGE>

     (in thousands)
     Current assets                                   $ 2,317
     Property and equipment                             1,369
     Other assets                                       1,090
     Goodwill and other intangible assets              28,393
                                                      -------
       Total assets                                    33,169

     Liabilities assumed                               (2,623)
                                                      -------
     Purchase price                                   $30,546
                                                      =======

As  a  result  of  the  above  recent  transaction,  the  Company,  through  its
wholly-owned  subsidiary OED,  currently owns and operates the Evangeline Downs.
The Evangeline  Downs is located five miles north of Lafayette off Interstate 49
and is  comprised  of a 94,200  square foot  pari-mutuel  wagering  complex,  an
approximate  2,000-space  parking  lot,  7/8-mile  dirt  track and  stables  for
approximately  1,000  horses.  The  complex  features  an  approximate  750-seat
grandstand,   an  approximate   3,000-person   capacity  apron  and  patio,   an
approximately  850-seat  restaurant,  four concession  stands and four bars. The
horse racetrack offers live thoroughbred and quarter horse races a minimum of 80
days a year from mid-April  through Labor Day in September.  The horse racetrack
also offers simulcast wagering six days a week year-round.  OED also operates an
off-track  betting  parlor  (an "OTB") in New  Iberia,  Louisiana,  that  offers
simulcast pari-mutuel wagering, and an OTB in Port Allen, Louisiana, that offers
video poker gaming and simulcast pari-mutuel wagering.

The following unaudited consolidated pro forma information presents a summary of
the  consolidated  results of operations of the Company for years ended December
31, 2002 and 2001 as if the  acquisition of 100% of OED had occurred  January 1,
2001.

        Consolidated Pro Forma Information (Unaudited)
        (in thousands)
                                               2002        2001
                                             --------   ---------
        Net revenues                         $ 61,326   $ 61,395
        Income from operations                 11,973      8,932
        Net income to common interests           (620)    (4,401)

The  consolidated pro forma  adjustments  included in the consolidated pro forma
information  above represents  interest on borrowings of $12.0 million under the
Company's  credit  facility  with  Foothill  Capital  Corporation,  interest  on
borrowings  under the Term Loan, the PGP Note and the WET2 Note, all proceeds of
which were used to finance the  purchase of OED and land  located in St.  Landry
Parish,  the elimination of interest  expense  associated with the Old OED Notes
and the elimination of  amortization  of goodwill  related to OED. The pro forma
results do not purport to be  indicative of results that would have occurred had
the acquisition been in effect for the periods presented, nor do they purport to
be indicative of the results that will be obtained in the future.

Racino Development

In 1997, the State of Louisiana  passed the  Pari-Mutuel  Act,  which  permitted
three  of the  four  companies  operating  pari-mutuel  wagering  facilities  in
Louisiana  which offer live horse racing to install slot machines at their horse
racetrack  facilities,  subject to  ratification by the voters of the individual
parishes.  The voters of Lafayette Parish,  where OED's existing horse racetrack
is located,  have not approved the  installation of slot machines at OED's horse
racetrack  facility.  However,  in October 1997 the voters of



                                      F-9
<PAGE>

St. Landry Parish  approved the operation of both slot machines and  pari-mutuel
wagering.  Therefore, OED is currently developing a casino and pari-mutuel horse
racetrack  facility,  or "racino,"  in nearby  Opelousas,  Louisiana  within St.
Landry Parish,  which facility will replace OED's existing horse  racetrack near
Lafayette and where OED will be permitted to operate slot machines,  in addition
to conducting  live horse racing.  OED's  approximately  532-acre racino site is
located approximately 20 miles north of Lafayette,  OED's primary market, at the
intersection  of Interstate 49 and U.S.  Highway 190. On December 19, 2002,  OED
received its racing license to operate in St. Landry Parish,  and on January 21,
2003,  OED received a gaming  license to operate slot  machines at the racino,
subject to customary conditions.

OED  purchased  all the  necessary  land to develop  OED's  racino and the total
remaining  cost to  design,  develop,  construct,  equip and open the  racino is
expected to be approximately $88.5 million.  The construction and development of
the racino  project is expected to be completed in two phases.  During the first
phase,  OED will  construct the casino and related casino  amenities,  which OED
expects  to open in March  2004,  at a total  remaining  cost of $68.6  million.
During the second  phase,  OED will  construct  the horse  racetrack and related
facilities  for a total  remaining  cost of $19.9  million.  OED  expects  to be
prepared to begin  scheduling live racing meets in December 2004. OED expects to
continue to operate its  existing  horse  racetrack  until live racing meets are
scheduled at the racino, at which time OED will cease operations at its existing
horse racetrack.

The source of funds to develop the racino will be  proceeds  from OED's  private
placement of $123.2 million  aggregate  principal  amount of Series A 13% Senior
Secured Notes due 2010 with Contingent  Interest (the "OED Notes").  See Note 17
for further information about the OED Notes.

3.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation  - The  consolidated  financial  statements  include the financial
information of the Company and its wholly-owned direct and indirect subsidiaries
Peninsula Gaming Corp., OEDA, OED and The Old Evangeline Downs Capital Corp. All
significant intercompany transactions have been eliminated.

Cash and Cash Equivalents - The Company considers all cash on hand and in banks,
certificates of deposit and other highly liquid debt instruments  purchased with
original maturities of three months or less to be cash equivalents.

Restricted  Cash -  Restricted  cash  represents  amounts  for purses to be paid
during  the live  meet  racing  season  at OED.  Additionally,  restricted  cash
includes  entrance fees for a special  futurity  race during the racing  season,
plus any  interest  earnings.  These funds will be used to pay the purse for the
race. A separate interest bearing bank account is required for these funds.

Allowance  for  Doubtful  Accounts - The  allowance  for  doubtful  accounts  is
maintained at a level considered adequate to provide for possible future losses.
The  provision  for doubtful  accounts of $138,751,  $152,158 and $107,505  were
recorded in 2002, 2001 and 2000, respectively.

Inventories -  Inventories  consisting  principally  of food,  beverage,  retail
items,  and  operating  supplies are stated at the lower of first-in,  first-out
cost or market.

Property  and  Equipment  - Property  and  equipment  are  recorded  at cost and
capitalized  lease  assets  are  recorded  at  their  fair  market  value at the
inception of the lease.  Major renewals and improvements are



                                      F-10
<PAGE>

capitalized,   while   maintenance   and  repairs  are   expensed  as  incurred.
Depreciation  and  amortization  are computed on a straight-line  basis over the
following estimated useful lives:

         Land improvements                                      20-40 years
         Building and portside improvements                      9-40 years
         Riverboat and improvements                              5-20 years
         Furniture, fixtures and equipment                       3-10 years
         Computer equipment                                       3-5 years
         Vehicles                                                   5 years

      *  The Company  currently  leases the land on which the OED  building  and
         leasehold  improvements are located.  The ground lease annual rental is
         $0 per year and the lease term  expires on the earlier of December  31,
         2004 or the first day the Company  opens a new  racetrack  facility for
         business in St. Landry Parish, Louisiana.

Long-Lived  Assets - In October 2001, the FASB issued SFAS No. 144,  "Accounting
for the  Impairment  or Disposal of Long-Lived  Assets".  SFAS No. 144 addresses
financial  accounting and reporting for the impairment or disposal of long-lived
assets. This statement  supersedes SFAS No. 121,  "Accounting for the Impairment
of  Long-Lived  Assets and for  Long-Lived  Assets to be  Disposed  Of," and the
accounting  and  reporting  provisions  of APB  Opinion No. 30,  "Reporting  the
Results of  Operations  -  Reporting  the  Effects of Disposal of a Segment of a
Business,  and  Extraordinary,  Unusual and  Infrequently  Occurring  Events and
Transactions."  This new  pronouncement  also  amends  ARB No. 51  "Consolidated
Financials  Statements,"  to  eliminate  the  exception to  consolidation  for a
subsidiary  for which control is likely to be  temporary.  SFAS No. 144 requires
that one  accounting  model be used for  long-lived  assets to be disposed of by
sale,  whether  previously held and used or newly acquired and also broadens the
presentation of discontinued  operations to include more disposal  transactions.
SFAS No. 144 is effective for fiscal years beginning after December 15, 2001 and
interim  periods within those fiscal years.  Adoption of SFAS No. 144 on January
1,  2002,  did not have any  impact on our  financial  position  or  results  of
operations for the year ended December 31, 2002.

Property and Equipment at St. Landry Parish - Included in Property and Equipment
at St. Landry Parish as of December 31, 2002 are land and land acquisition costs
associated   with  the  racino  project  of   approximately   $5.4  million  and
architecture  fees  associated  with the  design and  development  of the racino
project of  approximately  $2.1 million as of December 31, 2002 and $0.2 million
as of December 31, 2001.

Capitalized  Interest - The Company  capitalizes  interest costs associated with
debt  incurred  in  connection  with  the  racino  project.  When  debt  is  not
specifically  identified as being incurred in connection with the development of
the racino project,  the Company capitalizes interest on amounts expended on the
racino project at the Company's  average cost of borrowed money.  Capitalization
of interest will cease when the project is  substantially  complete.  The amount
capitalized during 2002 was $0.1 million.

Deferred  Financing Costs - Costs associated with the issuance of debt (see Note
5) have been  deferred  and are  being  amortized  over the life of the  related
indenture/agreement using the effective interest method.

SFAS 142 "Goodwill and Other Intangible  Assets" - Goodwill and Other Intangible
Assets consists of goodwill, business acquisition costs, licensing costs and the
acquired  tradename  associated  with the  purchase  of the  Company  and OED as
described in Notes 1 and 2. To the extent the purchase  price  exceeded the fair
value of the net identifiable assets acquired,  such excess has been recorded as
goodwill.   SFAS  142  provides  that  goodwill  and  certain  indefinite  lived
intangible  assets  will no longer be  amortized



                                      F-11
<PAGE>

but will be reviewed  at least  annually  for  impairment  and written  down and
charged to income when their recorded value exceeds their  estimated fair value.
During  the  first  quarter  of  2002,  the  Company  performed  a  transitional
impairment  test on  goodwill in  accordance  with SFAS 142 and  determined  the
estimated fair value of the Company exceeded its carrying value as of that date.
During the first quarter of 2003,  the Company  performed its annual  impairment
test on goodwill in accordance  with SFAS 142 and determined  that the estimated
fair value of the Company  exceeded its carrying value as of that date. Based on
that review,  management  determined  that there was no  impairment of goodwill.
Goodwill amortization during 2001 was $1,413,987.  Assuming the non-amortization
provisions of these  standards  had been adopted at the  beginning of 2000,  the
Company's  adjusted net income for 2001 and 2000 would have been  $3,233,468 and
$2,658,679, respectively.

Business  Acquisition  and Licensing  Costs - At December 31, 2001,  the Company
recorded  approximately  $1.4 million on its balance sheet for directly  related
legal and other  incremental  costs  associated  with the acquisition of OED and
obtaining the relevant gaming licenses to conduct gaming  operations  associated
with the racino  project in  Louisiana.  These costs,  including  related  costs
incurred  during the year ended December 31, 2002, are included as a cost of the
acquisition and will be evaluated under SFAS No. 141 "Business Combinations" and
SFAS No. 142  "Goodwill and Other  Intangible  Assets." As of December 31, 2002,
the Company has not completed its evaluation of the intangible  assets  acquired
in the OED acquisition.

Financial  Instruments - The carrying amount for financial  instruments included
among cash and cash  equivalents,  accounts  receivable,  accounts  payable  and
security deposits  approximates  their fair value based on the short maturity of
those instruments.

Revenue  Recognition - In accordance with common industry  practice,  our casino
revenue is the net win from gaming  activities,  which is the difference between
gaming  wins and  losses.  Racing  revenues  include  our  share of  pari-mutuel
wagering on live races after payment of amounts returned as winning wagers,  and
our share of wagering from import and export  simulcasting  as well as our share
of wagering from our off-track betting parlors.

Promotional  Allowances  - Food,  beverage,  and other items  furnished  without
charge to customers are included in gross revenues at a value which approximates
retail and then  deducted as  promotional  allowances to arrive at net revenues.
The cost of such complimentary services have been included as casino expenses on
the  accompanying  statements of operations.  Such estimated  costs of providing
complimentary  services allocated from the food and beverage and other operating
departments  to the  casino  department  were  $592,539  and $4,672 for food and
beverage and other, respectively, in 2002, $568,098 and $8,977, respectively, in
2001 and $529,133 and $12,632. respectively, in 2000.

Referendum  Expenses - In  accordance  with Iowa law, a referendum  must be held
every eight years in each of the counties where gambling games are conducted and
the  proposition  to continue to allow  gambling  games in such counties must be
approved by a majority of the county electorate voting on the proposition.  Such
a referendum took place on November 5, 2002.  During 2002, the Company  incurred
various advertising,  promotional and other referendum related expenses totaling
$771,111 to promote the  approval of  continued  gaming in Dubuque  County.  The
measure was  approved on November 5, 2002 with 79% of the  electorate  voting on
the proposition  favoring  continued gaming on riverboats in Dubuque County.  As
the Company will not be required to be a part of another  referendum until 2010,
such  referendum  related  costs are not  expected  to be incurred in the future
until that time.

State of  Wisconsin  Government  Relations - During  2002 and 2001,  the Company
incurred expenses for a governmental  relations  services agreement with respect
to gaming issues and  developments  in Wisconsin  which might affect the Company
and its gaming  operations.  Such expenses in 2002 and 2001



                                      F-12
<PAGE>

totaled $55,000 and $147,163,  respectively.  The Company does not plan to incur
any additional expenses to provide such governmental relations services relative
to the State of Wisconsin.

Minority  Interest  -  Minority  interest  on  the  Consolidated   Statement  of
Operations  represents  the 50%  portion of net  income  from OED  allocated  to
WET2LLC,  who owned the remaining 50% interest in OED during the period February
15, 2002 through August 30, 2002.

Income Taxes - The Company is a limited liability company.  In lieu of corporate
income  taxes,  the  members of a limited  liability  company are taxed on their
proportionate share of the Company's taxable income.  Therefore, no provision or
liability  for  federal   income  taxes  has  been  included  in  the  financial
statements.

Use of Estimates - The  preparation of financial  statements in conformity  with
accounting  principles  generally  accepted  in the  United  States  of  America
requires  management to make estimates and assumptions  that affect the reported
amounts  of assets and  liabilities  and  disclosure  of  contingent  assets and
liabilities at the date of the financial  statements and the reported amounts of
revenues and expenses during the reporting periods.  Actual results could differ
from those  estimates.  We periodically  evaluate our policies and the estimates
and  assumptions  related to these  policies.  We operate in a highly  regulated
industry and are subject to regulations that describe and regulate operating and
internal  control  procedures.  The  majority of our revenues are in the form of
cash, which by its nature,  does not require complex  estimations.  We also made
certain estimates  surrounding our application of purchase accounting related to
the  acquisition  and the  related  assignment  of costs to  goodwill  and other
intangible assets.

Concentrations  of Risk - The  Company's  customer base consists of eastern Iowa
and  southwest  Louisiana.  Although  the  Company is  directly  affected by the
economic  viability of the area,  management does not believe  significant  risk
exists at December 31, 2002.

The Company  maintains  deposit  accounts at two banks. At December 31, 2002 and
2001,  and various  times during the years then ended,  the balance at the banks
exceeded the maximum amount insured by the FDIC.  Management believes any credit
risk related to the uninsured balance is minimal.

Reclassifications - Certain prior year amounts have been reclassified to conform
with current year presentation.

Recently  Issued  Accounting  Standards - In July 2002, the FASB issued SFAS No.
146,  "Accounting for Costs Associated with Exit or Disposal  Activities".  This
statement addresses financial accounting and reporting for costs associated with
exit or disposal  activities and nullifies the previous guidance on the subject.
This  statement  requires,  among  other  things,  that a  liability  for a cost
associated with an exit or disposal activity be recognized when the liability is
incurred.  The  provisions for this statement are effective for exit or disposal
activities  that are  initiated  after  December 31, 2002.  Management  does not
expect the adoption of SFAS No. 146 to have a material  effect on the  Company's
results of operations or financial position.

4.    PROPERTY AND EQUIPMENT

Property and equipment at December 31 is summarized as follows:

                                                      2002              2001
                                                      ----              ----
Land                                             $  1,110,000     $    800,000
Building and improvements                           8,387,134        6,565,735
Riverboats and improvements                         8,300,776        8,261,693


                                      F-13
<PAGE>

Furniture, fixtures and equipment                   7,942,095        5,512,717
Computer equipment                                    962,700          617,538
Vehicles                                              130,753           65,032
Equipment held under capital lease obligations        704,527          704,527
                                                   ----------       ----------

Subtotal                                           27,537,985       22,527,242
Accumulated depreciation                           (9,291,128)      (4,596,599)
                                                   ----------       ----------
Property and equipment, net                       $18,246,857      $17,930,643
                                                  -----------      -----------


5.    DEBT

The Company's debt consists of the following at December 31:

                                                      2002             2001
                                                      ----             ----
12 1/4% Senior Secured Notes due July 1,
   2006, net of discount of $506,845 and
   $615,518,  respectively,  secured  by
   assets of the Diamond Jo.                       $70,493,155     $70,384,482

Line of  Credit  with  Foothill  Capital
   Corporation, interest rate at greater
   of  LIBOR  +  3%  or  Prime  +  .75%,
   however,   at  no  time   shall   the
   interest  rate be  lower  than  8.5%,
   principal  payments  of  $50,000  due
   monthly    beginning   October   2002
   through February 2005, maturing March
   12,  2005,  secured  by assets of the
   Diamond Jo.                                     11,850,000

Term   loan   with   Foothill    Capital
   Corporation,   interest  at  Prime  +
   3.75%,  however, at no time shall the
   interest  rate  be  lower  than  7.5%
   (current rate of 8.0%),  maturing the
   earlier  of (a) June 30,  2003 or (b)
   the date on which OED consummates its
   financing  of  the  racino   project,
   secured  by  substantially   all  the
   assets of OED.                                   8,300,000

Note  payable  to PGP,  issued  by OEDA,
   interest rate of 7% until January 31,
   2003,  thereafter  8% until  February
   28, 2003,  thereafter  9% until March
   31, 2003,  thereafter  the greater of
   12% or the  fixed  rate on the  notes
   expected  to be issued to finance the
   racino project,  maturing on June 30,
   2003.                                            7,325,000

Note payable to WET2,  interest  rate of
   7% until March 31,  2003,  thereafter
   the  greater of 12% or the fixed rate
   on the notes expected to be issued to
   finance the racino project,  maturing
   on June 30, 2003.                                4,500,000
                                                  -----------      -----------
Total debt                                        102,468,155       70,384,482

Less current portion                              (20,725,000)
                                                  -----------      -----------
Total long term debt                              $81,743,155      $70,384,482
                                                  ===========      ===========



                                      F-14
<PAGE>

On July 15, 1999,  the Company  completed  the private  placement of $71 million
aggregate principal amount of Peninsula Notes. The Peninsula Notes bear interest
at a rate of 12 1/4% per year  which is payable  semi-annually  on January 1 and
July 1 of each year.  The Peninsula  Notes are secured by all of our current and
future  tangible and intangible  assets (with the exception of certain  excluded
assets).  The Peninsula  Notes,  which mature on July 1, 2006, are redeemable at
the Company's  option,  in whole or in part at any time or from time to time, on
and after July 1, 2003 at certain  specified  redemption prices set forth in the
indenture  governing the Peninsula Notes. The indenture  governing the Peninsula
Notes  contains a number of  restrictive  covenants  and  agreements,  including
covenants  that limit the Company's  ability to, among other  things:  (1) incur
more debt;  (2) pay  dividends,  redeem stock or make other  distributions;  (3)
issue stock of subsidiaries;  (4) make investments;  (5) create liens; (6) enter
into transactions with affiliates; (7) merge or consolidate; and (8) transfer or
sell assets.  The events of default under the indenture include  provisions that
are typical of senior debt  financings.  Upon the occurrence and  continuance of
certain  events of  default,  the trustee or the holders of not less than 25% in
aggregate principal amount of outstanding Peninsula Notes may declare all unpaid
principal and accrued  interest on all of the Peninsula  Notes to be immediately
due and payable.  Upon the  occurrence of a change of control (as defined in the
indenture),  each holder of  Peninsula  Notes will have the right to require the
Company to purchase all or a portion of such holder's  Peninsula  Notes pursuant
to the offer described in the indenture at a purchase price equal to 101% of the
principal amount thereof plus accrued and unpaid  interest,  if any, to the date
of repurchase.

The  Company's  Line of Credit and Term Loan  agreements  contain,  among  other
things,  covenants,   representations  and  warranties  and  events  of  default
customary  for loans of this  type.  The most  significant  covenants  include a
minimum EBITDA  requirement and the maintenance of certain financial ratios that
limit our ability to make distributions and incur debt. At December 31, 2002 and
2001, the Company was in compliance with all such covenants.

As further  described in Note 17, our  obligations  under the Term Loan, the PGP
Note and the WET2 Note were repaid in February 2003.

6.    CAPITAL LEASE OBLIGATION

Capital lease obligations at December 31 are as follows:

                                            2002            2001
                                         ----------     ----------
    Liability under capital leases       $  475,781     $  475,781
    Less current portion                                 (113,552)
                                         ----------     ----------
                                         $  475,781     $  362,229
                                         ==========     ==========

      *  On September 6, 2002,  the Company  entered into a purchase and license
         agreement (the "CDS Agreement")  with Casino Data Systems ("CDS").  The
         CDS  Agreement  contains  various  requirements  including  upgrades to
         Diamond Jo's current slot information  system,  installation of the CDS
         slot  information  system as part of the racino  project and  equipment
         purchases.  If and when such  requirements are met, CDS agrees to waive
         any claimed  liability or  responsibility of the Company for payment of
         the outstanding  capital lease  liability of $475,781.  The Company has
         not met all of the  requirements  included in the CDS  Agreement  as of
         December  31,  2002 and does not  expect  such  requirements  to be met
         within the next twelve months.



                                      F-15
<PAGE>

7.    LITIGATION SETTLEMENT

On  November  8,  1994,  the  Louisiana  Horsemen's  Benevolent  and  Protective
Association  1993,  Inc.  ("LHBPA")  filed a lawsuit  against all licensed horse
racetracks  in the State of  Louisiana.  The lawsuit  alleged that LHBPA did not
receive the  appropriate  share of net revenues from video poker devices located
at licensed  horse  racetracks.  In February 2003, OED entered into a settlement
agreement  with LHBPA for $1.6 million.  The terms of the  settlement  agreement
requires OED to make payments of $400,000 annually beginning in March 2003, with
additional $400,000 payments due in March 2004 through 2006.

In accordance with Statement of Financial Accounting Standards No. 5 "Accounting
for Contingencies",  the Company recorded an expense and related accrual of $1.6
million in the  financial  statements as of December 31, 2002. Of the total $1.6
million  accrual,  $0.4 million has been  included in "Accrued  expenses" in the
"Current  Liabilities"  section with the remaining  $1.2 million  recorded under
"Litigation   settlement"  in  the  "Long-term   liabilities"   section  of  the
Consolidated Balance Sheet.

8.    EMPLOYEE BENEFIT PLAN

The Company started a qualified  defined  contribution plan under section 401(k)
of the  Internal  Revenue  Code  during  December  1999 at the  Diamond Jo and a
separate plan during June 2002 at the Evangeline Downs. Under the plan, eligible
employees  may elect to defer up to 15% of their  salary,  subject  to  Internal
Revenue  Service  limits.  The Company may make a matching  contribution to each
participant based upon a percentage set by the Company, prior to the end of each
plan year.  Company  matching  contributions  to the plan at the Diamond Jo were
$216,529,  $227,596  and  $212,766  in 2002,  2001 and 2000,  respectively,  and
$10,822 during 2002 at Evangeline Downs.

9.    LEASING ARRANGEMENTS

Ground  Lease - Lafayette - The Company  currently  leases the land on which the
OED racetrack is located.  The ground lease annual rental is $0 per year and the
lease term  expires on the  earlier of  December  31,  2004 or the first day the
Company  opens a new  racetrack  facility  for  business in St.  Landry  Parish,
Louisiana.

New Iberia - The Company is under a twelve-month lease which runs from September
1, 2002  through  August 31, 2003 with lease  payments of $5,000 due each month,
after which the lease will revert to a  month-to-month  contract  for $5,000 per
month to lease the New  Iberia  off-track  betting  parlor.  The lease  requires
payment of property taxes, maintenance and insurance on the property. During the
period  February 15, 2002 (date of  acquisition)  to December 31, 2002, OED paid
$52,321 in rent for the New Iberia off-track betting parlor.

Pari-Mutuel  Processing Equipment - OED entered into a five-year lease agreement
commencing on February 15, 2001 for computerized  pari-mutuel central processing
equipment,  terminals and certain associated equipment at OED. Additionally, the
lease  agreement  provides the Company  with  pari-mutuel  services  whereby the
leased equipment  automatically  registers and totals the amounts wagered on the
races held at the race track or simulcast to it and to its respective  off-track
wagering parlors,  and displays the win pool odds, payoffs,  and other pertinent
horse racing  information needed to operate live meet horse racing and off-track
betting.  The Company pays 0.43% of the handle for the services  provided during
both live meet racing days and off-track  betting  racing days.  The charges are
subject to a minimum  of $1,950 per live meet race day and $1,150 per  off-track
betting race day. Additionally, if a race day is not completed, the Company must
pay 50% of the minimum if less than four races are declared official and 100% of
the minimum if four or more races are declared official.  In a typical year, the
Company has 87



                                      F-16
<PAGE>

live meet racing days and 223 off-track  betting days. OED paid $378,204  during
the period  February 15, 2002 (date of acquisition) to December 31, 2002 related
to the pari-mutuel processing equipment lease.

The total  minimum  rental  payments for the lease  mentioned  in the  preceding
paragraph  assuming  the Company has 87 live meet racing days and 223  off-track
betting days for each of the years ended December 31 are summarized as follows:

        2003                                      426,100
        2004                                      426,100
        2005                                      426,100
                                                  -------
                                               $  1,278,300
                                               ============

The Company leases various other equipment under noncancelable operating leases.
The leases require fixed monthly  payments to be made ranging from $60 to $2,800
and certain other gaming machines and tables require  contingent  monthly rental
payments  based on usage of the  equipment.  The leases  expire on various dates
through 2007.  Rent expense in 2002, 2001 and 2000 were  $1,236,088,  $1,348,670
and $873,949, respectively.

The future  minimum  rental  payments  required under these leases for the years
ended December 31 are summarized as follows:

        2003                                        21,415
        2004                                         4,085
        2005                                         3,625
        2006                                         3,121
        2007                                         3,121
                                                 ---------
                                                 $  35,367
                                                 =========

10.   COMMITMENTS AND CONTINGENCIES

On June 21, 2002, PGP filed a complaint with the United States District Court in
the Western District of Louisiana (the "Trotter  Complaint")  alleging breach of
contract by WET2LLC for failing to honor its previous  agreement to, among other
things,  enter into a  management  services  agreement  with the Company for the
management  of  the  existing  OED  horse  racetrack  and  the  development  and
management of the racino project.  However,  in connection with the consummation
of the Trotter  Purchase (as discussed in Note 2 above),  the Trotter  Complaint
was dismissed.

In October 2002, the Company entered into a charitable  giving agreement with an
Iowa  non-for-profit  organization  in which the Company has agreed,  subject to
certain  contingencies,  to  give  such  organization  a total  contribution  of
$450,000.  The agreement  calls for a payment of $50,000 upon the signing of the
agreement  and $50,000 on March 1 of each of the next seven years  beginning  on
March 1, 2003.  The first two payments  were made by the Company in October 2002
and March 2003, respectively.

Under the Company's  and PGP's  operating  agreements,  the Company and PGP have
agreed,  subject to few exceptions,  to indemnify and hold harmless our members,
PGP and PGP members,  as the case may be, from liabilities  incurred as a result
of their  positions as our sole manager and as members of the Company or PGP, as
the case may be.



                                      F-17
<PAGE>

We are not a party to, and none of our  property  is the  subject  of, any other
pending legal proceedings other than litigation  arising in the normal course of
business. We do not believe that adverse determinations in any or all such other
litigation  would have a material  adverse  effect on our  financial  condition,
results of operations or cash flows.

11.   PREFERRED MEMBERS' INTEREST--REDEEMABLE

On July 15, 1999,  the Company  authorized  and issued $7.0 million of preferred
membership  units.  The  holders of all of the  Company's  preferred  membership
interests are entitled to receive,  subject to certain restrictions contained in
the indenture  governing the Notes,  out of funds  legally  available  therefor,
cumulative preferred  distributions payable semiannually at an annual rate of 9%
of the original face amount  thereof.  Other than certain limited consent rights
and as required by law, holders of the Company's preferred  membership interests
have no voting rights.

The  Company  redeemed  $3.0  million in original  face amount of its  preferred
membership  interests on January 19, 2001 at a redemption price of $3.0 million,
plus a portion of accrued and unpaid interest  thereon of $170,000,  the balance
of which,  in an amount equal to $145,000  plus accrued  interest on such amount
(the "Accrued Preferred Distribution"),  has agreed to be paid by the Company at
such time that such payment is permitted  to be made  pursuant to the  Company's
existing  financing  arrangements,  but in no event later than January 15, 2003.
The Accrued  Preferred  Distribution  totaling  $171,100 was paid on January 15,
2003. The balance of preferred  membership interests not redeemed by the Company
must be redeemed by the  Company 90 days after the  seventh  anniversary  of the
closing date of the acquisition at a redemption price of $4.0 million,  plus any
accrued  and unpaid  preferred  distributions  through  the date of  redemption.
Distributions  for the years ended December 31, 2002,  2001 and 2000 (other than
the Accrued  Preferred  Distribution)  were  $373,050,  $386,174  and  $630,000,
respectively.

12.   MEMBERS' EQUITY

On July 15,  1999,  the Company  authorized  and issued  $9.0  million of common
membership  units.  PGP,  as the  holder  of all of  the  Company's  issued  and
outstanding common membership  interests,  is entitled to vote on all matters to
be voted on by  holders  of common  membership  interests  of the  Company  and,
subject to certain  limitations  contained in the Company's  operating agreement
and the indenture  governing the Peninsula  Notes,  is entitled to dividends and
other  distributions  if, as and when declared by the Company's  managers out of
funds legally available therefor.

13. DUBUQUE RACING ASSOCIATION, LTD. CONTRACT

Dubuque Racing Association,  Ltd. (the  "Association"),  a qualified  sponsoring
organization,  presently holds a license to conduct gambling games under Chapter
99F and other Iowa statutes.  The  Association  owns Dubuque  Greyhound  Park, a
traditional greyhound racetrack with 600 slot machines and amenities including a
gift shop,  restaurant and clubhouse.  The Company  entered into a contract (the
"Operating  Agreement")  with the  Association  relating to the  operation of an
excursion  gambling  riverboat for excursion  seasons through December 31, 2008,
under  gambling  licenses  held  jointly.  Under  the  terms  of  the  Operating
Agreement,  subject to certain  conditions,  the  Association  shall receive the
greater of the  Association's  gaming  revenues from the greyhound  park for the
period, or a percentage of the total combined gaming revenues of the Association
from the greyhound park and the Company as follows:

      o     32% of the first $30,000,000 of total combined gaming revenues, plus

      o     8% of the total combined gaming revenues over $30,000,000,  but less
            than $42,000,000, plus



                                      F-18
<PAGE>

      o     8%  of  total  combined  gaming  revenues  between  $42,000,000  and
            $46,000,000  during any period for which no excursion  boat gambling
            or land based  gambling  operation is carried on from a Wisconsin or
            Illinois  gambling  operation  in Grant  County,  Wisconsin,  or Joe
            Davies County, Illinois.

Gaming revenues under this contract means adjusted gross  receipts,  less gaming
taxes.

The Association's gaming revenues from the greyhound park in 2002, 2001 and 2000
were $30,041,841,  $27,108,884 and $25,912,357,  respectively,  which are higher
than the previously described thresholds,  therefore, no payments have been made
to the Association in 2002, 2001 and 2000 under the Operating Agreement.

Commencing  April 1, 2000,  the Company had been obligated to pay, and has paid,
the  Association  the sum of $.50 for each patron  admitted on the boat,  which,
based upon recent annual  attendance,  approximates  $500,000  annually.  During
2002,  2001  and  2000,  these  payments  approximated  $495,000,  $503,000  and
$405,000, respectively.

In the event the Company  elects to sell or lease the excursion  gambling  boat,
its  furnishings and gambling  equipment  and/or its interest in any ticket sale
facility or other buildings located in the Dubuque Ice Harbor used in connection
with the operation of an excursion  gambling boat to a third party that does not
agree to  operate  these  assets  subject  to the  terms and  conditions  of the
Operating  Agreement,  and obtains an acceptable offer from such third party for
the purchase or lease thereof, the Association shall have the option to purchase
or lease these assets on the same terms as those offered by such third party.

14.   TRANSACTIONS WITH RELATED PARTIES

During  the period  February  15,  2002  through  December  31,  2002,  OED paid
principal  of $18,379 and  interest  of  $297,536 to WET2  related to WET2's 50%
interest in the Old OED Notes. WET2, through its affiliate WET2LLC, owned 50% of
the membership interests of OED until August 30, 2002.

During 2002 and 2001, the Company paid $1,260,012 and $1,760,908,  respectively,
to PGP primarily in respect of (i) certain  consulting  and  financial  advisory
services,  (ii)  board  fees and  expenses  paid to the  members of the board of
managers of PGP and (iii) tax,  accounting,  legal and administrative  costs and
expenses  of  PGP.  Additionally,  in 2001  OEDA  paid  $523,826  to PGP for the
assignment of a purchase agreement to purchase OED.

During  2000,  expenses  related to interim  management  consulting  services of
approximately $37,500 were paid to an affiliate of a board member of the Company
following the  resignation  in the previous  year of the Company's  former Chief
Operating Officer. In addition, the Company paid approximately $1,917,551 during
such period to PGP primarily in respect of (i) certain  consulting and financial
advisory services, (ii) board fees and expenses paid to the members of the board
of managers of PGP and (iii) tax, accounting, legal and administrative costs and
expenses of PGP.

15.   SEGMENT INFORMATION

Pursuant  to the  provisions  of SFAS  131  "Disclosures  About  Segments  of an
Enterprise  and  Related  Information",  the  Company has  determined  that,  in
connection  with the  acquisition  of OED,  the Company  currently  operates two
reportable  segments:  (1)  Iowa  operations,  which  comprise  the  Diamond  Jo
riverboat casino in Dubuque,  IA; and (2) Louisiana  operations,  which comprise
the racetrack and OTB's operated by OED in Lafayette, LA.


                                      F-19
<PAGE>

The  accounting  policies  for each  segment are the same as those  described in
footnote 3 above.  The  Company  and the gaming  industry  use  earnings  before
interest, taxes, depreciation and amortization ("EBITDA") as a means to evaluate
performance.  EBITDA  should not be  considered  as an  alternative  to, or more
meaningful  than,  net income  (as  determined  in  accordance  with  accounting
principles generally accepted in the United States of America).

The table below presents  information  about reported segments as of and for the
years ended (in thousands):

                                                Net Revenues
                                                ------------
                                              2002         2001
                                              ----         ----
Diamond Jo (1)                           $  48,598    $  48,117
OED (2)                                     11,359
                                         ---------    ---------
Total                                    $  59,957    $  48,117
                                         =========    =========

                                                  EBITDA (3)
                                              2002         2001
                                              ----         ----
Diamond Jo (1)                           $  15,782    $  15,776
OED (2)                                      1,262
                                         ---------    ---------
Total EBITDA                                17,044       15,776
Diamond Jo:
   Referendum expense                         (771)
   Depreciation and amortization            (2,767)      (3,963)
   Interest expense, net                   (10,466)      (9,457)
   Loss on sale of assets                       (8)        (151)
   Preferred member distributions             (373)        (386)
OED:
   Litigation settlement                    (1,600)
   Depreciation and amortization              (184)
   Interest expense, net                    (1,375)
   Minority interests                         (232)
                                         ---------    ---------
Net income to common members' interest   $    (732)   $   1,819
                                         =========    =========

                                                Total Assets
                                                ------------
                                              2002         2001
                                              ----         ----
Diamond Jo                               $  83,706    $  84,374
OED                                         42,742
                                         ---------    ---------
Total                                    $ 126,448    $  84,374
                                         =========    =========

       (1)  Reflects   results  of   operations  of  the  Diamond  Jo  excluding
            referendum  and litigation  settlement  expenses for the years ended
            December 31, 2002 and 2001.

       (2)  Reflects  results of operations  of OED for the period  February 15,
            2002 (date of acquisition) to December 31, 2002.

       (3)  EBITDA is defined as income from  operations plus  depreciation  and
            amortization  referendum related expenses (see Note 3 for discussion
            on referendum  expense) and  litigation  settlement  (see Note 7 for
            discussion on litigation settlement).



                                      F-20
<PAGE>

16. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

                                        2002 Quarters Ended
                                      (Dollars in Thousands)

                               March 31    June 30   September 30   December 31
                              ----------  ---------  ------------   ------------
Net revenues                   $ 12,794   $ 16,367    $ 16,437       $ 14,359
Income from Operations            2,949      3,923       4,201            650
Net income (loss)                   322      1,049       1,159         (2,657)
before preferred member
  distributions and minority
  interest
Net  income  (loss)            $    194   $    795   $  1,029   $ (2,750)(1)
________________

(1)   An increase in net loss in the fourth quarter 2002 compared to 2001 is due
      to  (a)  net  loss  at OED  of  $2.0  million,  including  the  litigation
      settlement   of  $1.6  million  as  described  in  Note  7  and  excluding
      intercompany  charges, and (b) referendum expenses of $0.6 million related
      to the Diamond Jo's  referendum  requirement  as described in Note 3.

                                       2001 Quarters Ended
                                      (Dollars in Thousands)

Net revenues               $ 11,257   $ 11,998   $ 13,003   $ 11,859
Income from Operations        2,719      2,924      3,793      2,377
Net income (loss) before        393        488      1,376        (51)
   preferred member
   distributions
Net income (loss)          $    289   $    393   $  1,282   $   (145)


17. SUBSEQUENT EVENTS

On February  26,  2003,  OED  completed a private  placement  of $123.2  million
aggregate  principal  amount of Series A 13% Senior  Secured Notes due 2010 with
Contingent  Interest in a transaction exempt from the registration  requirements
of the  Securities  Act of 1933, as amended,  pursuant to Rule 144A  promulgated
thereunder  (hereinafter  referred to as the "OED  Notes").  Interest on the OED
Notes  is  payable  semi-annually  on  March 1 and  September  1 of  each  year,
beginning on September 1, 2003.  Contingent interest is payable after the casino
portion of the racino  begins  operating on the terms set forth in the indenture
governing the OED Notes.

OED used the net  proceeds  from the sale of the OED Notes to (a) repay the then
existing  indebtedness  under the Term Loan, the PGP Note and the WET2 Note, (b)
fund (together  with cash from  operations  and other  available  financing) the
design,  construction,  development,  equipping and opening costs of the racino,
and (c) fund the first three  payments of fixed  interest on the OED Notes.  OED
deposited  the net proceeds from the offering of the OED Notes,  after  repaying
existing  indebtedness,  into  construction  disbursement,  interest reserve and
completion  reserve accounts,  from which funds will be periodically  withdrawn.
These accounts are pledged as security for the OED Notes.


                                      F-21
<PAGE>

As noted in Note 7, in February  2003,  OED entered into a settlement  agreement
with LHPBA for a total  settlement of $1.6 million.  The settlement will be paid
by OED in four annual payments of $400,000.  The first payment was made on March
7, 2003.

                                    * * * * *



                                      F-22
<PAGE>

                                                                     SCHEDULE II


                          PENINSULA GAMING COMPANY, LLC
                        VALUATION AND QUALIFYING ACCOUNTS
             For the Years Ended December 31, 2002, 2001 and 2000
                                 (in thousands)


<TABLE>
<CAPTION>
                                       Balance at  Charged to                   Balance at
                                        Beginning  Costs and                      End of
Description                              of Year    Expenses    Deductions (a)     Year
-----------                              -------    --------    --------------     ----
<S>                                       <C>        <C>          <C>             <C>
Year ended December 31, 2002:
   Allowance for doubtful accounts.....   $  57      $ 139        $  (150)        $  46
Year ended December 31, 2001:
   Allowance for doubtful accounts.....      43        152           (138)           57
Year ended December 31, 2000:
   Allowance for doubtful accounts.....      55        108           (120)           43
</TABLE>

______________
(a) Amounts written off.




                                      F-23